Key takeaways
Debt on investment properties isn’t the enemy – it’s a powerful wealth-building tool when used strategically.
Inflation and capital growth naturally reduce your loan-to-value ratio over time, even if you never pay off a cent of principal.
Smart investors often focus on leverage and asset growth, not rushing to be debt-free.
An “exit strategy” isn’t always necessary – your loans can be refinanced indefinitely or passed on to the next generation.
The mindset shift: stop thinking like a homeowner and start thinking like a sophisticated investor.
We’ve all grown up with the idea that debt is bad.
Pay off your mortgage as fast as you can. Avoid credit cards like the plague.
And never, ever retire with debt hanging over your head.
So every time I tell people that as a property investor I love debt – especially the kind that never gets smaller – I can see their jaws tighten.
“Michael, isn’t that just kicking the can down the road?”
“Won’t you end up in trouble later when the debt catches up with you?”
I get it.
This isn’t what we’re taught about “responsible” money management.
But here’s the thing: This kind of thinking might work for your family home, but it’s completely the wrong mindset for building a property portfolio.
Let me explain why debt, when used wisely, is not just your friend, but your most powerful wealth-building tool.
The debt that shrinks itself
Here’s the big misconception about interest-only loans: people see the number on their mortgage statement staying the same year after year and think they’re standing still.
But they’re missing a key point: inflation is quietly working in your favour.
Let’s put some numbers around this…
Say you bought a $1 million property in Brisbane in 2015 with an 80% loan-to-value ratio (LVR). That’s an $800,000 mortgage.
Fast forward to 2025:
- Median Brisbane house prices have grown roughly doubled in that time.
- Your $1 million property is now worth about $1.8 million.
- Your $800,000 loan hasn’t changed – but your LVR has fallen naturally to about 44%.
You haven’t paid off a cent of principal. Yet inflation and capital growth have transformed your financial position.
And as an investor, your rent is probably doubled as well.
But here’s the kicker – in another 10 or 20 more years, that $800,000 debt will seem tiny.
Back in 1990, the median Sydney house price was about $194,000.
Today it’s well over $1.6 million.
What felt like a huge loan then barely registers now.
The same principle will apply to today’s loans in the decades ahead.
The elegant exit strategy
Here’s the part I love sharing with clients.
Imagine you’ve built a portfolio of four investment properties, each originally bought with 75% loans.
After 25 years, your properties have doubled or tripled in value, and your LVRs have naturally dropped to around 25%.
At this point, you can sell one property, use the proceeds (after tax) to wipe out the loans on the other three and end up with three unencumbered properties, all producing passive rental income.
You didn’t scrimp and save to make extra repayments.
You simply let time, growth, and inflation do the heavy lifting.
However, that’s not really my preferred option; the following is…
The forever option
But here’s the thing – you don’t even have to pay off the debt.
- Also read:Latest Property Price Forecasts Revealed. Australian Property Market Outlook 2026: Where To For Prices With Further Rate Cuts Unlikely.
- Also read:Melbourne property market forecast for 2026 | Is it a good time to invest in Melbourne?
- Also read:Sydney property market forecast for 2026. Is it a good time to invest in Sydney?
- Also read:Brisbane Property Market Forecast [2026] – What’s Ahead & Where to Invest
- Also read:Everything you need to know about the state of Australia’s property markets in 20 charts – November 2025
In Australia, lenders are generally happy to roll over interest-only loans or extend loan terms, especially if your portfolio has healthy equity and rental income.
And with the right structures in place – for example, holding your properties in trusts with your children involved – your debt can literally outlive you.
Future generations might decide to keep leveraging the portfolio, using the equity to expand further. Or they may choose to pay it down at their own pace.
The point is, you don’t have to race to zero.
Why this makes sense for investors (but not homeowners)
This is where most people trip up - they apply homeowner logic to investment properties.
Sure, paying off your home loan makes sense – it gives you security and peace of mind.
But for investment properties, it’s a different game.
Here the goal isn’t to be debt-free.
It’s to use the bank’s money to control as many high-quality, appreciating assets as possible.
Every dollar you pour into principal repayments is a dollar that’s not working to grow your portfolio.
And let’s not forget the tax benefits.
In Australia, interest on investment loans is tax-deductible.
Principal repayments aren’t.
So why rush to pay off debt that the ATO is effectively subsidising?
The contrarian view: isn’t debt dangerous?
Now let’s address the elephant in the room.
“What about rising interest rates? What about the risk of overleveraging?”
These are valid concerns – and they’re exactly why debt needs to be managed strategically.
Some investors get into trouble because they:
- Buy the wrong properties (secondary locations with poor growth).
- Take on too much debt relative to their income.
- Fail to maintain cash flow buffers.
But for well-capitalised investors with strong buffers and a long-term perspective, debt is a tool – not a trap.
Warren Buffett once said: “It’s not about avoiding debt. It’s about making sure you never get caught needing to repay it at the wrong time.”
That’s why at Metropole we always advise clients to:
- Hold quality assets in prime locations.
- Keep significant financial buffers.
- Regularly review their portfolio and financing structures.
This approach helps ensure debt works for you, not against you.
The takeaway: Debt isn’t evil – it’s a wealth builder
The next time someone tells you “all debt is bad,” remind yourself of this:
- Debt on depreciating assets (like cars or holidays) is bad.
- But debt on appreciating, income-producing assets like investment properties is good debt. In fact, that’s what separates successful investors from the rest.
The goal isn’t to be debt-free.
The goal is to be financially free – and that’s a very different thing.
So don’t fear the mortgage that never shrinks.
Learn to love it.
Because while that number stays the same, your wealth won’t.
