What I Wish I Knew Before Buying My First Investment Property: The Strategies That Matter As Your Portfolio Grows
If you're just starting out in property investing — or even a few properties deep — there are lessons and strategies that only become obvious in hindsight. Property can be a powerful way to build long-term wealth, but it also comes with hidden complexities around tax, loan structuring, and portfolio growth.
In this article, we’ll unpack:
What experienced investors wish they knew when they bought their first investment property
Why most people get stuck at 1 or 2 properties
Strategic considerations when building a portfolio — including refinancing, debt reshuffling, and equity release
The big question: how many properties is enough?
Before we dive in, a quick note: The information in this article is provided for general educational purposes only and should not be considered tax or financial advice. Individual circumstances vary, and you should seek guidance from a qualified professional before making any investment decisions.
What I Wish I Knew Before Buying My First Investment Property
1. The Structure of Your First Loan Can Limit Your Future Borrowing
When you're buying your first investment property, the excitement often overshadows planning. Most people walk into the bank, get pre-approved, and go with whatever loan structure the lender suggests.
What’s often missed?
Cross-collateralisation (using one property as security for multiple loans) can limit your flexibility and trap equity.
Paying Principal & Interest on investment loans instead of Interest Only might seem "safer" — but it could slow down your cash flow and borrowing power.
Not understanding how banks assess your total debt-to-income (DTI) ratio can mean you're unknowingly capping your future capacity.
Using your redraw facility to pay down your loan principal (instead of an offset account) can have unintended tax consequences later — especially if you plan to change your owner-occupied property into an investment property and buy a new owner-occupier. This is because the Australian Tax Office treats redraw repayments as new borrowing if the purpose changes, potentially limiting the tax deductibility of interest and complicating loan structures when refinancing or purchasing again.
Keeping your lending consolidated in a single loan account, rather than splitting it, may limit your flexibility in managing repayments and make it harder to refinance portions of your debt at a later date.
Mixing investment and personal borrowing within the same loan can create complex tax issues and make it difficult to clearly identify tax deductible interest.
2. Offset Accounts Are Gold — If You Use Them correctly
Many first-time investors either don’t use offset accounts or don’t understand their potential.
Used strategically, an offset can:
Save you thousands in interest over time
Keep your loan balance low while preserving access to funds for your next deposit
Provide flexibility if you later convert a property from owner-occupied to investment or vice versa
Important note:
Even if your offset account fully offsets a loan, lenders still assess the full loan amount in your debt-to-income ratio — not the net balance. So while offset helps your cash flow, it doesn't reduce your "assessed debt."
Additionally, unlike redraws, funds kept in an offset account don’t have the same tax implications if your loan purpose changes. This makes offsets a preferred tool for managing funds when planning to transition owner-occupier properties into investments or when juggling multiple property purchases.
3. Your Exit Strategy Shapes Your Entry Strategy
Nobody thinks about selling or retiring when they buy their first property. But it matters. Will you:
Hold properties for long-term capital growth?
Live off the rent later?
Renovate and flip?
Pass them down?
Your answers here will influence everything from how you borrow to how you structure ownership.
Why Most Investors Get Stuck at 1–2 Properties
Most aspiring investors start with the goal of owning a “portfolio” — but statistically, the majority stop at just 1 or 2 properties.
Common reasons investors get stuck:
Poor loan structure from the start (e.g. cross-collateralised or too much P&I debt)
Low borrowing capacity due to DTI limits or overly conservative cash flow
Equity locked away because of market stagnation or underperforming property
Fear of taking on more debt — often due to lack of guidance or a clear strategy
Banking with one lender — rather than spreading risk and optimising across multiple banks
Often, these challenges aren’t obvious until you try to buy the next one — and then it feels like the door slams shut.
Strategic Considerations for a Growing Property Portfolio
1. Diversify Your Portfolio — Without Losing Focus
This doesn’t necessarily mean buying in five states — it means understanding:
Cash flow vs capital growth balancing
Spreading lender exposure
Diversifying dwelling types (units, townhouses, houses)
2. Stagger Fixed Rates to Avoid a Cliff-Edge
Locking all loans into the same fixed period might seem tidy, but if they all expire at once (especially in a high-rate environment), your cash flow can take a hit.
Instead, you might consider:
Staggering fixed-rate terms
Leaving some variable for flexibility (e.g. to use an offset or redraw)
Reviewing rates annually, not just when they expire
3. Reassess Your Loan Structure Every 12–18 Months
As your portfolio grows, so do your risks — and opportunities. You should periodically:
Revalue properties to release equity
Restructure debt to maintain borrowing power
Rebalance fixed vs variable, P&I vs IO, and loan splits
Refinancing, Debt Reshuffling & Equity Release
Refinancing isn’t just about getting a better interest rate — it’s about unlocking the next phase of your portfolio strategy.
Debt Reshuffling Explained:
Move from P&I to Interest Only on investment loans to improve cash flow and serviceability
Split or separate loans that are cross-secured to free up individual properties for equity release
Use offset funds for deposits instead of paying out loans, to retain flexibility and tax deductibility
Releasing Equity:
Pull out equity from existing properties (if values have grown) to fund the next deposit and costs
Structure the new equity loan as a separate facility for clean record-keeping and deductible interest
This kind of strategy takes experience — and the right lending partners. Not every bank will be the right fit as your portfolio grows.
How Many Properties Is Enough?
This is the question most investors eventually ask.
The answer isn’t straightforward and there is no one-size-fits-all number. Instead, it depends entirely on your individual goals and what you want to achieve with your portfolio.
Ask yourself:
What passive income figure am I aiming for?
What mix of cash flow vs capital growth properties do I have?
Do I want to hold long-term, sell down, or live off equity?
For some, 2–3 well-structured properties are enough. For others, it might be 6 or more.
And remember — property isn’t the only way to build wealth. Many successful investors also spread their investments across other areas such as shares, managed funds, or even their own businesses. The right mix for you will depend on your goals, timeframes, and appetite for risk.
The Power of Looking Back — and Planning Forward
Investing in property isn’t just about buying bricks and mortar. It’s about building a financial ecosystem that supports your goals — and doesn’t box you in later.
If you’re early in your journey, now is the time to get strategic.
And if you’ve already got a few properties, it’s not too late to restructure, refinance, and move forward smarter.
Need help reviewing your current portfolio or structuring your next investment?
At Lumière Financial, we help investors plan beyond the next purchase — so you can grow with clarity, confidence, and control.
Book a call today to talk through your circumstances and explore the best way forward.
