Or, to put it another way, LVRs set the restriction for just how much money a bank can loan to you compared to the value of your house.

The LVR restrictions are stricter for investors than for other types of borrowers.

For investors, the bank can only lend you up to 65% of your property’s value (for an existing property). That means you – as an investor ­– need to put in the rest of the money (35%) as a deposit.

Case study: examples of real-life deposits

Using real-world examples, let’s look at how deposits can change based on the property.

Example #1 New Build – Belfast, Christchurch

This property is available to Opes Partner investors (at the time of writing).

It is a 4-bedroom standalone house based in Belfast, Christchurch, and costs $769,000.

The deposit required for this property is 20%. Therefore, an investor wanting to buy this house needs a $153,800 deposit.

Example #2 Existing property – Highcliff, Dunedin

Here is another property currently available for purchase on Trade Me.

It’s also a 4-bedroom standalone house, this time based in Dunedin. Its asking price is currently $649,000.

If an investor bought this property and paid the asking price, they would need a 30% deposit. That means putting down $194,700.

Even though the existing property is cheaper, it requires a $40,900 higher deposit.

How do (most) property investors get the deposit?

Many people new to property investment are often surprised to hear that most investors don’t use cash for their deposits.

Instead, they use their equity (wealth) within their home as a deposit.

The way you do this is –

• you take out a new loan secured against your house, and
• you use that money as the deposit for your investment

The extra amount you can borrow against your own home (or another property) is called ‘usable equity’. Here’s how it works

If you’ve owned your own home for a while two things are likely to have happened:

• You’ve paid down some of your mortgage
• Your property has probably also increased in value.

This creates wealth within your home because it’s worth more, and you’ve got less debt held against it.

You can borrow against this wealth for a deposit for an investment property.

The formula for calculating your usable equity in your own home is as follows:

(Home Value x 0.8) – Personal Mortgage = Usable Equity.

You can also use our calculator to run the numbers for you:

Equity and leverage calculator.

What are my next steps?

Returning to our initial question: How much deposit do you need to buy an investment property?

The answer depends on what sort of property you want to buy.

For a New Build, you need 20%. For an existing property, you need 30%. Or for something more specific, you may need 50%.