Getting your loan structure right across a property portfolio is one of the most important and underrated decisions an investor makes. A poor structure limits your future borrowing capacity, creates tax complications and reduces your ability to sell or refinance individual assets. This guide covers the correct approach for Australian portfolio investors.
Core Principles of Good Loan Structure
- Keep every investment loan separate and standalone (avoid cross-collateralisation)
- Keep your PPOR loan completely separate from investment loans
- Use offset accounts against your PPOR loan to reduce non-deductible interest
- Use interest-only on investment loans if negatively geared
- Draw investment equity via separate loan splits, not redraw (for tax clarity)
Recommended Structure for a 3-Property Portfolio
| Property | Loan Type | Security | Purpose |
|---|---|---|---|
| PPOR | PI with offset | PPOR only | Minimise non-deductible interest |
| Investment 1 | IO standalone | Investment 1 only | Maximise deductibility, preserve cash flow |
| Investment 2 | IO standalone | Investment 2 only | Independent refinance and sale rights |
| Equity draw | Separate loan split | Source property only | Deposit for next purchase (clearly deductible) |
Using Equity Correctly
When drawing equity for a new deposit, always create a new loan split rather than using redraw. Redraw mixes deductible and non-deductible funds, creating a tax contamination problem. A separate equity loan split keeps the investment purpose clear and fully deductible.
Frequently Asked Questions
Should I use the same lender for all my investment properties?
Not necessarily. Spreading across multiple lenders reduces concentration risk and gives you more flexibility to refinance individual properties independently. Some lenders also offer better terms for additional properties with the same institution.
What is a loan split and how does it work?
A loan split is a separate sub-account within your existing loan facility. It allows you to draw equity for a specific purpose (such as an investment deposit) while keeping it clearly separated from your original loan for tax purposes.
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