How to Acquire Two Investment Properties in Richmond

Building a Two-Property Portfolio Without Overextending

You can acquire two investment properties by purchasing the first with sufficient deposit and income capacity, then using equity from that property to fund the second deposit while meeting serviceability requirements on both loans.

In Richmond, where established apartments near Bridge Road may sit around the mid-range for the broader Melbourne inner-city market and renovated Victorian terraces command much higher values, the difference in entry price between property types changes how quickly you can move from one property to the next. A buyer who starts with a lower-entry apartment and allows some capital growth before accessing equity will generally have a clearer path to a second purchase than someone who stretches to buy the terrace first and exhausts their borrowing capacity immediately.

Consider a buyer who purchases a one-bedroom apartment as their first investment property. They hold a 20 per cent deposit, their rental income covers most of the loan repayment, and their employment income services the shortfall. Twelve to eighteen months later, the property has appreciated modestly and they have paid down some principal. They approach a broker to assess whether they can access equity for a second deposit without selling the first property. The broker calculates usable equity, applies the lender's serviceability buffer, and determines whether the buyer's income can service both loans plus living expenses. If the numbers work, the buyer proceeds. If not, they wait, increase income, or adjust expectations on the second property type.

How Equity Release Works When You Already Hold One Property

Equity is the difference between your property's current value and the outstanding loan balance. Lenders will typically allow you to borrow up to 80 per cent of the property's value without paying Lenders Mortgage Insurance, meaning your usable equity is capped at 80 per cent of the valuation minus your existing loan.

If your Richmond apartment was purchased for $500,000 with a $100,000 deposit and is now valued at $550,000 with a loan balance of $380,000, your total equity is $170,000. Lenders will allow you to borrow up to $440,000 against that property without triggering LMI. Subtracting the existing $380,000 loan leaves $60,000 in accessible equity. That $60,000 can be used as a deposit on a second property, though you will still need to cover stamp duty and other settlement costs separately unless you increase the loan further and accept the LMI premium.

Lenders assess the combined loan-to-value ratio across your portfolio and your ability to service both loans simultaneously. You do not get a separate income test for each property. Your total debt is measured against your total income, and that ratio must fall within the lender's policy, which since February this year includes the requirement that no more than 20 per cent of new investor lending can go to borrowers with a debt-to-income ratio of six times or more.

Serviceability Is Tested on Both Loans at the Same Time

Every lender applies a serviceability buffer of at least 3 percentage points above the loan product rate when assessing your ability to repay. If your variable rate is 6.2 per cent, the lender tests your capacity at 9.2 per cent. This test applies to the total debt across both properties, not each loan in isolation.

Rental income from your investment properties is included in the assessment, but lenders typically apply a shading factor of 20 per cent to account for vacancy, maintenance, and periods without a tenant. If your Richmond apartment generates $450 per week in rent, the lender will assess it at $360 per week. That reduced figure is added to your employment income, then your total living expenses and the theoretical repayments on both loans are deducted. What remains must be positive and sufficient to meet the lender's minimum surplus threshold.

In our experience, buyers who assume rental income will fully offset the loan repayment are often surprised during the assessment. The combination of rental shading, the serviceability buffer, and living expense benchmarks means you need genuine surplus income to support a second property, even if the rent on paper looks adequate.

Interest-Only Loans and How They Affect Your Borrowing Capacity

Many investors choose interest-only repayments on investment loans to reduce monthly outgoings and preserve cash flow. An interest-only loan on a $400,000 balance at 6.2 per cent requires roughly $2,067 per month in repayments, compared to around $2,600 on a principal-and-interest loan over 30 years. The difference improves your serviceability position when applying for the second loan because the lender assesses your current repayment obligation, not a theoretical future obligation.

However, interest-only periods are typically limited to five years, and lenders are aware that the loan will eventually revert to principal and interest. Some lenders will assess serviceability on a principal-and-interest basis even when you select interest-only, particularly if your loan-to-value ratio is above 80 per cent or the interest-only term is not clearly defined. Under the prudential framework, a long-term interest-only loan with an LVR greater than 80 per cent and a term longer than five years is classified as non-standard, which attracts a higher risk weighting and may result in stricter assessment.

If you are relying on interest-only to make the numbers work, confirm with your broker how each lender treats that structure in their serviceability model. A lender who assesses on principal-and-interest terms will reduce your maximum borrowing capacity compared to one who assesses on interest-only.

Timing the Second Purchase Around Market Conditions and Portfolio Balance

Richmond's proximity to the CBD, established transport links including the train line and tram routes along Bridge Road and Church Street, and the mix of period homes and contemporary apartments create different timing considerations depending on which property type you are targeting. Apartments may offer lower entry prices and higher rental yields, while townhouses and terraces typically appreciate more steadily but require larger deposits and generate lower yields relative to purchase price.

If your first property is an apartment and you are targeting a second apartment in the same suburb or a neighbouring area such as Abbotsford or South Yarra, you are building a portfolio concentrated in one asset class and one geographic area. That approach can work if your goal is to accumulate multiple properties quickly using lower entry prices, but it also exposes you to localised market downturns and uniform vacancy risk. A buyer who diversifies by location or property type may experience more stable income across the portfolio, though the second property may take longer to acquire if the deposit requirement is higher.

Timing also depends on your income trajectory. A buyer expecting a salary increase, a partner returning to work, or a change in employment structure should factor that into the acquisition timeline. Lenders assess income at the time of application, so a pay rise that takes effect three months after you apply will not help your current serviceability. Delaying the second purchase by six months to establish the higher income in your tax records or payslips can materially increase your borrowing capacity.

What Happens When You Cannot Service Both Loans on Current Income

If your income does not support both loans under the lender's serviceability test, you have several options. You can wait and allow your income to increase, pay down the first loan to reduce the ongoing repayment, sell the first property and use the proceeds to fund two purchases simultaneously, or adjust your expectations on the second property to bring the loan amount within serviceability limits.

Some buyers consider adding a co-borrower, such as a spouse or family member, to increase the assessable income. This works only if the co-borrower has genuine income and is willing to take on joint liability for both loans. Lenders will assess the co-borrower's existing debts, living expenses, and credit history, and the combined application must still meet the debt-to-income limits that apply to new lending.

Another option is to refinance the first loan to a lender with a more favourable serviceability policy. Different lenders apply different expense benchmarks, rental shading factors, and treatment of income types. A lender who assesses your overtime, bonus, or rental income more generously may increase your borrowing capacity by tens of thousands of dollars without any change to your actual financial position. A broker with access to multiple lenders can model your scenario across different panels and identify which lender offers the highest approved amount.

How the Negative Gearing Rules Affect Properties Acquired After May Last Year

If you acquired your first investment property before 12 May last year, or it was under contract at that time, you can continue to deduct losses from that property against your salary and other income indefinitely. If you acquire a second established property now, losses from that property can only be offset against income from residential properties, including rent from the first property or capital gains when you eventually sell either property. Excess losses carry forward to future years.

This does not prevent you from acquiring a second property, but it does change the after-tax cash flow. A buyer who previously relied on a tax refund each year to cover holding costs on a negatively geared property will no longer receive that refund for the second property unless they have other residential property income to offset. You will need to fund the shortfall from your salary or savings without the tax benefit, which increases the cash flow requirement and may affect your willingness to proceed.

Interest, council rates, insurance, property management, and other deductible expenses remain claimable, but the value of those deductions is limited to your residential property income. If you are purchasing a new build, the negative gearing exemption applies and you can continue to deduct losses against all income, which is one reason many investors are now prioritising new builds over established stock when planning a second acquisition.

Structuring Your Loans to Preserve Flexibility and Manage Risk

Each property should be secured by its own mortgage, but the loans can be cross-collateralised if necessary to access sufficient equity or avoid LMI. Cross-collateralisation means the lender holds a mortgage over both properties to secure both loans. This can simplify the approval process and reduce upfront costs, but it also means you cannot sell or refinance one property without the lender's consent to release that security.

Where possible, keep the loans separate with each property securing only its own debt. This requires sufficient equity in the first property to fund the second deposit without relying on cross-securitisation, and it may mean paying LMI on one or both loans if your deposit falls short of 20 per cent. The trade-off is flexibility. If you want to sell the first property or move it to a different lender in future, you can do so without unwinding the entire structure.

Some buyers split their loans between variable and fixed rates to manage interest rate risk. A variable rate allows you to make extra repayments and access offset accounts, while a fixed rate provides certainty over repayments for a set period. If you are holding both properties long-term and relying on rental income to cover repayments, a portion of fixed-rate debt can protect your cash flow if variable rates rise further. However, fixed rates typically do not allow offset accounts, and breaking a fixed loan early can result in significant costs.

Your broker can structure the loans to match your goals, whether that is minimising upfront cost, maximising flexibility, or balancing interest rate risk across the portfolio. The structure you choose now will affect your options later, so consider where you want to be in five years, not just where you are today.

Growing a two-property portfolio in Richmond or the surrounding inner suburbs requires disciplined income management, a clear understanding of how lenders assess investment debt, and a realistic view of how equity, serviceability, and timing interact. The path from one property to two is not automatic, but it is achievable when the structure, income, and market conditions align. Call one of our team or book an appointment at a time that works for you.

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