How Much Deposit Do You Really Need for an Investment House?

One of the biggest questions new investors ask is simple.How much deposit do I actually need to buy an investment property?

The short answer is that it depends.The long answer is worth understanding properly, because the deposit size affects risk, cash flow, and borrowing power.

This guide explains realistic deposit expectations for investment properties in Australia.

The Standard Deposit for an Investment Property

Most lenders require a higher deposit for investment properties than for owner-occupied homes.

Typical Deposit Range

For most investors, the standard deposit is:

• 20 percent of the property value
• Plus purchase costs such as stamp duty and legal fees

This means for a $600,000 investment property, you usually need:

• $120,000 deposit
• Plus roughly $25,000 to $30,000 in costs

This is the safest and most common setup.

Cosmopolitan | Real Estate Parramatta, Sydney | Secure with $10k and $573 x 111 weeks

Why Lenders Want a Larger Deposit

Investment loans are considered higher risk than owner-occupied loans.

Reasons include:

• Investors are more likely to sell in a downturn
• Rental income is not guaranteed
• Market conditions can affect cash flow

A larger deposit reduces the lender’s risk.

East + Cowper | Real Estate Granville, Sydney | Secure with $10k and $573 x 76 weeks

Can You Buy With Less Than 20 Percent?

Yes, but there are trade-offs.

Buying With a 10 to 15 Percent Deposit

Some lenders allow investment purchases with:

• 10 percent deposit
• 15 percent deposit

However, this usually comes with Lenders Mortgage Insurance, known as LMI.

LMI protects the lender, not the buyer.It can add tens of thousands of dollars to the loan.

When a Lower Deposit Might Make Sense

A smaller deposit may suit investors who:

• Have strong income
• Expect strong capital growth
• Want to enter the market sooner

But it increases risk and repayments.

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Using Equity Instead of Cash

Many investors do not use cash deposits.

How Equity Works as a Deposit

If you already own property, you may be able to use equity.

This involves:

• Borrowing against your existing property
• Using that borrowed amount as the deposit
• Taking a separate loan for the purchase

This can reduce or remove the need for cash.

Risks of Using Equity

• Your debt increases
• Your existing property becomes exposed
• Market downturns affect multiple assets

Equity can accelerate growth, but it must be used carefully.

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What About Stamp Duty and Purchase Costs?

The deposit is only part of the equation.

Typical Costs to Budget For

• Stamp duty
• Conveyancing and legal fees
• Building and pest inspections
• Loan fees

These costs usually cannot be borrowed and must be paid in cash.

Many investors underestimate this part.

Rouse Hill | Real Estate Rouse Hill, Sydney | Secure with $10k and $843 x 19 weeks

How Rental Income Affects Deposit Requirements

Rental income does not reduce the deposit required.But it does affect borrowing capacity.

Lenders usually:

• Take 70 to 80 percent of rental income
• Factor in vacancy and expenses

Strong rental yield can help you borrow more, but it does not replace the deposit.

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Interest Rates and Deposit Size

Deposit size directly impacts your interest rate.

Higher Deposit Benefits

• Lower interest rates
• No LMI
• Better loan options
• Stronger cash flow

Even moving from 10 percent to 20 percent can make a big difference over time.

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First-Time Investors vs Experienced Investors

Your experience matters.

First-Time Investors

• Usually need higher deposits
• Face stricter serviceability checks
• Have fewer lender options

Experienced Investors

• May access more flexible lending
• Can leverage equity
• Often negotiate better terms

Your financial profile matters more than the property itself.

The Avenues | Real Estate Zetland, Sydney | Secure with $10k and $1,088 x 86 weeks

Common Myths About Investment Property Deposits

Let’s clear up some confusion.

• You do not need 30 percent in most cases
• Rental income does not replace a deposit
• LMI is not always bad, but it is not free
• Zero-deposit investing carries high risk

Understanding the structure is more important than chasing shortcuts.

How Much Deposit Should You Aim For?

A practical guideline for most investors is:

• 20 percent deposit
• Plus all purchase costs
• Plus a cash buffer

This setup provides flexibility and resilience.

If you are stretching to buy, consider waiting.A strong start often leads to better long-term results.

Pyrmont Place | Real Estate Pyrmont, Sydney | Secure with $20k and $807 x 137 weeks

The Real Question Is Risk, Not Just Deposit Size

The real question is not how little you can put down.It is how much risk you are comfortable carrying.

A larger deposit:

• Improves cash flow
• Reduces stress
• Provides protection in downturns

For investment properties, stability often beats speed.

Understanding your deposit requirements clearly is one of the most important steps in building a sustainable property portfolio.