How Much Deposit Do I Need for an Investment Property?

Written By Shaun Craike
How Much Deposit Do I Need for an Investment Property?

If you're thinking about building wealth through real estate, one of the first questions you'll face is: “How much deposit do I actually need for an investment property?” The short answer is: it depends.
But understanding your options and the pros and cons of each can help you enter the market sooner and invest with confidence.

The Standard Deposit: 20% + Purchasing Costs

For most investors, the traditional benchmark is:

  • 20% deposit, plus

  • Purchasing costs, which usually include:

    • Stamp duty

    • Conveyancing/solicitor fees

    • Building and pest inspections

    • Loan application fees

Putting down a 20% deposit means you avoid Lenders Mortgage Insurance (LMI) and often secure more competitive interest rates. It also gives you more immediate equity buffer and a stronger financial position from day one.

This is generally considered the “safe” or “standard” approach for property investment.

Can You Buy with a 5% Deposit? Yes, With LMI

Many buyers don’t realise that it’s absolutely possible to purchase an investment property with as little as 5% deposit, provided you're willing to pay Lenders Mortgage Insurance (LMI).

Advantages of a 5% Deposit

  • Get into the market sooner – This is often the biggest advantage. In a rising market, waiting an extra 2–3 years to save a 20% deposit can cost more in capital growth than the LMI premium itself.

  • Build wealth earlier – Once you're in the market, the property can begin appreciating and generating rental income.

Risks of a Small Deposit

  • Higher lending risk = higher LMI costs

  • Lower equity starting point, meaning less buffer if the market softens

  • Potentially higher interest rates

A smaller deposit is a powerful strategy but like all strategies, it must align with your long-term financial plan and risk tolerance.

First Home Buyer Schemes (Including 5% No-LMI Options)

If you’re purchasing your first property to live in (not as an investment), the government’s First Home Guarantee Scheme allows eligible buyers to enter the market with:

  • 5% deposit

  • No LMI payable

This can save tens of thousands of dollars and significantly shorten the time required to enter the market. While this scheme is designed for owner-occupiers, many buyers use it to get their foot in the door, live in the property for the required period, and later convert it into an investment.

Using Equity Instead of Savings

If you already own a home, your deposit doesn’t necessarily need to come from cash in the bank.
Many investors leverage the equity in their existing home.

What is Equity?

Equity is the difference between the value of your home and the amount you owe on it. Lenders will typically allow you to pull out equity up to 80% of the property’s value.

For example:

  • Home value: $700,000

  • Loan balance: $400,000

  • Equity: $300,000

  • Available Equity: $260,000

Cross-Collateralisation vs Equity Release: What’s Better?

This is a critical concept for property investors.

1. Cross-Collateralisation (Generally NOT recommended for investors)

This is when multiple properties are tied to one loan or the lender uses one property as security for another without separating the loans.

Risks:

  • Banks have control over both properties

  • Refinancing becomes harder

  • Selling one property requires revaluing the others

  • Reduced flexibility as your portfolio grows

2. Equity Release / Separate Loan (Preferred for investors)

This is when you pull out equity from your home into a separate loan split, which then becomes your deposit for the investment property.

Advantages:

  • Each property stands alone with its own loan

  • You maintain control and flexibility

  • Easier refinancing, restructuring, or selling properties

  • Cleaner structure as your portfolio grows

This is exactly how many large-scale property investors grow quickly by leveraging equity responsibly and keeping their loans separated.

So How Much Deposit Do You Really Need?

Here’s a simple breakdown:

  • Ideal: 20% deposit + costs

  • Minimum (with LMI): 5% deposit + costs

  • Using equity: Potentially $0 savings required, depending on how much equity you can release

  • First home buyers: 5% deposit without LMI (scheme eligibility applies)

The “right” amount depends entirely on your financial goals, available equity, borrowing power, timeframe, and risk appetite.

Our Recommendation: Speak With a Finance Broker First

There is no one-size-fits-all answer. Your borrowing capacity, loan structure, equity position, and risk profile need expert assessment before making a move.

A skilled finance broker can:

  • Calculate exactly how much deposit you need

  • Assess whether LMI is beneficial or not

  • Identify whether equity release is an option

  • Structure loans properly to support future investment growth

  • Ensure you avoid common pitfalls like cross-collateralisation

How Our Team Can Help

Not sure how to get started buying property? Our team can help you buy smart with the right strategy, area insights, property analysis, negotiation support, and end-to-end guidance.

Whether you're a first-time buyer, an investor ready to scale, or someone exploring equity options, we’re here to help you make informed, confident, and profitable decisions.

Other articles you might enjoy:
-Is buying in Cairns a good investment?
-Cairns Property Market Update: Why 2026 Is a Smart Time to Invest
-Why Use a Buyer’s Agent in Cairns?

Shaun Craike
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