To increase future tax deductions it is important to borrow as much as you can for investment purchases. Ideally you would borrow 105% of every purchase, including the first. See here to find out why: Tax Tip 60: Never use cash to invest https://propertychat.com.au/community/threads/tax-tip-60-never-use-cash-to-invest.4883/ But this can be difficult where the first property will be an investment property. However it is not impossible as I can think of 3 strategies to allow you to achieve this. 1. Borrow from parents This is the easiest way to do it. If you don’t have parents who can lend you can borrow or other family members or friends. This loan should be clearly documented and tax advice obtained as it will be refinanced later into the main loan. 2. Use parents property as security For your loan of 105% of the purchase price of the new property you will have 2 forms of security - both your parent’s property and your new property itself. this involves cross collateralising properties. Different lenders do thing differently but your parents are putting their property directly at risk in doing this. 3. Use Cash as Security You can also deposit a sum of money, say 25% of the purchase price, with the bank that is lending you the money to purchase. The bank can then take this term deposit as security and lend you 105% of the purchase price. example on the 3rd option. Tom buys a $500,000 property with $25,000 stamp duty and costs. Tom has $125,000 in cash. His mate tells him to take out an 80% loan so he can avoid LMI. HIs accountant says no, borrow 90% and LMI so you can maximise deductions. I say borrow 105% to avoid LMI and maximise deductions even more. Differences Borrows $400,000, interest is $20,000 pa at 5% Borrows $450,000, interest is $25,000 pa at 5%. LMI is about $10,000 too Borrows $525,000, interest is $26,250 pa at 5%. After 3 years the property is worth $660,000. Tom decides to move out of his mum and dad’s place and buy a main residence of his own. The effect would be: He used up all his cash on the investment property. He therefore has to borrow 105% of the new purchase price of the new property. He has $125,000 tied up in this property. He can still access it by borrowing against it, but it will cost him $125,000 x 5% $6,250 more per year in interest and this is not deductible Similar to a, except the extra interest will be just $85,000 x 5% is $4,250 per year. Plus the one of payment of $10k He would release the cash from being used as securty and the use it as deposit on the new property. This would mean he has $125,000 less borrowings for the main residence and $125,000 more borrowings for the investment property. That means $6,250 in extra tax deductions per year. At 37% marginal tax rate that is $2,312 per year extra cash in his pocket at 5% interest rate. Over 30 years or more (life of the property ownership) this could amount to a small fortune.