The biggest risk in property investment is not the market.
It's borrowing more than your income can service when something changes. FIFO work gives you the income to build wealth through property, but it also comes with variables that make risk management critical: roster changes, project completions, and gaps between contracts.
How FIFO income affects borrowing capacity and serviceability
Banks calculate how much you can borrow by assessing your income after a serviceability buffer is applied. That buffer sits at 3 percentage points above the product rate, so if a variable rate sits around 6.5 per cent, the lender tests your ability to repay at roughly 9.5 per cent. They also apply a debt-to-income cap, which limits how much you can borrow relative to your gross income.
FIFO income is assessed differently by different lenders. Some will include overtime and allowances at 100 per cent if you have at least 12 months of consistent pay slips. Others shade overtime by 20 or 30 per cent, or exclude it entirely. A FIFO worker on a permanent roster earning $160,000 including allowances might find one lender assesses them at $160,000 and another at $120,000. The difference can be $100,000 or more in borrowing capacity, and it changes how much exposure you can safely take on.
Consider a mobile plant operator on a two-year contract in the Pilbara earning $170,000 a year, including allowances. If they borrow at maximum capacity under a lender that shades allowances and the contract ends without immediate replacement work, the repayments on an investment loan suddenly become unmanageable. If the property was purchased using principal and interest repayments and sits vacant for two months, the shortfall is immediate and substantial.
Loan structure and repayment type
Interest only repayments reduce the monthly cost of holding an investment property, which protects cash flow when rental income drops or when you are between contracts. The repayment on a $500,000 loan at 6.5 per cent is roughly $2,700 a month on interest only, versus $3,300 on principal and interest. That $600 difference per month becomes $7,200 a year, which can cover two months of holding costs if a tenant leaves or a roster changes.
Interest only periods typically run for one to five years, depending on the lender and loan to value ratio. Once the interest only period ends, the loan reverts to principal and interest and the repayment jumps. If you have not planned for that reversion, or if your circumstances have changed, the increase can force a sale or a refinance at a time that does not suit you.
Fixed rate loans lock in the interest rate for a set period, usually one to five years. They remove the risk of rate rises during that period, but they also remove flexibility. If you need to sell, refinance, or make extra repayments during the fixed term, break costs can apply. Those costs are calculated based on the difference between your fixed rate and the current wholesale rate, and they can run into tens of thousands of dollars if rates have fallen significantly since you fixed.
Variable rate loans cost more when rates rise, but they let you make extra repayments, redraw funds, and exit without penalty. For FIFO workers, that flexibility matters. If you finish a contract and need to access funds, or if you want to sell because your work has moved interstate, a variable rate loan gives you options.
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Loan to value ratio and equity buffers
Loan to value ratio measures how much you borrow relative to the property value. Borrowing at 90 per cent LVR means you hold 10 per cent equity. Borrowing at 80 per cent means you hold 20 per cent equity. The lower your LVR, the more buffer you have if property values fall or if you need to refinance.
Lenders Mortgage Insurance is required when you borrow above 80 per cent LVR. LMI protects the lender, not you, and it is a non-refundable cost that can run from a few thousand dollars to more than $20,000 depending on the loan amount and LVR. Some LMI waivers are available for FIFO workers in certain occupations, which can reduce upfront costs and improve cash flow at settlement.
If property values fall and your equity drops below 20 per cent, refinancing becomes difficult. Most lenders will not refinance above 80 per cent LVR without LMI, and if you are already holding an investment property with thin equity, that can lock you into an uncompetitive rate. Buying with a 10 per cent deposit leaves little room for market movement, particularly in regional areas where values can move quickly in either direction.
Vacancy, holding costs, and rental shortfalls
Rental income rarely covers all holding costs. Even with interest only repayments, you also pay council rates, water, strata fees if applicable, property management, landlord insurance, and maintenance. On a property with $2,700 in monthly interest, holding costs can add another $400 to $600 per month. If the property rents for $550 a week, or roughly $2,380 a month, the shortfall before tax is around $700 to $900 per month.
That shortfall is manageable when you are working and when the property is tenanted. It becomes a problem when the tenant leaves and the property sits vacant for six weeks, or when your roster is cut and your income drops by 30 per cent. Vacancy rates vary by location and property type. In Perth, vacancy rates have tightened significantly over the past two years, but regional towns with heavy exposure to a single mine site or project can see vacancy rates spike when rosters are cut or operations wind down.
In a scenario like this, a heavy diesel mechanic purchases an investment property in a Pilbara town with strong rental demand tied to an expanding mine. The property rents for $650 a week. Two years later, the mine announces a reduction in workforce and rental demand drops. The property sits vacant for three months while comparable properties in the area are listed at $500 a week. The mechanic is still working, but the rental income has disappeared and the holding costs are $3,200 a month. Without a cash buffer, that three-month period costs nearly $10,000 out of pocket.
Debt to income limits and portfolio growth
From 1 February 2026, lenders are restricted in how many new investor loans they can write at a debt-to-income ratio of six times or greater. If your total borrowings exceed six times your gross income, you may find fewer lenders willing to offer finance, or the rate and features on offer may be less competitive. For FIFO workers looking to build a portfolio, that cap limits how much leverage you can use, particularly if you already hold debt against your owner-occupied property.
Debt recycling can help reduce non-deductible debt and increase deductible debt over time, but it requires discipline and a clear understanding of the tax and cash flow implications. Debt recycling involves using investment loan funds or equity to pay down your home loan, then reborrowing against your home to invest. The interest on the reborrowed amount becomes deductible because the funds are used for investment purposes. It is a long-term strategy that works when income is stable and when you can manage the additional debt serviceability.
New negative gearing and capital gains tax rules from 1 July 2027
From 1 July 2027, net rental losses on residential properties purchased on or after 7:30pm AEST on 12 May 2026 can only be offset against other residential rental income or carried forward. You cannot offset those losses against your FIFO salary. Properties purchased before that time, or under contract before that time, are not affected.
The change removes one of the key cash flow benefits of property investment for salaried workers. Instead of reducing your taxable income each year by the rental shortfall, you carry the loss forward and apply it when you sell the property or when you have other rental income to offset it against. That increases the out-of-pocket cost of holding the property each year, particularly in the early years when rental income is lowest and interest costs are highest.
Eligible new builds remain exempt. If you purchase a newly constructed dwelling on previously vacant land, or a property where the number of dwellings has increased, you can still offset rental losses against salary and wages. A knock-down rebuild that does not increase the number of dwellings does not qualify, and neither does a substantial renovation of an existing property.
Capital gains tax rules also change from 1 July 2027. The 50 per cent CGT discount for individuals is replaced with cost base indexation and a minimum 30 per cent tax rate on real gains for properties purchased after that date. Properties held before 1 July 2027 continue under the old rules for gains that accrued before that date. Eligible new builds allow you to elect between the old 50 per cent discount and the new indexation method.
Both changes make new established dwellings less attractive as investments from a tax perspective, and they shift the risk calculation. If the tax benefit is smaller and the holding cost is higher, the property needs to perform better through capital growth or rental yield to deliver the same return. For FIFO workers with variable income, that makes cash flow planning and risk management even more important.
Foreign investment ban and supply constraints
The foreign investment ban on established dwellings, which runs until 30 June 2029, has reduced demand in some markets and shifted buyer activity toward new builds. For investors, that can mean less competition when purchasing established property, but it can also mean lower liquidity and longer selling periods if you need to exit quickly. Regional Western Australian towns with historically high levels of foreign investment activity have seen price movements flatten in some cases, which affects both short-term equity growth and refinancing options.
If you need to manage risk in a changing market, call one of our team or book an appointment at a time that works for you.
Frequently Asked Questions
Should FIFO workers use interest only or principal and interest repayments for investment loans?
Interest only repayments reduce monthly costs and protect cash flow during roster changes or vacancies. They typically run for one to five years before reverting to principal and interest, so you need a plan for when the repayment increases.
How does the debt to income cap affect FIFO property investors?
From 1 February 2026, lenders are limited in how many investor loans they can write at six times gross income or higher. If your total debt exceeds six times your income, fewer lenders will offer finance and rates may be less competitive.
Can I still negatively gear an investment property purchased after 1 July 2027?
Only if the property is an eligible new build on previously vacant land or increases the dwelling count. Established properties purchased after 12 May 2026 can only offset rental losses against other rental income, not salary or wages.
What loan to value ratio should FIFO investors target?
Borrowing at 80 per cent LVR or lower avoids Lenders Mortgage Insurance and leaves an equity buffer if property values fall or you need to refinance. Borrowing above 80 per cent increases upfront costs and limits flexibility.
How do vacancy rates affect investment property holding costs?
Even with rental income, most investment properties run a monthly shortfall once you include rates, insurance, maintenance, and management fees. If the property sits vacant for several weeks, that shortfall increases and you cover all costs out of pocket.
