How Can You Buy a Rental Property Without Draining Your Savings?

• By Fineducke Team

• 291

• Last updated Feb 15, 2026

Stop listening to your parents about real estate. They bought houses in the 80s when interest rates were 17%, but a house in Sydney cost two years' salary. The old advice says you need to scrape together a 20% deposit plus stamp duty before you even look at a rental listing.

That is terrible advice.

If you wait until you have $150,000 sitting in a savings account to buy a median-priced investment property, you are going to be waiting a decade. Meanwhile, prices will go up, and your cash will rot away due to inflation.

I bought my first unit with less money than I paid for my used ute. It wasn’t luck. It was math. You need to understand leverage and the ATO tax rules, not just how to save pennies. Here is how you actually get into the game without emptying your offset account.

Utilizing Second Mortgage Loans for Maximum Leverage

Most new investors are terrified of debt. They think the goal is to pay off the house. Wrong. The goal is cash flow and capital growth. You want to control the asset with as little of your own money as possible.

One of the most effective tools for this is utilizing second mortgage loans.

Here is the simple version: A second mortgage loan is a secondary loan secured against the equity in your current property. Crucially, it sits behind your existing mortgage.

Why does this matter? Because you don’t have to refinance your primary loan. If you locked in a great rate with your bank a few years ago, you don't want to touch that. A second mortgage lets you access your equity without disturbing that first loan.

You generally go to a non-bank lender for this. They are faster and more flexible than the big four banks. They look at your equity, give you a lump sum, and often set it up as an interest-only, fixed-rate repayment.

I used this logic recently. Instead of selling a property to release cash (and paying agent fees and Capital Gains Tax), I used a second mortgage to pull the equity out. I used that cash as the deposit for the next rental.

It’s a specific tool for a specific job: accessing capital for opportunities—like a new property or a renovation—without the headaches of refinancing or selling.

Understanding the Depreciation Schedule for Rental Property and Tax Benefits

The Australian tax system is practically written for property investors. Negative gearing gets all the headlines, but depreciation is the silent killer that builds wealth. It’s not just about the rent checks; it’s about what the ATO lets you keep.

When you buy a rental, the ATO lets you deduct the building’s wear and tear over time. They assume the building is losing value, even if the market price is skyrocketing.

Here is the magic trick. On paper, you might look like you are losing money. But in your bank account, you have cash.

You need to understand the standard depreciation schedule for rental property. In Australia, for the building structure (Capital Works), you can generally claim 2.5% of the construction cost per year for 40 years. Plus, you get faster deductions on "plant and equipment" like carpets, blinds, and air cons.

Let’s say you buy a newer build. You get a Quantity Surveyor to draw up a report. You might be deducting $10,000 to $15,000 a year from your taxable income just for owning the building.

I had a year where I made legit profit from rent. But because of depreciation and other deductions, my taxable income dropped significantly. I got a massive refund at tax time. Try doing that with a regular PAYG wage. You can't.

House Hacking with Low Deposit Loans to Minimize Upfront Costs

If you want to buy a rental without a mountain of cash, you have to make sacrifices. First Home Buyer schemes allow you to get in with as little as 5% deposit.

The catch? You have to live there for typically 6 to 12 months.

So, buy a duplex or a house with a granny flat potential. Live in one part. Rent out the other. This isn't sexy. I lived in a place for two years where I could hear my tenant’s TV through the wall every night.

But the numbers don't lie.

The tenant paid a chunk of the mortgage. I lived cheaply. And because I only put 5% down, I kept my savings for renovations. After the required period, you can move out, turn it into a full investment property, and do it again. This is the "rentvesting" mindset but with an owner-occupier start.

People refuse to do this because they want the passive income lifestyle without the grit. They want the turnkey property in a nice suburb. Those deals require heavy cash. If you are broke, you trade comfort for equity. That’s the deal.

Managing Interest Rates When Investing in Real Estate

I hear this excuse every day. "The RBA keeps holding rates high."

So what?

If the numbers work at 6 or 7%, they work. If rates drop later, you refinance. If they go up, you look like a genius for locking in at today’s prices before borrowing capacity shrinks further.

The purchase price matters way more than the rate. You date the rate; you marry the price. When you drain your savings to put a huge deposit on a property just to lower your weekly repayment by $50, you are killing your agility.

Cash in the bank (or an offset account) gives you options. Equity in a house is dead money until you sell or refinance.

Final Thoughts on Investing in Rental Properties

You don't need to be on a CEO salary to buy rental property in Australia. You need to be creative.

Stop trying to save your way to wealth. It takes too long. Use the bank's money. Use the tax code to keep the money you make.

Find a deal where the numbers work with low money down. Look into second mortgage loans to unlock the equity you already have without breaking your current mortgage. Just get the first deal done. The first one is the hardest. The second one is just paperwork.