Higher interest rates have made some Australian investment properties more expensive to hold. Mortgage payments take up a greater share of rental income, while insurance, maintenance and other ownership costs continue to add up. If you're contributing more of your own money to keep an investment property than you expected, selling may have crossed your mind.
It's a significant decision, especially if you've spent years building equity and the property still fits your long-term plans. Before you put it on the market, it helps to understand how much the property is costing you, what you would receive from a sale and whether you have other options for managing the pressure. The right answer depends on your circumstances and the property itself.
Why rising interest rates are changing the numbers for property investors
Following its 3 November 2026 meeting, the Reserve Bank of Australia (RBA) increased the cash rate target by 0.25 percentage points to 4.85%, up from 4.60% in September. Higher cash rates can flow through to variable mortgage rates, although each lender decides when and how much to change its rates. Investors with variable-rate mortgages may therefore see their holding costs increase again, depending on their lender and loan arrangements.
A rate increase can feel manageable when you look at it on its own. The greater challenge often comes from several expenses arriving close together, such as insurance renewals, strata levies, council rates or unexpected repairs. Rental income may take time to adjust, and there may be periods when the property is vacant. As Moneysmart explains, investors need to account for these ongoing costs and be able to cover their mortgage when rental income falls short.
What another 0.25 percentage point increase could mean
Consider an investment property receiving $650 a week in rent, with a $500,000 interest-only mortgage. If the mortgage rate rises from 6.75% to 7.00%, annual interest increases by $1,250. The figures below show how that change affects cash flow when the rent and other expenses remain the same. The mortgage rates are illustrative and do not represent a quote or a guaranteed lender response to the RBA decision.
In this example, the investor's annual cash-flow shortfall rises from $7,316 to $8,566, or from roughly $141 to $165 per week. These figures assume the property is rented for all 52 weeks, a property management fee equal to 7% of gross rent, and $5,000 in other annual property expenses. They exclude income tax, principal payments, major capital works, vacancy and any additional land tax or strata costs that might apply.
Whether that extra $24 a week is manageable will depend on the investor's income, savings and other commitments. It is worth checking how a temporary vacancy or another rate increase would affect the numbers as well. A property that is affordable on paper today could still create pressure if several expenses arrive together.
When holding your investment property may still make sense
Many investors buy property with a long-term plan to earn rent, build equity and potentially benefit from capital growth. A change in interest rates can alter the short-term cash flow without necessarily changing the reasons they bought the property. Holding may remain appropriate if the property's fundamentals are sound and the ongoing costs fit within your wider financial position.
You can comfortably afford the ongoing shortfall
An investment property may cost more to run than it earns in rent, particularly while mortgage interest rates are high. Some investors are comfortable contributing money each month because the property remains part of their long-term strategy. The key is knowing exactly how much you are contributing and whether that amount leaves enough room for your household expenses, savings and unexpected costs.
For example, a shortfall of $150 a week adds up to $7,800 over a year. If you can cover that amount without relying on high-interest personal debt or exhausting your emergency savings, it may be a reasonable holding cost for your circumstances. If the shortfall keeps growing and you have no practical way to fund it, the decision deserves a closer look.
The property still has good rental and investment prospects
Review the reasons you originally purchased the property and whether they still hold up. Local rental demand, vacancy rates, the condition of the building, nearby supply and the cost of future maintenance all matter. A property with reliable tenant demand and manageable upkeep may remain suitable even when the mortgage has become more expensive.
It is also worth looking at whether modest improvements could support a higher rent or make the property easier to lease. For example, a $15,000 upgrade that genuinely increases rent by $50 a week could produce $2,600 in extra gross annual rent at full occupancy. You would still need to factor in funding costs, any downtime during the works and whether the local market supports the increase before deciding to proceed.
Keeping the property supports your longer-term plans
Property transactions are expensive, and selling means giving up the rent and any future capital growth that the property might generate. If you plan to hold for many years, a period of higher rates may be something you can plan around. That said, future price growth is never guaranteed, and holding for longer can also expose you to additional expenses or a fall in property value.
Think about where this property fits within your overall portfolio and life plans. The answer may be different for an investor with stable income and a substantial cash buffer than for someone preparing to retire or reduce debt. What matters is whether the property still serves a purpose you can afford to pursue.
When selling may be the better decision
There are circumstances where selling is the sensible option. If the property is consistently drawing more cash than you can comfortably contribute, holding it could compromise your other financial commitments. Rising expenses, major repairs or a change in your income may make the position difficult to sustain, even if you still believe in the property's long-term potential.
Selling may also fit your plans if you want to reduce debt, simplify your finances or move capital into other investments. Before making that choice, it helps to separate a temporary funding problem from an ongoing affordability problem. Additional capital might help with a large repair bill or a short vacancy, but it won't necessarily solve a property that remains unaffordable month after month.
How much money would you actually receive from selling?
When investors think about selling, they often start with the property's market value and subtract the mortgage balance. That gives an indication of equity, although it doesn't tell you how much cash you'll take away after the transaction. Real estate agent fees, marketing, conveyancing, mortgage discharge costs and potential capital gains tax can all affect the proceeds.
For example, consider an investment property sold for $800,000 with an outstanding mortgage of $520,000. If selling and marketing costs total $19,000, the amount remaining before tax and other applicable expenses would be $261,000.
The $261,000 figure is a simplified estimate rather than an amount the investor would necessarily receive. Depending on the property's history and ownership structure, a sale may also trigger capital gains tax (CGT). The Australian Taxation Office explains how property sales are assessed, including the cost base, applicable capital losses, exemptions and discounts. Tax rules can change, so ask your accountant to calculate your expected position under the rules that apply when you sell.
It is also worth considering what you would need to spend if you wanted to buy another investment property in the future. Stamp duty, legal costs and other acquisition expenses can make leaving and re-entering the market costly. Those costs alone should not decide whether you sell, but they belong in a proper comparison.
What can you do before putting your investment property on the market?
If you still want to keep the property, a few practical reviews may help clarify your options. Start with the changes you can make to recurring expenses, then look at your cash reserves and any major costs approaching. You may find a manageable way forward, or the exercise may confirm that selling is the better choice.
Review your mortgage and rental income
Speak with your lender or mortgage broker to understand whether your interest rate and loan features remain competitive. Depending on your circumstances, there may be opportunities to negotiate a rate reduction or consider other mortgage arrangements. Compare any savings with fees, eligibility requirements and the longer-term effects of changing your loan.
Your property manager can also help you review the current rent against comparable properties and understand when a lawful rent adjustment may be possible. If improvements would help the property attract or retain good tenants, ask for a realistic estimate of the rental benefit before committing to the work. A small increase in rent or reduction in recurring costs can make a difference over time.
Plan for major expenses and keep a cash buffer
Unexpected bills are easier to manage when you have money set aside for the property. Consider the likely cost of a vacancy, urgent repairs, insurance excesses and annual bills, then compare that amount with the funds you can access without disrupting your other commitments. If you have an offset account, holding available savings there may also reduce mortgage interest while keeping the money accessible, subject to your loan terms.
If you do not have enough cash available, it may be worth comparing ways to fund a specific expense. Using savings, arranging a mortgage top-up or accessing capital from the investment property can have very different costs and implications. The best option depends on the amount you need, how quickly you need it and what the arrangement will mean for your future cash flow.
Can accessing capital help you hold your investment property?
Some investors own properties with substantial equity but have limited cash available for an immediate expense. They may need funds to complete essential repairs, make improvements that could lift the rent or cover a temporary shortfall while keeping the property. Accessing capital can provide flexibility in these situations, although the cost of accessing it needs to be weighed against the benefit.
For eligible Australian property investors, Futurerent provides a way to cash out up to $100,000 from an investment property, or up to $500,000 across a portfolio, without refinancing or changing the existing mortgage. An investor receives an upfront amount, and a fixed portion of the property's future rental income is allocated to Futurerent over the agreed term. The tenant continues paying rent through the property manager as usual, and eligible investors can receive funds in as little as 2 business days after approval.
Futurerent does not impact your credit score, although it carries a setup cost and a fixed funding cost. Because some of the rent is directed to Futurerent, you will receive less rental income during the arrangement. That reduced income needs to be included in your holding-cost calculations, and a future mortgage lender may also assess the effect on your available rental income. A cash-out may help with a defined funding need, but it may be unsuitable if the property's ongoing expenses already exceed what you can comfortably support.
You can learn more about the different options and their trade-offs in our complete guide to investment property equity release. For a more detailed look at rental income, expenses and financial buffers, see our investment property cash-flow guide.
Questions to ask before deciding to sell or hold
A useful way to approach the decision is to write down the numbers for both scenarios. Start with what you're paying now and how much you could reasonably afford if conditions changed. Then compare that with the likely net proceeds from a sale and what you would do with the money afterwards.
- What is my actual holding cost? Include mortgage payments, recurring expenses, upcoming repairs and a realistic allowance for vacancy.
- Could I manage another increase or a period without rent? Assess your cash buffer and how much room you have in your household budget.
- Does the property still suit my goals? Consider its rental performance, condition, location and role within your broader investments.
- How much would I receive after selling? Estimate selling costs, outstanding debt and potential tax obligations.
- Would accessing capital address the problem? Compare the total cost and cash-flow impact of each available option.
If you are unsure about the outcome, a mortgage broker, accountant or appropriately qualified financial adviser can help you work through the implications. You do not have to make a decision based only on the latest interest rate announcement, particularly when you are dealing with an asset you may have owned for many years.
Frequently asked questions
Should I sell my investment property when interest rates go up?
Rising interest rates are a reason to review your property finances, but they do not automatically mean selling is the best option. Calculate the current holding cost, test whether you could manage further increases and compare that with the money you would receive from selling. The decision should reflect your financial position and the property's prospects.
Is it worth holding a negatively geared investment property?
It can be, provided the ongoing shortfall is affordable and the investment still supports your goals. Any potential tax benefit is only part of the picture, and you still need enough cash to cover mortgage payments and property expenses. Speak with your accountant about how the current tax rules apply to your circumstances.
Can I access capital from my investment property without selling or refinancing?
Depending on your arrangements and eligibility, options may include existing redraw funds, alternative financing or a rental income advance. Futurerent allows eligible investors to cash out up to $100,000 per property without refinancing, with a fixed portion of future rent allocated to the arrangement. Compare the total cost and impact on rental cash flow before proceeding.
Will investment property prices recover when interest rates fall?
There is no guarantee that interest rates will fall within a particular timeframe or that property prices will rise in response. Local supply, demand, employment conditions, rental markets and lending conditions can all influence values. Make your decision using the property's current numbers and a range of possible outcomes.
Understand your options before selling
Selling an investment property can provide financial relief and free up capital, but it also involves costs and means giving up the property's future rental income and any potential growth. If higher interest rates are creating pressure, reviewing your cash flow and the alternatives available can help you avoid making a rushed decision.
If access to capital could help you meet a specific expense while keeping your investment property, see how much you may be able to cash out with Futurerent. The calculator can help you explore an indicative amount and understand the costs and effect on future rental income before deciding whether it's right for you.
This article is general information and is not financial, tax or legal advice. Consider your personal circumstances and seek appropriate professional advice before deciding to sell, retain or access capital from an investment property.
