Pros and Cons of Off-the-Plan Investment Loans

Buying off the plan lets you secure an investment property before it is built, but your lender has to assess the loan on rent that does not exist yet. That gap shapes almost every decision, from how much you can borrow to how your tax position works. For Sunshine Coast residents building a portfolio step by step, knowing it early makes the whole journey calmer.

What Are the Pros and Cons of Buying an Off-the-Plan Investment Property?

The main advantage is that a new build may keep access to negative gearing and a choice of capital gains tax methods. The main drawback is that there is no rental history, so lenders place less weight on your expected income.

Other points to weigh are that you commit to a purchase before you can walk through the finished property, and that you need to check the finance position before you sign. If the property sits in a strata complex, body corporate levies are an extra holding cost to factor into your budget. A Mortgage Broker in Sunshine Coast can help you test these points before you commit.

How Does Negative Gearing Work on a New Build?

Losses from an eligible new build acquired after 12 May 2026 can continue to be deducted against all of your income, including salary and wages. Established residential properties bought after that time are treated differently.

From the 2027-28 income year, net rental losses on established properties acquired after 7:30pm AEST on 12 May 2026 can only be used against other residential property income. Eligible new builds include dwellings built on previously vacant land, and dwellings that replace an existing property where the number of dwellings increases. If a new build is occupied for more than 12 months before it is sold to a later investor, that later investor loses access to negative gearing.

For capital gains, an investor in an eligible new build can elect either the 50 per cent discount or indexation with a 30 per cent minimum tax. Whether a particular apartment or townhouse qualifies, and which option suits you, is a question for your accountant. Tax outcomes depend on your own circumstances and are never certain.

How Do Lenders Count Rent on a Property That Is Not Built Yet?

Lenders generally count no more than 80 per cent of expected rent, because APRA expects a minimum 20 per cent allowance for periods when the property sits empty. They also tend to place less reliance on rental appraisals than on actual rent received.

With an off-the-plan purchase there are no rent receipts, so the appraisal is all there is. How much of it a lender accepts is set by that lender's own credit policy. That is why comparing lenders before you apply matters. Our investment loans team can show you how different lenders treat expected rent, so your property investment loan application is built on the right assumptions from day one.

How a 6.75% Loan Gets Assessed at 9.75%

Banks and other authorised deposit-taking institutions must assess new borrowers at a rate at least 3 percentage points above the loan rate. On an illustrative loan rate of 6.75% p.a., that means your capacity is tested at 9.75% p.a.

Consider an investor who plans to buy an off-the-plan apartment and works out repayments at 6.75% p.a. only. The numbers look comfortable, but the lender tests the same loan at 9.75% and counts just 80 per cent of the expected rent. The investor speaks with a broker before signing the contract and checks their borrowing capacity against that tougher test. They also use the mortgage repayments calculator to see how repayments change at different rates. The outcome is a clear ceiling, so they choose a purchase price that still works at the higher assessment rate instead of finding out after the contract is signed.

The buffer applies to ADIs only. Non-bank lenders are not bound by it, though each lender still applies its own credit policy.

Should You Choose Interest Only for an Off-the-Plan Purchase?

An interest-only period can lower your repayments for a set time, but it does not increase how much you can borrow. Lenders assess interest-only loans on principal and interest repayments over the remaining term, which can mean a lower maximum loan than a principal and interest loan.

The trade-off is that your loan balance stays the same during the interest-only period, so you are not paying down the debt. For tax, only the interest portion of a repayment is deductible under either structure, and the principal portion is never deductible. Which structure leaves you with more deductible interest depends on your loan, so speak with your accountant before choosing.

When Do You Need Lenders Mortgage Insurance?

Lenders mortgage insurance is generally required when your loan to value ratio (LVR) is above 80 per cent. You pay the premium, and both the lender and the insurer must approve the loan.

The 80 per cent mark is not a legal borrowing limit. It is the point where LMI generally applies. A larger deposit lowers your LVR and can avoid the premium, while a smaller deposit may let you buy sooner at the cost of that extra charge. Each lender sets its own rules above 80 per cent, so it pays to compare before you choose.

The debt-to-income limit that APRA applies to banks excludes loans for the purchase or construction of new dwellings. That limit is a measure on each bank's overall lending, not a cap on you personally, and lenders still decide each application under their own policies.

If you are weighing up an off-the-plan purchase on the Sunshine Coast, we would love to help you map the path from contract to settlement. Call one of our team or book an appointment at a time that works for you.

Frequently Asked Questions