Investment Loans and Property Planning for FIFO Workers

Your FIFO income puts you in a position most tradies don't reach until later in their careers.

The question isn't whether you can afford an investment property. It's whether you're setting it up right so the rental income covers what it needs to, the tax deductions work in your favour, and you're not locked into a loan structure that costs you when circumstances change.

How Lenders Calculate Your Investment Loan Amount on FIFO Income

Lenders assess your investment loan application differently to your owner-occupied home loan because they factor in rental income and investment expenses. Your borrowing capacity depends on how much of your FIFO income they'll accept, what rental income they'll count, and how they treat the expenses.

Most lenders will only count 80% of projected rental income when calculating serviceability. They assume a vacancy rate to account for periods between tenants. If you're looking at a property that could rent for $500 per week, the lender calculates $400 per week as usable income. They also deduct property management fees, council rates, body corporate fees if applicable, and insurance costs before determining what you can service.

Your FIFO income gets assessed based on how the lender treats allowances. Some will accept 100% of your base plus allowances if you've been on the same roster for 12 months or more. Others discount allowances by 20%. This variation changes your borrowing power by tens of thousands of dollars depending on which lender you're working with. When you're planning to expand your property portfolio, knowing which lenders give full credit to your income structure makes a material difference to what you can access.

Interest Only Investment Loans Versus Principal and Interest

An interest only investment loan means you only pay the interest portion each month, not the principal. The loan balance stays the same for the interest-only period, which is typically one to five years.

Consider a diesel mechanic buying a $450,000 investment property in Port Hedland with a 20% deposit. The investment loan amount is $360,000. On principal and interest repayments at current variable rates, monthly repayments might sit around $2,400. On interest only, that drops to roughly $1,800. The $600 difference each month changes whether the property is negatively geared or close to neutral.

The benefit of interest only is cash flow. You're not building equity through repayments, but you're maximising tax deductions because all of the interest is deductible on an investment property. The trade-off is that you'll either need to start paying principal and interest after the interest-only period ends, refinance to another interest-only term, or sell the property. Many FIFO workers use interest only loans on investment properties while paying down their owner-occupied home loan faster, because owner-occupied interest isn't tax deductible.

Using Equity to Fund Your Investor Deposit

You don't need cash savings to buy an investment property if you've got equity in your home. Lenders will let you borrow against that equity to cover the deposit and purchase costs, which means you can buy without selling or draining savings.

Equity release works by increasing the loan on your existing property and using the additional funds for your investment property deposit. If your home is worth $600,000 and you owe $300,000, you've got $300,000 in equity. Lenders will typically let you access up to 80% of your home's value minus what you owe. That's $480,000 minus $300,000, giving you $180,000 in usable equity. After holding back for stamp duty and other costs, you've got a deposit for a property in the $400,000 to $500,000 range without needing Lenders Mortgage Insurance on the investment loan.

This strategy works well for FIFO workers who've been paying down their home loan while renting near site during swings. Your equity builds faster when you're putting extra repayments into your home loan, and that equity becomes the funding source for buying your first investment property without waiting years to save a separate deposit.

Variable Rate Versus Fixed Rate on Investment Property Finance

A variable interest rate moves with the market. A fixed interest rate locks in for a set period, usually one to five years. On investment loans, the decision depends on whether you value certainty or flexibility.

Variable rates give you the ability to make extra repayments without penalty, redraw funds if you need them, and refinance without break costs. If rates drop, your repayments drop. If they rise, you're exposed. Fixed rates lock in your repayment amount, which makes budgeting simpler and protects you if rates climb. The downside is you can't make extra repayments beyond a small annual limit, and if you need to refinance or sell during the fixed period, break costs can run into thousands of dollars.

Most investors on FIFO rosters prefer variable rates on investment properties because the loan structure might need to change. You might want to refinance to release more equity for a second property, switch from interest only to principal and interest, or consolidate debt. A variable rate gives you room to adjust without penalty.

Investment Loan Refinance to Access Rate Discounts

Refinancing your investment property loan means switching to a different lender or renegotiating with your current one. The main reasons to refinance are getting a lower interest rate, accessing equity for another purchase, or switching loan features.

Lenders offer better rate discounts to new customers than they give existing ones. If you took out an investment loan two years ago, you're probably paying 0.3% to 0.5% more than what the same lender is offering new borrowers today. That margin adds up. On a $400,000 loan, a 0.4% reduction saves you around $1,600 per year. Over time, that's either more cash flow or faster debt reduction if you switch to principal and interest.

Investment loan refinancing also lets you pull out equity if your property has increased in value. If you bought in Karratha or Newman a few years back and the property has appreciated, you can refinance to access that equity without selling. That equity funds the deposit on your next investment property, and the cycle continues.

Maximising Tax Deductions on Rental Property Loans

All interest on an investment loan is tax deductible, along with most expenses related to owning and managing the property. The deductions include loan interest, property management fees, council rates, insurance, repairs and maintenance, and depreciation on the building and fixtures.

Negative gearing happens when your deductible expenses exceed your rental income. That loss offsets your FIFO income, reducing your taxable income and increasing your tax refund. If your investment property costs you $8,000 more per year than it earns in rent, and you're on a marginal tax rate of 37%, you're getting back roughly $3,000 at tax time. The out-of-pocket cost is $5,000, not $8,000.

The key is keeping records of everything. Loan statements, invoices for repairs, property management statements, and receipts for any claimable expenses all matter when your accountant prepares your return. FIFO workers often miss deductions on travel costs if they need to visit the property for inspections or maintenance, or depreciation schedules that unlock thousands in deductions without spending a dollar.

Call one of our team or book an appointment at a time that works for you. We'll look at your income structure, work out your actual borrowing capacity across different lenders, and set up an investment loan that fits your roster and your plans for portfolio growth.

Frequently Asked Questions