Buying guide

How much deposit do I need to buy an investment property?

Before you buy you’re going to need to save a large portion of the purchase price. Find out how much you need.

Last updated: 20 December 2023

Over half a million Kiwis and private businesses own at least one investment property, according to Valocity data. The popularity of property investment is no surprise, it can be a great way to build wealth and many Kiwis rely on property to fund retirement and win financial freedom.

Unfortunately the barriers to entry are high. With that in mind, we’re taking a closer look at how much deposit you actually need to buy an investment property.

Investment property deposit requirements New Zealand

The banks generally require a 35% deposit to buy an investment property. These requirements are in force due to loan to value restrictions (LVR) imposed by the Reserve Bank that limit the amount of lending retail banks can offer to low deposit borrowers.

If you were to buy a property with a 35% deposit at the national average asking price on Trademe in November 2023, you’d need $259,395.

How to buy an investment property with a small deposit

Luckily, it may be possible to purchase an investment property with much less than a 35% deposit if you know what you’re doing. In fact, you may be able to buy with just 20% or even 10% - here’s how.

Buy a new build

To buy a new build property you’ll generally only need a 20% deposit. This is because new builds are subject to more relaxed LVR restrictions in order to encourage development and bring new properties into the rental market.

A new build is a brand new property bought straight from the developer, or from a developer via a real estate agent. This could be purchased off the plans or as a completed property (as long as the property has been built within the last six months).

If you already own your home you could use equity to purchase an investment.

Use home equity

You don’t need to use cash for your investment property deposit – you may be able to borrow it if you own your home. If you have more than 20% equity in your home most banks will allow you to borrow against that property to fund the deposit on your investment. Any equity you have in excess of 20% is often called ‘usable equity.’

To work out how much usable equity you may have, multiply your home value by 0.8 then deduct the amount of your personal mortgage. Speak to your lender to find out exactly what’s possible.

Speak to a mortgage broker

If you’re buying your first investment property or you’re unsure about how much deposit you need, it’s a great idea to speak to a mortgage broker. Banks are only able to discuss their loan products - mortgage brokers, on the other hand, can discuss the products of all available lenders.

A good broker can also offer advice on how much deposit you need, how to make your application more attractive, and which lenders are more likely to accept applications from you if you are a low deposit borrower.

Talk to a non-bank lender

Non-bank lenders are finance providers that aren’t banks. The main difference between banks and non-bank lenders is that non-banks don’t take deposits, or offer savings accounts so most of the money they lend is sourced via investors.

If you’re buying an investment property with a low deposit it may be worth talking to non-bank lenders because the Reserve Bank’s LVR restrictions do not apply to them. They will usually charge slightly higher interest rates and fees but they may be more likely to accept your application than a bank. (Talk to your mortgage broker about recommended non-bank lenders or do your research.

There are several different ways to secure finance for an investment property.

Get help from an expert

Financing an investment property purchase can be confusing and complex. So as soon as you’re sure you want to buy an investment property it’s a great idea to speak to an expert for impartial advice. That could be a financial adviser or a mortgage broker or a chartered accountant.

By getting expert advice early you can minimise the risks of property investment, make borrowing easier and create a strategy that ensures your investment is successful.

*We hope this article has provided some helpful information. It's based on our experience and is not intended as a complete guide. Of course, it doesn’t consider your individual needs or situation and it is not financial advice. If you’re considering buying a property, make sure to always do your due diligence, and speak with an advisor if necessary.


Ben Tutty
Ben Tutty

Ben Tutty is a regular contributor for Trade Me and he's also contributed to Stuff and the Informed Investor. He's got 10+ years experience as both a journalist and website copywriter, specialising in real estate, finance and tourism. Ben lives in Wānaka with his partner and his best mate (Finnegan the whippet).