The pros and cons of buying an investment property
Investing in property can be a good way to build wealth – but there are several factors you need to consider.
More than 2.24 million Australians – around one in five taxpayers – owned an investment property at last count. That says something about the popularity of property as an investment: a vehicle generally thought to offer reliable long-term capital growth, decent yields, and tax benefits.
But while buying an investment property and renting it out may seem straightforward, it’s not without its pitfalls. Let’s check out some of the pros and cons of investing in Australian property.
Advantages of property investing
Capital growth
While property prices can rise and fall, Australian home values have historically shown significant long-term growth. The median house price in Australia grew 412% over the 25 years to 2018, while units saw a 316% increase.
Capital growth
While property prices can rise and fall, Australian home values have historically shown significant long-term growth. The median house price in Australia grew 412% over the 25 years to 2018, while units saw a 316% increase.
Rising property prices can also provide an owner with a greater amount of equity in their property, giving them the opportunity to expand their portfolio by borrowing against that equity.
See also: A guide to home equity loans
Security and stability
Put simply, people will always need a place to live. For the most part, rental properties are in consistent demand. While the housing market isn’t immune to ups and downs, it tends to be less impacted by market volatility and, thanks to rental income, is more likely to yield fixed returns.
This arguably makes real estate in general a secure and stable investment vehicle when compared to other popular options.
Positive cash flow
Given the ongoing demand for housing, investment properties typically provide a steady stream of passive income. The rent an investor receives can even be greater than their loan repayments and maintenance costs, leaving them with positive cash flow
Access to tax benefits
Residential rental property owners can claim tax deductions if the rent brought in by a property doesn’t cover the cost of owning it. These deductions might allow them to maximise their return on investment.
Many expenses incurred in the day-to-day management and maintenance of a rental property can even be claimed against your other income, reducing the overall tax you pay. This strategy is commonly referred to as negative gearing.
Physical asset
Many property investors report feeling more comfortable owning a tangible asset – something they can touch and see – rather than an investment that exists on a digital platform or a piece of paper.
Easy to understand
You don’t require specialist knowledge to buy, own, and manage an investment property. That’s arguably unlike other markets, such as the share market or the cryptocurrency market. Though, if you’re keen to purchase other asset classes, there’s plenty of information out there to assist you.
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Evaluating whether an investment property aligns with your financial goals? Use our Investment Property Calculator to estimate upfront costs, ongoing expenses, and potential returns—helping you make a more informed investment decision.
Looking for a competitive investment home loan? Check out these deals
The home loan an investor chooses can make or break their wealth-building journey. Here are some of the lowest-rate investment home loans on the market right now.
| Lender | Interest Rate | Comparison Rate* | |||||||
|---|---|---|---|---|---|---|---|---|---|
| 5.59% p.a. | 5.63% p.a. | InvestorVariablePrincipal & Interest10% Min DepositRedrawExtra Repayments | Minimum 10% deposit needed to qualify. Available for purchase or refinanceNo application, ongoing monthly or annual fees. | More details | Compare | Promoted | Disclosure | ||
| 5.44% p.a. | 5.35% p.a. | Built and funded by CommBankInvestorVariablePrincipal & Interest20% Min DepositRedraw | A low-rate variable home loan from a 100% online lender.Backed by the Commonwealth Bank. | More details | Compare | Disclosure | |||
| 5.44% p.a. | 5.78% p.a. | InvestorVariablePrincipal & Interest10% Min DepositRedrawExtra Repayments | Discounted interest rate for 5 years for homes with an eligible solar systemAvailable for refinance or purchaseNo monthly, annual or ongoing fees | More details | Compare | Disclosure |
Important Information and Comparison Rate Warning
Drawbacks of investing in property
Lack of liquidity
Investing in property will not give you quick access to cash should you ever need it. Unlike stocks, it can take a long time to sell a property. And once it sells, it will take even more time for you to receive the returns of the sale. Simply put, an investment in property might not be the best if you ever need cash in an emergency.
You’ll also need to sell the property entirely to free up funds, even if you only need part of its value in cash. Though, in such a case, it could be worth considering refinancing as a means to access funds before selling up.
High entry cost
One of the biggest hurdles hindering many Australians from investing in property is the heavy cost of entry, which often demands external financing.
A deposit on a property can be tens or hundreds of thousands of dollars. On top of that, there are hefty transaction costs associated with buying property, including stamp duty, legal expenses, and loan fees.
Ongoing costs
As well as the big upfront cost of purchasing an investment property, there are a raft of ongoing expenses. These include mortgage repayments, council rates, maintenance and renovation expenses, insurance, and perhaps body corporate fees. A would-be investor must ensure they have a long-term investment strategy that allows them to afford more than just their investment loan repayments.
Risks associated with finding tenants
Dealing with bad tenants can be a nightmare. Not only do bad tenants cause emotional stress, but their actions can result in financial losses too, especially if they regularly fail to pay rent or cause damage to your property.
What makes a good investment property?
Weighing up whether or not to buy an investment property? There are a number of factors that can make or break you as a property investor.
Careful research, planning, and stringent due diligence are crucial when searching for the right investment property. Here are six key considerations to keep an eye out for:
1. Location
As with all property purchases, location, location, location should be your number one priority. Where your investment property is situated can have a major impact on its rental demand, tenant quality, and rate of return.
If the property is in a high-growth market, there’s a good chance the rent it brings in will increase along with its value.
Some indicators that an area is high growth include a large and increasing population, proximity to public amenities, a vibrant job market, good school zones, low crime rate, accessibility to public transport, affordable insurance rates, and lifestyle factors such shops, cafes, and restaurants.
2. Type of property
Although property type can be determined by budget, you should also think about it in the context of the location you’re looking in. A standalone house with a backyard will probably appeal more to tenants looking to live in a family-friendly area, while apartments might be more in demand in locations that attract young people, such as in inner-cities or around universities.
3. Condition of the property
When selecting a property to invest in, it’s recommended you conduct a thorough home inspection to determine if the property is in sturdy condition and ready to accommodate tenants. Repair and maintenance expenses can eat into investment returns and majorly impact cash flow.
4. Number of listings and vacancies
An area with a fewer listings and vacancies can be a sign of a strong property and rental market. Low vacancy rates can also be a contributor to rental demand, giving landlords more leeway to raise rents to boost their investment returns.
5. Positive cash flow
Depending on what your prime investment motivation is (more on that below), an investment property should (or eventually be able to) generate a positive cash flow. This means the income a property generates is more than enough to cover what it costs an investor to own the property, also known as positive gearing.
6. Potential for capital growth
As well as cash flow, a good investment should be able to generate a profit when its owner eventually sells. If a property’s value rises over the period in which a person owns it, that rise is known as capital growth. When that person sells, they would then realise a capital gain – meaning they sold their property for more than they paid for it. Of course, the opposite can happen and an investor can experience a capital loss.
See also: Is buying an investment property as your first home a good idea?
Highest yield areas for investment properties
Some property experts advise the key to finding high-yield investment properties is to look for areas that have both affordable property prices and relatively high rental returns. It’s common for these locations to be outside major capital cities which generally have more expensive housing and lower yields – although that may not always be the case.
Property prices and rental yields can change due to many factors including general economic conditions, seasonal considerations, and employment opportunities. Australian mining towns can be subject to huge swings in median property prices and rental yields depending on the cycles of the commodity markets they service, for instance.
Many a regional property investor has been stung by investing during peak times and selling during troughs, when prospective renters have left town.
According to Your Investment Property, here are the top three suburbs in each state with the best rental yields (as at October 2025):
| State/Territory | Suburb (House/Units) | Median Price | Gross Rental Yield |
| New South Wales | Fairfield (U) | $443,500 | 5.80% |
| Lakemba (U) | $510,000 | 5.67% | |
| Wagga Wagga (U) | $427,500 | 5.47% | |
| Victoria | Meadow Heights (U) | $488,500 | 5.45% |
| Flora Hill (U) | $436,500 | 5.27% | |
| Bundoora (U) | $515,000 | 5.23% | |
| Queensland | Idalia (U) | $375,000 | 6.85% |
| Cannonvale (U) | $418,000 | 6.23% | |
| Ashmore (U) | $604,250 | 6.04% | |
| Northern Territory | Malak (U) | $290,000 | 8.98% |
| Araluen (U) | $352,500 | 8.48% | |
| Parap (U) | $420,000 | 8.33% | |
| South Australia | Lightsview (U) | $556,000 | 5.05% |
| St Clair (U) | $640,000 | 5.00% | |
| Hectorville (U) | $753,000 | 4.87% | |
| Western Australia | Bilingurr (H) | $770,000 | 8.94% |
| Cable Beach (H) | $720,500 | 8.29% | |
| Perth (U) | $517,000 | 6.78% | |
| ACT | Gungahlin (U) | $447,500 | 6.16% |
| Lyons (U) | $385,000 | 6.10% | |
| Belconnen (U) | $480,000 | 5.99% | |
| Tasmania | Claremont (U) | $445,000 | 5.61% |
| Glenorchy (U) | $455,000 | 5.52% | |
| Glenorchy (H) | $580,000 | 5.22% |
Source: CoreLogic. Median house price data for the period ending 31 July 2025 based on sales transactions over 12 months. No median price denotes low sales that may skew median. Rental yield data as at 30 September 2025.
Should I buy an investment property?
To answer this, you’ll need to work out what your prime investment strategy is.
There are generally three key areas that investors target: capital growth, rental income, and tax benefits.
These can work in combination, but you should understand which is your main motivator. Let’s consider each of them:
Capital growth
Put simply, capital growth is the increase in value of your investment property over time.
For example, if you purchase the property for $500,000 and sell it for $850,000 10 years later, you would have achieved $350,000 in capital growth.
This strategy best suits long-term investors who intend to hold the property over time. Investors looking for good long-term growth may choose to purchase a property in an in-demand area that’s shown reliable growth over time, even if the purchase price is relatively high and the rental income may not cover the cost of owning it in the interim.
Tax benefits associated with the loss of holding the property may also be a factor in this strategy.
Rental yield and income
For some investors, their main goal is to buy an investment property that attracts enough passive income to cover all the costs associated with owning it.
If this is your strategy, research is key. You’ll need to identify a property where the get-in costs are lower and the rental receipts are comparatively high.
Bear in mind, though, you’ll need to have enough funds to cover instances in which you don’t have tenants or rental income from the property.
See also: How to increase your rental yield
Tax benefits
Investors also need to consider any tax implications of owning their investment properties.
Any income your investment property generates will be added to your taxable income, but losses you make says otherwise because you can claim them as tax deductions to your investment property – thereby reducing your overall taxation expense.
Some property investors may choose to invest in properties that don’t cover their costs, with the short-term aim of reducing their taxable income and the long-term goal of achieving capital growth. Their hope is that eventual capital growth makes up for their losses along the way.
I’ve you’re considering investing in property for tax purposes, it’s best to consult an accountant or tax professional to advise you on the implications and devise a strategy that will suit your individual circumstances and investment goals.
This could also help you decide what property is best for you and give you a better idea of how viable an investment property will be for you over the short, medium, and long term.
Your Mortgage’s Can I afford an investment property? calculator can give you an estimate of the income, expenses, and tax implications associated with owning an investment property.
Image by Towfiqu Barbhuiya on Unsplash
First published in June 2024
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How To Find A Good Property Manager & Questions to Ask
Published on 6 Aug 2024
Ask anyone who’s ever been a landlord, and they’ll tell you that the right property manager can make or break your investment!ON THIS PAGETraits to look for when choosing a property managerHow to find a good property managerQuestions to ask a potential property manager
If you’re looking to cut costs on your investment property, or even to tip it into positively geared territory, you might’ve thought about managing it yourself. While that’s something you can do, you should think very carefully about whether you have the time, not to mention the ability and knowledge, to fulfill this important task.
For many investors, their property manager is worth every penny. But finding a professional worth their weight can be tricky.
Here’s how to find the right professional for your needs.
Traits to look for when choosing a property manager
Like in any profession, some will thrive and some will survive. It can be assumed that most property investors want a property manager who thrives in the role and performs excellent work.
Here are some of the things that separate a good property manager from a mediocre one:
No corner-cutting
You want a property manager who is thorough with good attention to detail. It’s obviously tricky to work out if a person holds such traits during an interview. No one is going to come out and tell you they are lazy, after all. But you might be able to tell how much work the manager is putting in by looking at the likes of entry and exit reports and inspection notes.
Good at finding and managing tenants
Anytime your property is empty is time you’re not receiving rental income, so it’s important to try and ensure it’s always tenanted. When it comes to the pointy end of a lease that isn’t being renewed, a good property manager will be proactively advertising to try and minimise any time between tenants.
Simultaneously, you presumably don’t want to end up at your state’s tenancy tribunal. For that reason, it’s also vital that your property manager is adapt at handling any problems that come up throughout the lease.
Easy to deal with and professional
Investorkit research analyst Junge Ma recommends seeking out a property manager that is professional and easy to deal with.
“[A good property manager] has processes and procedures in place, is easily contactable, and gets back to you quickly,” she told Your Mortgage.
Strong understanding of legalities
One of the most valuable things a property manager brings to the table is familiarity with tenancy laws.
There are lots of regulations around rental properties, with laws dictating how often you can increase rent, what amenities you must provide, how quickly you have to repair breakages, and many other factors.
So, if the hot water were to break in the middle of the night and your tenants demanded it’s fixed by morning, you could look up the relevant legislation and case law to find out exactly what your obligations are, or your property manager could simply take care of it.
Even if you think of yourself as a legal expert, Ms Ma says it’s ambitious and risky to go without professional advice these days.
“Tenancy laws are ever-changing, and new regulations come in [frequently],” she explained.
“There’s so much that a landlord needs to be up to date with [to ensure] they are compliant and providing a safe space.
“Big fines are in place … [it’s] a risk that can be mitigated by having a property manager.”
Read more: How to deal with a tenant in arrears
Experience and local knowledge
There’s lots of things that can go wrong with an investment property, so an experienced property manager’s know-how can be invaluable.
For example, a local management firm might have dealt with certain tenants before and may remember the raucous and damaging parties they used to throw. In that case, they could advise you to steer clear.
Or, if something were to go wrong with the ceiling fan, a seasoned property manager will probably know a reliable (and preferably reasonably priced) sparky to repair it.
Whenever such issues come up, it’s tough to beat experience.
How to find a good property manager
If you’re not from an area, or you’ve not been involved with an area’s rental market, it can be hard to know where to start your search for a worthwhile property manager.
There are lots of property management firms that operate in Australia. Some are huge, and have hundreds of franchises spread throughout the nation, such as Ray White, LJ Hooker, McGrath, and Metropole. Meanwhile, there are hundreds, if not thousands, of smaller business, often locally- or family-owned, to choose from.
If you’re not sure where to find a good one, the local paper or online forums and community groups could be a good place to start. Depending on where you’ve invested, you might consider asking around at the local pub.
Once you’ve narrowed it down to a handful of candidates, whether they be agencies or individuals, it’s time to start interviewing.
“It’s important to interview [a property manager] before signing up so to understand the service they provide,” Ms Ma explained.
“If they’re sharing tips, experiences, and knowledge that’s helpful to you, it can be a sign they’re in your corner.”
Questions to ask a potential property manager
When you’re interviewing potential property managers, here are a few questions that might be worth asking:
- How much support can your team provide? A property management team able to promptly respond to tenants’ complaints can save you a lot of hassle, so it’s worth investigating how stretched a manager’s team is. Your property manager might be looking after hundreds of other properties and you should make sure there’re enough resources available that your investment won’t get sidelined.
- What is your strategy for attracting tenants? Keeping properties tenanted all year round is obviously very important to an investor, so you’ll want to know how your property manager plans to achieve that. Ideally, every time one tenant moves out, you’ll have a selection of potential new incumbents to choose from, which might mean proactive advertising or turning to a database of quality potential tenants.
- What commission do you charge? Hopefully this goes without saying, but you should compare how much different property managers will charge you. Property managers usually receive a portion of the rent as commission, and different managers or companies might charge a different percentage. It shouldn’t be solely a numbers game – sometimes services are cheap for a reason – but make sure you aren’t getting a raw deal.
- How many properties do you look after in the local area? Knowledge and experience in the surrounding vicinity of your investment property can prove invaluable. A property manager who knows the suburb inside out is less likely to make errors on pricing (asking too much rent and not finding tenants, for example) and more likely to know how best to attract local tenants. A quick way to assess a manager’s local experience is to find out how many properties they or their firm services in that area.
Best investor home loan deals available now
Just like choosing a property manager can be a crucial decision, so too can selecting a home loan. Here are some of the most competitive mortgages available to property investors right now
| Lender | Interest Rate | Comparison Rate* | |||||||
|---|---|---|---|---|---|---|---|---|---|
| 5.59% p.a. | 5.63% p.a. | InvestorVariablePrincipal & Interest10% Min DepositRedrawExtra Repayments | Minimum 10% deposit needed to qualify. Available for purchase or refinanceNo application, ongoing monthly or annual fees. | More details | Compare | Promoted | Disclosure | ||
| 5.44% p.a. | 5.35% p.a. | Built and funded by CommBankInvestorVariablePrincipal & Interest20% Min DepositRedraw | A low-rate variable home loan from a 100% online lender.Backed by the Commonwealth Bank. | More details | Compare | Disclosure | |||
| 5.44% p.a. | 5.78% p.a. | InvestorVariablePrincipal & Interest10% Min DepositRedrawExtra Repayments | Discounted interest rate for 5 years for homes with an eligible solar systemAvailable for refinance or purchaseNo monthly, annual or ongoing fees | More details | Compare | Disclosure |
Important Information and Comparison Rate Warning
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