A bloke sat across from me at a cafe a few weeks back, flat white going cold, and asked the question I get more than almost any other. How much of an investment property deposit do I actually need before I can buy? He had a number stuck in his head. Twenty per cent. It had been sitting there for a couple of years, quietly holding him back.
I get it. That number feels like a wall. On a median-priced home right now, 20 per cent is close to $188,000. For a lot of people that figure sounds like a decade of saving, so they file the whole idea away under “one day” and get on with their lives.
Here is what most people get wrong. The deposit question has more than one right answer, and the number you land on says a lot about the kind of investor you are going to be. So let me walk you through what you actually need, where the 20 per cent figure comes from, when a smaller deposit makes sense, and the costs that catch people out after the deposit is sorted.
The 20% Investment Property Deposit Rule (And Where It Comes From)
Let me start with the number everyone knows. Twenty per cent.
The reason that figure matters comes down to one bit of banking maths called the loan to value ratio, or LVR. Your LVR is simply the size of your loan divided by the value of the property. Put down 20 per cent on a $600,000 property, borrow the other $480,000, and your LVR is 80 per cent.
Eighty per cent is the magic line. Below it, lenders are comfortable. Above it, they get nervous, and they make you pay for their nerves through something called lenders mortgage insurance. More on that in a minute.
So when people say you need a 20 per cent investment property deposit, what they really mean is that 20 per cent is the amount that keeps you under the 80 per cent LVR line and out of insurance territory. It is the clean, no-complications option. Nothing more mysterious than that.
To give you a sense of the real dollars, a 20 per cent investment property deposit on the national median dwelling value (around $941,000 in mid 2026) is roughly $188,000. But that national figure hides a huge spread. On capital city medians earlier in 2026, a 20 per cent deposit ran from about $127,000 in Darwin to around $256,000 in Sydney. Where you buy changes the number enormously, which is one of the quiet reasons smart investors look well beyond their own backyard.
I have seen this play out dozens of times. Someone in Sydney assumes they need a quarter of a million dollars to start, when the right investment-grade property two states over needs a deposit less than half that. The 20 per cent rule is real, but the suburb you apply it to is a choice.
Can You Buy With a Smaller Investment Property Deposit?
Short answer: yes. Plenty of investors get started with a smaller investment property deposit of 10 per cent, and some lenders will go as low as 5 per cent for the right borrower.
The catch is lenders mortgage insurance, or LMI. When your deposit is under 20 per cent, the lender makes you take out an insurance policy that protects them (not you) if you default. It is a one-off cost, and it is not small. On an investment loan it tends to run higher than it would for an owner-occupier, and depending on the size of your loan and how low your deposit is, you could be looking at anywhere from $8,000 to $30,000. The government’s MoneySmart site has a plain-English rundown of how lenders mortgage insurance works if you want to understand exactly what you are paying for.
So the real question most people wrestle with is whether paying LMI to get in sooner beats waiting another two or three years to save the full 20 per cent. There is no universal answer. In a market that is climbing, the growth you capture by buying now can dwarf the insurance premium. In a flat market, you might be better off waiting and keeping that cash. I have broken down that exact trade-off in detail over here: should you save a 20% deposit or pay LMI.
And that is where most people come unstuck. They treat the deposit as a pure savings target, when it is really a timing decision. Buying a quality asset two years earlier with a smaller deposit can be worth far more than the premium you paid to do it. Or it can be a mistake, if the property is ordinary and the market goes sideways. The deposit size is not the thing that matters most. The quality of what you buy is.
One more point worth making. A small deposit does not just cost you LMI. It means a bigger loan, bigger repayments, and a thinner buffer if rates move or the property sits empty for a few weeks. So if you go in with 5 or 10 per cent, your borrowing capacity and your cash flow need to genuinely stack up, not just scrape through. If you are not sure yours does, this piece on how to increase your borrowing capacity is a good place to start.
Using Equity Instead of Cash for Your Deposit
Here is the part that changes the game for a lot of people, and most of them have no idea it is even on the table.
Your investment property deposit does not have to be cash sitting in a savings account. If you already own a home, or another property, the equity you have built up in it can do the job instead. Equity is just the difference between what your property is worth and what you still owe on it.
Lenders will generally let you borrow against your home up to 80 per cent of its value. So the usable equity is 80 per cent of the current value, minus whatever you still owe. If your home is worth $800,000 and you owe $400,000, that is $640,000 minus $400,000, which leaves around $240,000 of usable equity. That is often more than enough to cover a full deposit plus costs on your next purchase, without touching your savings.
To be honest with you, this is how a big chunk of Australian portfolios get built. People do not save their way to five properties. They recycle equity from one into the deposit for the next. It is a genuinely powerful approach, and I have written a full guide on using equity to buy an investment property that walks through the mechanics.
Two things to keep in mind. First, the bank will usually want you to hold on to some equity in your existing property, so you cannot strip it bare. Second, equity gets you the deposit, but you still need the income to service two loans. Equity opens the door. Serviceability decides whether you can walk through it.
The Costs That Come After the Deposit
This is the bit that catches people off guard, and it is the reason I never let a client budget for the investment property deposit alone.
The deposit is the headline number, but it is not the whole bill. On top of it, you are up for a stack of upfront costs that usually add up to somewhere between 5 and 7 per cent of the purchase price. Skip over these and you can find yourself short at the worst possible moment, right before settlement.
The big one is stamp duty. Depending on your state and the price of the property, it is usually somewhere around 3 to 5 per cent of the purchase price, and investors almost never qualify for the concessions first home buyers get. On a $550,000 purchase that can mean anywhere from roughly $17,000 to $29,000 depending on which state you buy in. The numbers move around a lot, so always check your own state or territory revenue office before you lock in a budget. I have gone deeper on this in the guide to stamp duty on investment property.
Then there are the smaller line items that add up fast:
- Conveyancing and legal fees, usually around $1,000 to $3,000, to handle the contract, title searches and settlement.
- Building and pest inspections, generally $400 to $800, which is money I would never skip. A good inspection has saved my clients far more than it has ever cost.
- Loan application, valuation and registration fees, which can run anywhere from nothing to around $1,500 depending on the lender.
- LMI, if your deposit is under 20 per cent, which as I mentioned can be the biggest extra cost of the lot.
As a rough rule, budget a buffer of $30,000 to $50,000 on top of the deposit for a capital-city median property. Put the worked example together and a $600,000 purchase with a 20 per cent deposit looks like roughly $120,000 for the deposit plus $25,000 to $40,000 in costs, so you want to see something close to $145,000 to $160,000 in available funds before you start.
And remember, the costs do not stop at settlement either. Once you own the place there are ongoing holding costs to plan for. The deposit gets you in the door. A sensible buffer keeps you there.
How Much Deposit for Your Second Property?
If you already own one investment property and you are eyeing the next, the investment property deposit conversation shifts.
The same 20 per cent and 80 per cent LVR logic applies to the loan itself. What changes is where the deposit comes from and whether the banks will let you go again. Most investors buying a second place are not saving a fresh pile of cash. They are tapping the equity in property number one, exactly as I described above.
The thing that trips people up on the second one is rarely the deposit. It is serviceability. The banks look at your existing loan, your rental income, your living costs and the buffer they apply to interest rates, and they decide whether you can carry both loans at once. Plenty of people have the equity for a second deposit and still get knocked back because the income side does not stack up. If that is the stage you are at, I have written specifically about buying your second investment property and the mistakes that stall people right there.
The logic is fairly straightforward. Property one builds the equity. That equity becomes the deposit for property two. But it only works if your borrowing capacity keeps pace, which is why structure and strategy matter more and more as you scale.
Working Out Your Real Number
So, what do you actually need? Here is how I would have you think about it.
Start with the property, not the deposit. Decide what kind of asset you are chasing and roughly what it costs in the markets that make sense for your budget. A good investment-grade property in a well-chosen location might cost far less than the median in your home city.
Then work backwards. Twenty per cent of that price is your no-LMI investment property deposit. Add 5 to 7 per cent for stamp duty and costs. That total is your clean, no-complications number.
Now ask the honest questions. Do you have equity you can use instead of cash? Could a smaller deposit plus LMI get you into a quality asset two or three years sooner, and is that worth it given where the market is? Does your income actually support the loan you would need? Your real number sits at the intersection of those answers, and it is almost never the scary figure people start with.
I have spent the best part of fifteen years doing exactly this for clients, and across our community of more than 78,000 investors the pattern is the same. The people who get moving are not the ones with the biggest deposits. They are the ones who understood their real number, picked the right asset, and acted. Our clients have averaged a 22.35 per cent return on the deals we have secured, against roughly 6 per cent average market growth, and almost none of them started with a quarter of a million dollars in the bank.
Frequently Asked Questions
What is the minimum deposit for an investment property in Australia?
The minimum investment property deposit some lenders will accept is as little as 5 per cent, though 10 per cent is more common at the low end, and either way you will pay lenders mortgage insurance because your loan to value ratio is above 80 per cent. Twenty per cent is the figure that avoids LMI entirely. The right minimum for you depends on your income, your buffer and whether the asset is worth getting into sooner rather than later.
Do I need a 20% deposit to buy an investment property?
No, you do not strictly need 20 per cent, but it is the deposit that keeps you under the 80 per cent LVR line and out of lenders mortgage insurance. You can buy with less and pay the insurance, or you can use equity from a property you already own instead of cash. Twenty per cent is the clean option, not the only option.
Can I use equity instead of a cash deposit for an investment property?
Yes, and a large share of experienced investors do exactly that. Lenders generally let you access up to 80 per cent of your existing property’s value minus what you still owe, and that usable equity can cover your deposit and costs. You still need the income to service both loans, so equity solves the deposit side but not the serviceability side.
How much money do I need in total, not just the deposit?
Budget for the deposit plus another 5 to 7 per cent of the purchase price in upfront costs, mostly stamp duty, with conveyancing, inspections and loan fees on top. On a capital-city median property that extra buffer often lands between $30,000 and $50,000. If your deposit is under 20 per cent, add LMI to that total as well.
Key Takeaways: Investment Property Deposit in Australia
- A 20 per cent deposit is the figure that keeps your loan under the 80 per cent LVR threshold and avoids lenders mortgage insurance, which is where the well-known number comes from.
- You can buy with a smaller deposit of 5 to 10 per cent, but you will pay LMI, carry a bigger loan, and need your cash flow and borrowing capacity to genuinely stack up.
- Your deposit does not have to be cash, because usable equity in a property you already own can cover it, and that is how most larger portfolios actually get built.
- The deposit is not the full bill, so budget another 5 to 7 per cent of the purchase price for stamp duty, conveyancing, inspections and loan costs before you commit.
- For a second property the deposit usually comes from equity, and the real hurdle becomes serviceability rather than the deposit itself.
- Your real number depends on the asset you choose, the market you buy in, and whether you use cash or equity, and it is almost always lower than the figure that scared you off in the first place.
Investment Property Deposit in Australia: Final Thoughts
The deposit question stops more people from investing than almost anything else, and most of the time it is the wrong thing to be stuck on. Twenty per cent is a useful benchmark, not a law. Depending on your situation, the right investment property deposit might be 20 per cent in cash, it might be 10 per cent plus insurance, or it might be equity you already have sitting in your own home without realising it.
My direct take, after doing this for the better part of fifteen years, is this. The size of your deposit matters far less than the quality of what you buy and the timing of when you buy it. I have watched people sit on the sidelines for years saving toward a number that was never really the obstacle, while the market quietly moved on without them.
Get clear on your real number. Work out whether cash or equity is the smarter path for you. Check that your income supports the loan, not just the deposit. Then make a decision based on the asset in front of you, not a figure you half-remember from a mate at a barbecue.
This is exactly the work we do for clients every week, taking the guesswork out of the deposit, the structure and the property itself, so you buy the right asset at the right time instead of waiting for a perfect deposit that keeps drifting further away. If you want a clear read on what you can actually do right now, let’s talk it through properly.
