Key Points
  • Evaluate your financial status and understand market trends to determine your investment capacity.
  • Set clear investment goals, whether for capital growth or rental income, to guide your property choices.
  • Choose a strategic location with growth potential and access to amenities to maximise investment returns.
  • Secure appropriate financing and consider various property types, from residential to commercial.
  • Protect your investment with essential insurances like building, landlord, and liability coverages.
  • Seek professional help along the way e.g. buyers agents, property managers, tax specialists, financial advisers, and conveyancers.

Investing in property in Australia can be a highly rewarding endeavour, but it also comes with its set of challenges. Whether you're a seasoned investor or a first-time buyer, understanding the benefits and risks associated with property investment is crucial. This article will guide you through what you need to know to make informed decisions in the Australian real estate market.

See Also: InfoChoice’s Free Property Report

1. Understand the Australian Property Market

Australia's property market has experienced significant fluctuations over the years, influenced by economic factors, interest rates, and government policies.

It’s easy to generalise Australia into one big market and say ‘property market going up’ but the reality is, there are hundreds and thousands of markets across Australia. This includes within capital cities - the suburb, and even the street can all influence a property’s value.

Before investing, it's essential to research the current market trends, including which areas are experiencing growth and what types of properties are in demand.

Key Market Drivers

Several factors drive the Australian property market:

  • Population Growth: Areas with increasing population typically see higher demand for housing.

  • Economic Conditions: Economic stability and job opportunities can attract more residents and boost property values.

  • Interest Rates: Lower interest rates make borrowing cheaper, often increasing demand for property.

  • Low Supply: Low supply can offset higher interest rates and other headwinds, and make more people compete for fewer properties.

2. Assess Your Financial Position & Investment Goals

Before diving into property investment, it’s essential to evaluate your current financial health. Determine how much you can afford to invest without compromising your lifestyle. Consider your income, expenses, debts, and financial commitments. It’s also wise to have a buffer to manage unforeseen costs associated with property investment.

If you have an existing home loan, you will have to assess how this new investment loan or purchase can be budgeted with your current financial commitments. You will also have to assess how you pay for the investment property, and if you use your current home’s equity to fund it.

Clear investment goals will guide your decision-making process. Are you looking for capital growth or rental yield? Your strategy could differ based on whether you buy into a high-growth area perhaps at the expense of yield, or chase yields through cheaper areas.

If you’re unsure, consider talking to a tax professional or financial adviser before embarking on this journey.

See Also: What to Know Before Buying a Second Home

See Also: Rentvesting 101

See Also: Property vs Shares as an Investment

3. Know What You’re Investing In

Decide what type of property you want to invest in—residential, commercial, or industrial. Each type has its own risks and returns. For the purpose of brevity this article focuses on residential property investment.

Choosing the Right Location

The location of your property is crucial. Look for areas with strong growth potential, good infrastructure, and amenities. Consider both metropolitan and regional areas, as each offers different advantages.

See Also: How to Pick a Good Investment Suburb

Consider factors such as:

  • Proximity to Amenities: Schools, shops, public transport, and hospitals attract tenants.

  • Economic Activity: Areas with growing employment opportunities are likely to experience higher demand for housing.

  • Future Development: Planned infrastructure or developments can increase property values.

Consider also the type of tenant or demographic you want to attract. For example, a small apartment in a family-oriented suburb might take longer to rent out. If you want students, consider the proximity to universities and public transport.

See Also: Where Can I Buy Calculator

Strata or body corporate properties

Next you’ll want to consider whether to buy a freehold home, or one with a strata title. A strata title is most often associated with apartments and townhouses, and body corporate fees can cost thousands of dollars per year, depending on the type of property and its features.

The cost breakdown of body corporate fees are usually available in a strata report. These are also useful indicators as to the sinking fund (how much is there for maintenance and routine repairs), and insurance (for major repair items).

The body corporate fees should cover common area maintenance, major external repair items, and any public area liability. As a strata title holder you will also be able to attend Annual General meetings, vote for particular items, and raise any issues. On the other hand, a freehold home means you’ll be on the hook for any maintenance items yourself, as a landlord, but you’ll also be the master of your domain.

Consider also that buying into a strata title often means you’re buying in a building or complex with potentially quite a few other properties. This could affect capital growth potential.

See Also: How to Turn Existing Home into an Investment

4. Know the Benefits & Risks


  • Leverage: With an investment home loan you can tap into your current home’s equity and use part of that as a deposit. This could turn say $100,000 into a $500,000 investment property.

  • Potential for Capital Growth: One of the most significant advantages of property investment is the potential for capital growth. Real estate values in Australia have generally appreciated over time, making it a potentially lucrative long-term investment.

  • Rental Yields: Investing in property can generate consistent rental income. This is particularly appealing in high-demand areas where vacancy rates are low.

  • Tax Advantages: Property investors in Australia can benefit from various tax deductions. These include deductions for property management fees, repairs and maintenance, interest on loans, and depreciation. If the outgoings are more than the income, you can deduct that from your other income, known as negative gearing.

See Also: More on the Tax Advantages


  • Market Volatility: Like any investment, the property market can be unpredictable. Economic downturns, changes in government policies, or an oversupply of properties can lead to a decrease in property values. This can be street-to-street dependent.

  • High Entry Costs: The initial costs of purchasing property in Australia are high. These include the down payment, stamp duty, legal fees, and other upfront costs.

  • Liquidity Issues: Real estate is not a liquid asset. Selling a property can be time-consuming and costly, which might not be ideal if you need quick access to capital. Also consider how much of a strain a second home loan will place on your budget.

  • Legal & Insurance Risks: Familiarise yourself with the legal aspects of property ownership and rental management. This includes understanding tenant rights, your responsibilities as a landlord, and how to properly manage a rental property. Also consider the appropriate insurance - more below.

See Also: The Hidden Costs of Buying Property

5. Secure Financing

Before you actually start shopping for a property, it can be helpful to know how much a lender is willing to give you, if you need finance. This differs from lender to lender, so it’s important you look at getting pre-approval - also called conditional approval - before you put in an offer or bid at auction. After all, it’s no use shopping for champagne tastes on a beer budget.

Some lenders might have restrictions on the property they are willing to lend against e.g. a studio apartment smaller than 40 sq m, a property larger than 2-hectares, an apartment in a building more than X floors high, and so on.

Speak to a mortgage broker or your bank to understand your loan options if unsure. This will give you a clear idea of your budget and strengthen your position when making an offer on a property.

Update resultsUpdate
LenderHome LoanInterest Rate Comparison Rate* Monthly Repayment Repayment type Rate Type Offset Redraw Ongoing Fees Upfront Fees LVR Lump Sum Repayment Additional Repayments Split Loan Option TagsFeaturesLinkCompare
6.29% p.a.
6.20% p.a.
Principal & Interest
  • No application or ongoing fees. Annual rate discount
  • Unlimited redraws & additional repayments. LVR <80%
  • A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.
6.19% p.a.
6.58% p.a.
Principal & Interest
  • You MUST already have Solar or a documented plan to install within 90 days to be eligible for this loan
  • Available for refinance or purchase
6.29% p.a.
6.34% p.a.
Principal & Interest
6.29% p.a.
6.29% p.a.
Principal & Interest
6.39% p.a.
6.41% p.a.
Principal & Interest
Important Information and Comparison Rate Warning

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. Some products will be marked as promoted, featured or sponsored and may appear prominently in the tables regardless of their attributes. All products will list the LVR with the product and rate which are clearly published on the product provider’s website. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of . View disclaimer.

To go interest-only?

A popular method for property investors is pick an interest-only (IO) home loan. This might especially suit those with a shorter investment timeline. This is because IO loans minimise your financial outlay in the early days; are tax deductible; and can maximise cashflow.

Many lenders offer IO periods up to five years, potentially extendable for another five. Ultimately however it means more in interest paid, and higher repayments once you start repaying the principal as well.

Many IO loans also offer repayments ‘in advance’, meaning you could pay your entire year’s worth of interest obligations at once, thereby bringing forward tax-deductible interest payments, which may reduce your taxable income.

6. Shop for a property and settle

Now comes the fun stuff. Chances are before you’ve arrived at this step you’ve already had a gander at some listings websites to know what’s out there.

When you’re ready to shop, this is where having pre-approval can come in handy. This will let you know how much you can offer, and how quickly you can settle. In a hot market, vendors typically prefer shorter settlement periods.

If you’re unsure about the area or the property, you could consider talking to a buyers agent. They will have local area expertise, and will work with you through the rigours of open homes, talking to selling agents, and finding properties for you - even ones yet to hit the market.

Once you’ve worked it all out, it’s time to start putting in offers, or get ready to bid at an auction. At an auction, typical marketing periods last for four weeks, and the sale is unconditional - so buyer beware!

In this step it can also be useful talking to a conveyancer who will sort out all the legal documentation for you, and potentially point you in the right direction of the inspections you need to conduct on the property.

See Also: 10 Things to Ask at an Open Home or Inspection

See Also: The Reports You Need Before Buying a Home

7. Take out Insurance

As a property investor in Australia, securing the right insurance policies is crucial to protect your investment and minimise financial risks. Here’s a breakdown of the essential types of insurance you should consider:

Building Insurance

Building insurance covers the physical structure of your property, including the roof, floors, and walls, along with permanent fixtures like kitchens and bathrooms. This insurance is vital to cover the costs of repair or rebuilding in case of damage due to fire, flood, or other natural disasters.

At-risk areas (such as North Queensland, or being a flood or fire zone) can affect your premium, and so can the building materials used. Also consider that many insurers restrict vacancies to 60 continuous days - if you think your home may be vacant for longer than this, consider your insurance options.

Landlord Insurance

Landlord insurance is specifically designed for property investors and goes beyond standard building insurance. It typically includes cover for:

  • Property Damage: Protects against damage to your property caused by tenants or their guests.

  • Loss of Rental Income: Compensates for lost income if the property becomes uninhabitable due to damage.

  • Liability Protection: Covers legal liability if someone is injured on your property and you are found to be at fault.

Another type of insurance is contents insurance. This can be useful if you have completely furnished the property, however many rental properties in Australia come unfurnished and contents insurance is at the behest of the tenant.

8. Manage Your Property

Decide if you will manage the property yourself or hire a property manager. Property managers can help find tenants, collect rent, and handle maintenance issues, but they do charge fees for their services.

Such fees can amount to anywhere from 8-12% of the weekly rental price, depending on the property and management company.

This seems like a lot, but consider the hassle and costs of finding tenants yourself. This includes listing the property with good photos, conducting open homes, filtering the right tenants, conducting routine inspections, and tending to any repairs or maintenance using your own network of skilled trades.

See Also: How to Choose a Good Tenant

9. Keep on Top of Your Investment

Property investment requires ongoing management and reassessment. Stay informed about market changes and regulatory updates. Regularly review your property’s performance and your financial situation to adjust your strategy as needed.

Tenants rights can also change from year-to-year, so it’s important you stay on top of them. You will also need to stay on top of any repair requests, and ensure the property makes basic tenancy obligations in your state, such as adequate heating.

If it’s come time to sell, having an exit strategy is as important as your initial investment plan. Know when and how you might sell your investment to maximise returns or cut losses, depending on market conditions and your personal circumstances.

By following these steps, you can improve your chances of success in the competitive field of property investment in Australia. Remember, every investment carries risk, so it’s important to do thorough research and consider seeking advice from financial and real estate professionals.

Photo by Tierra Mallorca on Unsplash