Top tips to grow your property portfolio as a dentist

Public health dentists often ask whether their income profile supports multiple investment properties

Your salary as a public health dentist is steady, documented and reliable, which lenders recognise. The challenge is that your borrowing capacity gets compressed each time you add a property, and the speed at which that happens depends on how each loan is structured and whether you're holding rental income or absorbing losses. Lenders assess your ability to service a new investment loan by applying a buffer of at least 3.0 percentage points above the loan rate and treating rental income at a discounted rate, typically 80 per cent of market rent. Every additional property reduces the amount you can borrow for the next one, so the order in which you acquire properties and the way you structure each loan will determine how far your income can stretch.

Consider a public health dentist earning $160,000 annually who owns an investment property with a $600,000 loan, receiving $2,400 per month in rent. The lender treats that rental income at 80 per cent, or $1,920 per month, and assesses the loan repayment at a stressed rate roughly 3.0 percentage points higher than the actual rate. If the loan is principal and interest, the serviceability impact is larger than if it's interest only, because principal and interest repayments are calculated at the higher stressed rate. The rental shortfall, after accounting for loan repayments and other holding costs, reduces the borrower's remaining capacity for a second property. Switching that first loan to interest only during the accumulation phase reduces the assessed repayment and preserves capacity for the next purchase.

Interest only periods preserve borrowing capacity during portfolio growth

Interest only repayments on an investment loan are lower than principal and interest, which reduces the monthly outgoing used in serviceability calculations. This structure is commonly used during the acquisition phase when you're building a portfolio and need to maximise your capacity to borrow for the next property. Once the portfolio is established and you're no longer acquiring additional properties, you can revert loans to principal and interest to begin reducing debt.

Most lenders offer interest only periods of up to five years on residential investment loans. After that period, the loan reverts to principal and interest unless you apply to extend the interest only term. Some lenders will allow extensions, particularly where equity has grown or rental income has increased, but each extension request is assessed on current serviceability and policy. Under the prudential framework, a long-term interest only residential loan with an LVR above 80 per cent and an interest only period exceeding five years is classified as non-standard, which attracts higher capital costs for the lender. That means you'll generally need to keep your LVR at or below 80 per cent if you want flexibility around extending interest only terms beyond five years.

Lenders apply a debt-to-income limit of six times your gross income to 20 per cent of new investor loans

From 1 February 2026, authorised deposit-taking institutions can lend no more than 20 per cent of their new investor loans to borrowers with a total debt-to-income ratio of six times or more. If your gross income is $160,000, that threshold is $960,000 in total borrowing across all properties. If you already hold $600,000 in investment debt and want to borrow another $500,000 for a second property, your total debt would be $1.1 million, which is 6.875 times your income. That puts you in the high DTI cohort, and the lender can only approve that loan if they haven't already allocated their 20 per cent quota for the quarter.

This doesn't mean you can't borrow above six times income. It means the lender has a quarterly cap on how many high DTI loans they can write in the investor segment. Some lenders have internal DTI limits stricter than the regulatory threshold, others may have capacity available depending on the time of year and the composition of their lending book. If one lender declines on DTI grounds, another lender may still approve the same loan. You can also increase your borrowing headroom by paying down existing debt, adding a co-borrower, or timing your application strategically within the lender's reporting cycle.

How rental income and vacancy assumptions affect the amount you can borrow

Lenders assess rental income at 80 per cent of the market rent figure provided in a rental appraisal or lease agreement. The 20 per cent discount accounts for vacancy periods, maintenance, and other non-recoverable costs. If a property generates $2,500 per month in rent, the lender will use $2,000 per month in their serviceability calculation. Some lenders apply a higher discount, particularly in regional areas or markets with known high vacancy rates. If you're buying in an area with a vacancy rate above 3 per cent, expect the lender to take a more conservative view on rental income.

Where a property is not yet tenanted, the lender will rely on a rental appraisal from a licensed real estate agent. That appraisal must be recent, typically within the past 90 days, and reflect current market conditions. If you're purchasing a property that requires minor cosmetic work before it can be tenanted, some lenders will still accept a rental appraisal, but others may want evidence that the work has been completed and the property is available for lease. If the property is already tenanted and you're buying with a tenant in place, the existing lease provides the rental figure, and the lender will generally accept that unless the rent is materially above or below market.

Offset accounts and redraw facilities work differently for investment loans

An offset account linked to an investment loan reduces the interest you pay each month, but it doesn't reduce the loan balance for the purpose of calculating your tax-deductible interest. If you have a $500,000 investment loan and $50,000 sitting in an offset account, you pay interest on $450,000, but you can still claim deductions on the full $500,000 loan because the borrowed amount hasn't changed. Redraw works differently because when you make extra repayments and then redraw those funds, you may be creating a mixed-purpose loan, which complicates the deductibility of interest if the redrawn funds are used for private purposes.

For investors holding multiple properties, offset accounts provide flexibility to manage cash flow across the portfolio without affecting the deductibility of interest on each loan. You can direct surplus rental income and savings into the offset account linked to your owner-occupied loan, if you have one, to reduce non-deductible interest first, or into the offset linked to the investment loan that has the highest rate. Some lenders allow multiple offset accounts to be linked to a single loan, which can help if you're managing rental income from several properties and want to keep funds separated for accounting purposes. Not all investment loans for dentists include offset functionality, and where it's available, it's more commonly offered on variable rate products than fixed rate products.

Refinancing existing investment loans can release equity and improve cash flow

As property values increase, the equity in your existing investment properties grows, and you can access that equity to fund the deposit and costs for your next purchase. Most lenders will lend up to 80 per cent of the property's current value without requiring Lenders Mortgage Insurance. If you bought a property for $600,000 and it's now valued at $750,000, you have $150,000 in equity growth. At 80 per cent LVR, the lender will allow total borrowing of $600,000 against that property. If your current loan is $500,000, you can access $100,000 in usable equity, less any refinancing costs.

Refinancing can also improve cash flow if you secure a lower rate or switch from principal and interest to interest only. Even a 0.30 per cent reduction in the rate on a $500,000 loan reduces your monthly repayment by roughly $125, and that reduction flows straight into your serviceability calculation for the next loan. Where you're refinancing to access equity, the new loan amount includes the amount you're drawing plus the costs of refinancing, such as valuation fees, discharge fees from the outgoing lender, and any break costs if you're exiting a fixed rate early. You can find more about this process at investment loan refinancing for dentists.

Fixed and variable rate splits let you manage rate risk without locking in your entire loan

A split loan structure allows you to fix a portion of your investment loan and leave the remainder on a variable rate. If you have a $600,000 loan, you might fix $400,000 for three years and leave $200,000 variable. The fixed portion gives you certainty on repayments for that term, and the variable portion gives you flexibility to make extra repayments or access redraw without incurring break costs. Fixed rate loans generally don't allow extra repayments beyond a small annual cap, often $10,000 to $20,000 per year, and they don't typically include offset accounts.

If you're planning to refinance or sell the property within the next few years, keeping a larger portion of the loan on a variable rate reduces the risk of incurring break costs. Break costs apply when you exit a fixed rate loan early, and they're calculated based on the difference between the fixed rate you're paying and the wholesale rate the lender can now achieve by redeploying that funding. Those costs can run into thousands of dollars, particularly if rates have fallen since you fixed. If you're unsure about your plans over the next few years, a variable rate or a majority-variable split gives you more flexibility. Borrowers approaching a fixed rate expiry should review their options at least 90 days before the fixed term ends to avoid rolling onto a higher revert rate.

Negative gearing rules changed for properties purchased after 12 May 2026

If you purchased an investment property on or before 7:30pm AEST on 12 May 2026, or you had a contract in place at that time, you can continue to deduct losses from that property against your salary income for as long as you hold it. That treatment is grandfathered. If you purchase an established property after that date, losses can only be offset against other residential property income, including capital gains on residential property, from the 2027-28 income year onward. Excess losses can be carried forward to future years and used against residential property income when it arises.

Eligible new build properties purchased after 12 May 2026 remain fully deductible against all income, including salary. A new build is defined as a dwelling constructed on previously vacant land or a development that increases the number of dwellings on the site. A knock-down rebuild that replaces one dwelling with one dwelling does not qualify. If a new build is occupied by an owner or tenant for more than 12 months and is then sold, the next investor who purchases that property will be subject to the established property rules, meaning losses can only be offset against residential property income.

For public health dentists purchasing after 12 May 2026, the distinction between new and established properties affects the after-tax cash flow of holding multiple properties. If you're acquiring a second or third property and you expect it to run at a loss, buying an eligible new build preserves your ability to offset that loss against your salary, which improves your cash flow and may also improve your serviceability when applying for your next loan. You should discuss the tax treatment of any purchase with a registered tax agent before proceeding, as the rules are detailed and the ATO has published specific guidance on what qualifies as a new build.

Using equity from your owner-occupied property to fund investment purchases

If you own your own home and have equity in that property, you can use it to fund the deposit and costs for an investment property purchase. The lender will assess the combined LVR across both properties and your ability to service both loans. If your home is worth $900,000 and you owe $400,000, you have $500,000 in equity. At 80 per cent LVR, the lender will allow total borrowing of $720,000 against your home. You currently owe $400,000, so you can access $320,000 in usable equity.

When you draw equity from your home to invest in property, the interest on that drawdown is generally tax deductible because the borrowed funds are being used to acquire an income-producing asset. The key requirement is that the funds must be used directly for the investment purpose. If you draw $100,000 from your home loan and use $80,000 as a deposit on an investment property and $20,000 to renovate your own home, only the interest on the $80,000 is deductible. Keeping the loans and the purpose of each drawdown clearly separated is important for tax record-keeping. This structure is sometimes called debt recycling when applied systematically over time. You can read more at debt recycling and equity release loans for dentists.

Call one of our team or book an appointment at a time that works for you. We'll review your current position, model your serviceability across multiple scenarios, and identify which lenders and loan structures give you the flexibility to grow your portfolio while keeping your cash flow manageable.

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