Property Investment 101

Property is a popular long-term investment choice among many Australians. While shares and the stock market can feel a touch unfamiliar and overwhelming, property is often seen as an easier to understand option. But there are still things to consider before you take the investment property plunge.

Why is property so popular?

Australians love investing in property, and there are many benefits to making property part of your investment strategy. An investment property lets you:

  • Generate capital growth
  • Enjoy rental income
  • Gain tax advantages, such as negative gearing<link to negative gearing blog>

Getting on the property investment ladder

If you think the advantages to property investment are something you’d like to capitalise on, there are several things you should consider before you start climbing that investment property ladder.

Get your finances in order

Many people assume they can’t afford to invest. However, if you have a stable job, which pays reasonably well, you shouldn’t have too many problems getting a loan.

Get yourself a budget. List all your assets, expenses and income sources. All of this will come in handy when you speak to your bank manager and seek to arrange a pre-approval.

If you’re not sure you’re ready to invest, speaking to a mortgage broker or your accountant is a good first step to take.

While investing in property is a proven path to long-term wealth, you’ll want to make sure that you can afford to maintain your mortgage repayments over the long term. Servicing a loan and maintaining a property can become expensive, so you want to make sure you understand all of the potenital costs involved.

Where will you buy?

When buying to invest, location is critical. Always look for suburbs that outperform averages, ones that are close to the CBD, and going through a gentrification process. (These are usually the ones potential tenants will want to be living in.)

Other location tips include:

  • Choosing a market you’re familiar with, as this will save you valuable research time.
  • Look at local planning activities, as developments and changes to zoning regulations can all affect the future value of your property.
  • Research the rental yield. (You’ll want to purchase in an area where the rents are higher than the property value.)
  • Buy in a low vacancy rate area, as the higher the vacancy rate the harder it can be to find a tenant.

What type of investment property?

You’ll want a property that has continuously strong demand; so choosing the right property is a big decision. Units are (generally) easier to maintain, although you’ll have to pay regular strata levies. Other things to consider include:

  • New or old: While off the plan might sound attractive, you end up giving a premium to the developer and miss out on the first few years’ of capital growth. Buying in an older apartment often gives you more character and you have the potential to give it a cosmetic refurbishment with new blinds, carpet and paint.
  • Features: Things like a lock up garage, second bathroom, proximity to public transport and shops are all big tick items when it comes to renting a property out.
  • Keep your costs down: A pool or extensive garden can cost a lot to maintain and might even put off potential tenants.

Remember, it’s not about owning a property; it’s about owning the right investment property.

Pros and cons of buying an investment property:


  • Property is often a more stable investment than shares
  • Capital growth potential
  • Tax deductions
  • Rental income return
  • Anyone can invest – you don’t need any special knowledge or skills


  • High entry and exist costs
  • Interest rate and loan repayments
  • Property is time consuming (and expensive) to sell, should you need to access funds quickly
  • Ongoing costs, such as strata fees and insurances
  • Potential for difficult tenants
  • Rent free periods

Can you use your existing equity?

Buying an investment property by leveraging equity in your home, or another investment property, can be very effective. It lets you use money you actually own (but is tied up in your property) and it means you can borrow more money against your investment property – which will help to increase your tax deductions.

Be aware of your expenses

Buying and managing an investment property can be expensive. It’s worth keeping in mind that when you buy an investment property you’ll need to pay:

  • Stamp duty
  • Conveyancing fees
  • Legal costs
  • Search fees
  • Building inspection reports.

This can be a significant extra expense, and a shock if you haven’t budgeted properly.

And the expenses don’t end once you own your investment property. You’ll need to make regular allowances for the following outgoings:

  • Council rates
  • Water rates
  • Body corporate fees
  • Insurance costs
  • Repair and maintenance costs
  • Loan repayments
  • And if you use a real estate agent, property management fees.

Get a reliable managing agent

Speaking of property management fees, which are tax deductable, there are many reasons you should consider using a licenced real estate agent to manage your investment property. A good property manager is worth their weight in gold and can help by:

  • Giving you ongoing advice
  • Managing tenants, including choosing the best ones for your property
  • Getting you the best value from your property when it comes to setting the rent
  • Looking after any maintenance issues, where you have approved costs in advance.

Paying their fees is also easy as they usually get deducted from your rental earnings.

 Over to you

Have you got an investment property story you’d like to share? What’s your number one tip to anyone looking to start climbing the investment property ladder?
Disclaimer: The information here is provided on a general basis. You’re encouraged to consult with an expert who can consider your individual situation.

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