At a Glance
- • National home values rose 10.2% in the year to January 2026, with rental vacancy falling to a new low of 1.2% — reversing the brief seasonal lift seen in December 2025
- • The RBA raised the cash rate to 3.85% in February 2026 — borrowing costs matter more than ever
- • A 20% deposit avoids Lenders Mortgage Insurance; for a $750,000 property that means $150,000 plus costs
- • Negative gearing lets you offset rental losses against your income — at a 37% tax rate, a $17,000 shortfall saves $6,290 in tax
- • Depreciation on a newer build can generate $10,000+ in annual deductions — a non-cash tax benefit most beginners overlook
- • Location drives approximately 80% of capital growth — choosing the right suburb matters more than the property itself
More than 2.2 million Australians own at least one investment property. Yet most beginners spend months researching and still feel unprepared when it comes time to act. The concepts sound complex — negative gearing, depreciation schedules, DTI ratios, market cycles — but they're not nearly as difficult as they first appear.
This guide strips away the jargon. We'll walk through what property investment actually is, how the Australian market behaves, the strategies that work, and exactly how to finance and buy your first property. You'll also meet Sarah and Mark — a real couple who bought their first Brisbane investment property in 2025 — and see precisely what it cost them in Year 1.
One note before we start: this guide focuses on concepts and decision frameworks. If you also want printable checklists, a borrowing capacity worksheet, and state-by-state stamp duty tables to use when you're ready to purchase, those are available as a free download at /investment-guide.
What Is Property Investment and Why Do Australians Choose It?
The Core Concept
Property investment simply means purchasing real estate with the intent of generating a financial return — either through rental income, capital appreciation (the property rising in value), or both. Unlike buying your own home, an investment property is a financial asset: it has a yield, a cost structure, a tax position, and a market cycle.
The appeal of property as an investment isn't complicated. At its core, it comes down to four things Australians have always valued: leverage (you can control a $750,000 asset with $150,000 of your own money), tangibility (it's real, you can see it and touch it), income (tenants pay rent while your asset grows), and tax advantages that most other investments simply don't offer.
Why Australians Prefer Property
Australia has a deeply embedded property culture. Home ownership is seen as the cornerstone of financial security, and investment property has historically rewarded patient, long-term holders. Over the past 30 years, Australian residential property has delivered total annual returns — rental income plus capital growth — averaging 7–10% per annum across major capital cities.
That's not guaranteed, and past performance doesn't predict future returns. But the structural factors that have supported Australian property — a growing population, constrained housing supply, strong employment, and chronic undersupply in major cities — remain intact heading into 2026.
Australia also has a tax system that actively encourages property investment. Negative gearing, the CGT 50% discount, and depreciation deductions are all features of the system that property investors can legitimately use to improve their after-tax returns. We'll cover each of these in detail below.
Curious how property stacks up against shares over the long run? We've done a full data comparison in our property vs shares guide.
The Power of Leverage
The single biggest advantage property has over almost every other investment is leverage. When you deposit $150,000 and borrow $600,000 to buy a $750,000 property, any growth in value applies to the entire $750,000.
If that property grows at 8% per year, it gains $60,000 in Year 1. Your $150,000 cash deposit effectively earned a 40% return on capital — before tax benefits. No other mainstream asset class offers this combination of leverage and tax support to everyday Australian investors.
How Australian Property Market Cycles Work
Every property market moves in cycles. Understanding where a city or suburb sits in its cycle is one of the most important skills a beginner investor can develop — because buying at the wrong point can mean waiting years for growth, while buying at the right point can mean significant gains in a short time.
The Four Phases of the Property Cycle
Strong buyer demand outpaces supply. Prices rise quickly, auction clearance rates are high, and days on market fall. Investors and owner-occupiers both compete hard. FOMO is real.
Key signals: Rising auction clearance, falling days on market, media excitement
Growth slows but doesn't reverse. Listings rise, days on market lengthen, and buyers regain negotiating power. Interest rate rises or affordability constraints are often the trigger.
Key signals: Clearance rates falling, vendor discounting begins, rate concern
Prices fall, often in the range of 5–15% from peak. Distressed sellers appear. Vacancy rates can rise. This is typically when media coverage is most negative — and when patient investors start watching closely.
Key signals: Falling values, rising listings, negative media, rising vacancy
Buyers return. Listing volumes stay low while demand strengthens. Prices stabilise then start rising. This phase often passes quickly — investors who wait for certainty frequently miss the early gains.
Key signals: Improving clearance rates, falling vacancy, renewed enquiry
Where Each Market Sits in Early 2026
Australia's capital city markets are not synchronised — they each run on their own supply, demand and economic fundamentals. Here's how they sit entering 2026:
| City | Cycle Phase | Median Dwelling Value | Annual Growth | Vacancy Rate |
|---|---|---|---|---|
| Perth | Growth | $961,898 | +17.8% | <1.0% |
| Adelaide | Growth | $914,203 | +12.4% | 1.2% |
| Brisbane | Strong Growth | $1,054,555 | +14.0% | 1.2% |
| Sydney | Moderation | $1,290,537 | +6.4% | 1.8% |
| Melbourne | Moderation | $830,371 | +4.6% | 2.0% |
| Hobart | Recovery | $690,000 | +2–4% | 1.5% |
| Canberra | Stable | $980,000 | +2–3% | 1.2% |
| Darwin | Recovery | $620,000 | +7–9% | 1.8% |
Sources: CoreLogic/Cotality January 2026; PDF guide state forecasts. Annual growth figures are 12-month to Jan 2026 or forecast as noted.
How to Read the Market Where You're Looking
You don't need a PhD in economics to track market cycles. Three metrics tell you most of what you need to know: auction clearance rate (above 70% = strong demand), days on market (falling means buyers are competing), and rental vacancy rate (below 2% means strong rental demand). CoreLogic, SQM Research, and the Real Estate Institute of each state publish these monthly.
Pro Tip
Don't try to time the cycle perfectly — the data confirming a market has bottomed typically arrives 6–12 months after the actual bottom. Buy fundamentally sound property in structurally undersupplied markets and hold for at least 7–10 years. Cycles matter less the longer your hold period.
Free Tools to Track the Australian Market Yourself
Tracking market cycles has never been easier for retail investors. Here are the key free and low-cost data sources every beginner should bookmark:
Rental vacancy rates by suburb, asking rents, stock on market. Updated monthly. The vacancy rate is one of the single best leading indicators of rental market tightness.
Median property values, quarterly growth rates, days on market, vendor discounting. The Home Value Index is the gold-standard measure of national price movements.
Weekly auction clearance rates by city and region. Clearance rates above 70% indicate a seller's market; below 60% signals buyer advantage. Published each Saturday night.
Days on market by suburb, listing volumes, price history on individual properties. Use the "research" tabs on both platforms for suburb-level trend data.
Cash rate decisions, inflation reports, housing finance data. Subscribe to media releases to stay informed on monetary policy before it affects your borrowing costs.
Official population data, housing finance approvals, building approvals. Building approvals data is a leading supply indicator — high approvals in a suburb signal incoming supply that can suppress prices.
Spend 30 minutes each month reviewing your target market's vacancy rate, clearance rate, and days on market. These three numbers tell you whether conditions are improving or deteriorating — and whether now is the time to act or wait.
Capital Growth vs Cash Flow — Which Strategy Is Right for You?
Every investment property leans one of two ways: towards capital growth (buying for long-term value appreciation) or cash flow (buying for income surplus). Understanding the difference — and which suits your personal situation — is one of the most important decisions a beginner investor makes.
Capital Growth Strategy
Capital growth investors buy in locations where they expect property values to rise significantly over time. They typically accept that the property may be negatively geared — costing them money each year — in exchange for the long-term wealth-building potential of a rising asset. The ATO's negative gearing rules soften this annual cost through tax deductions.
Capital growth properties tend to be: houses on land rather than units, in inner-ring or infrastructure-adjacent suburbs of major cities, with low vacancy rates and strong owner-occupier demand. They often have relatively lower rental yields (3–4%) but higher long-term appreciation.
This strategy suits investors with higher incomes (who benefit more from negative gearing), stable employment, and a long investment horizon (7–10 years minimum).
Cash Flow Strategy
Cash flow investors buy in markets where rental income exceeds or closely matches holding costs. The goal is for the property to be self-funding — or even positively geared — from Day 1. Regional cities, smaller capitals, and higher-yield property types (units, dual-income properties, granny flats) are common targets.
Cash flow properties suit investors who need the portfolio to pay its own way immediately, those on lower incomes who can't absorb ongoing shortfalls, or investors building a larger portfolio who need each property to contribute rather than drain cash.
Side-by-Side Comparison
| Factor | Capital Growth Focus | Cash Flow Focus |
|---|---|---|
| Primary goal | Long-term wealth building | Immediate income surplus |
| Typical yield | 3–4% | 5–7%+ |
| Gearing | Usually negatively geared | Neutral to positively geared |
| Best market | Inner-ring capital city suburbs | Regional cities, smaller capitals |
| Suits who? | Higher income earners (37%+ tax rate) | Lower to medium income, portfolio builders |
| Time horizon | 7–10+ years | 5–10 years |
| Risk profile | Accepts short-term cost for long-term gain | Lower monthly exposure |
| Property type | Houses on land | Units, duplexes, regional houses |
The Blended Approach
Many experienced investors find a middle path: buying for capital growth in a market with above-average yields, or adding value to a cash flow property to drive appreciation. The best first property is often one that scores reasonably well on both metrics — not a pure play in either direction.
As your portfolio grows, you might hold capital growth properties in major cities and add cash flow properties to self-fund the portfolio's holding costs. This is the approach many buyers' agents recommend for building a 3–5 property portfolio over 10–15 years.
Which Strategy Suits Your Situation?
The right strategy depends on your income, risk tolerance, time horizon, and goals. Here's a quick guide for four common beginner profiles:
High marginal tax rate (39–47%) means negative gearing is highly effective. Can absorb a monthly shortfall. Long career runway means time to wait for capital gains. Target inner-ring houses in Sydney, Melbourne, or Brisbane.
Cannot afford major capital city outright. Consider buying in a regional city (e.g., Geelong, Gold Coast, Newcastle) where purchase prices allow neutral-to-positive gearing while still offering growth potential.
Shorter time horizon means less time to wait for capital gains. Cash flow properties reduce reliance on pension. SMSF property investment offers concessional 15% tax rate on rental income and 0% in pension phase.
Borrowing capacity is being consumed. New acquisitions need to be increasingly self-funding. Add a high-yield property to offset holding costs of existing growth properties.
What Makes a Property Investment Grade?
Not all investment properties are created equal. The term "investment grade" refers to a property that has the specific characteristics most likely to generate strong capital growth and consistent rental demand over time. Understanding what makes a property investment grade — and what disqualifies it — can save a beginner from costly mistakes.
The 80/20 Rule: Location Is Everything
Research consistently shows that approximately 80% of a property's capital growth performance comes from its location — the suburb, the street, and its proximity to employment, transport, and amenity. The remaining 20% comes from the property itself: its condition, configuration, and land-to-asset ratio.
This is why a modest, unrenovated house in an inner-ring suburb often outperforms a brand-new apartment in an oversupplied outer corridor. The land appreciates; the structure depreciates. Buy as much land as you can afford, in the best location you can access.
The 5 Hallmarks of Investment-Grade Property
Is the supply of this type of property in this location genuinely limited? Land in an established inner suburb can't be replicated. A high-rise tower with 200 identical units offers no scarcity at all.
Does the suburb have multiple reasons for people to want to live there? Employment hubs, quality schools, lifestyle amenity (cafes, parks, beaches), and good transport all generate sustained demand from both owner-occupiers and renters.
Properties within 10km of major employment centres, or near confirmed new infrastructure (train lines, hospitals, universities), tend to outperform over time. In 2026, watch Perth METRONET corridors, Sydney Metro West stations, and Brisbane's Olympic infrastructure precincts.
A suburb with less than 2% rental vacancy means tenants compete for available properties, reducing your vacancy risk and supporting rent increases over time. SQM Research publishes suburb-level vacancy data monthly.
A suburb that has delivered above-average growth across multiple market cycles — including downturns — demonstrates the underlying demand fundamentals are structural, not cyclical.
Red Flags to Avoid
Important: Properties That Often Underperform
- • High-rise apartments in oversupplied CBD postcodes — minimal land content, high body corporate fees, similar supply constantly entering the market
- • Single-industry towns — mining communities, tourism-dependent towns — where economic shock can collapse both rents and values
- • Off-the-plan in oversupplied corridors — you pay today's price for a property that won't settle for 2–3 years, in a market that may have changed significantly
- • Properties where body corporate exceeds $3,000/year — these fees eat into yield and are difficult to reduce
- • Vendor finance, rent-to-buy, or developer incentive packages — rarely in the buyer's interest
Our sister article on investment-grade property in Australia goes deeper on suburb selection methodology if you want to learn more.
Negative Gearing vs Positive Gearing — The Basics
Gearing refers to the relationship between your rental income and your property expenses. It's one of the most misunderstood concepts in Australian property investment — and one of the most important for understanding your actual out-of-pocket cost.
Negative Gearing Explained
A property is negatively geared when your annual rental income is less than your total deductible expenses (interest, management fees, council rates, insurance, maintenance, depreciation). The shortfall — your "loss" — can be claimed against your other taxable income, reducing your tax bill.
Worked Example — Negative Gearing
| Annual rental income | $31,200 | $600/week |
| Loan interest (Year 1) | −$39,000 | 6.5% on $600K |
| Property management (8.8%) | −$2,746 | |
| Rates, insurance, maintenance | −$5,300 | Estimate |
| Taxable loss | −$15,846 | |
| Tax saving at 37% marginal rate | +$5,863 | Offset against salary |
| Depreciation (newer build, Div 43+40) | −$10,000 | Non-cash deduction |
| Additional tax saving from depreciation | +$3,700 | At 37% rate |
Total tax benefit from gearing + depreciation: $9,563/year. This meaningfully reduces the real annual holding cost.
Positive Gearing Explained
A property is positively geared when rental income exceeds all expenses — creating a net profit. This profit is added to your taxable income. Positively geared properties are more common in regional areas and smaller capitals where purchase prices are lower relative to rents.
Positive gearing means less out-of-pocket cost but also means paying more tax on the income. It suits investors who need their portfolio to be self-sustaining, are on lower marginal tax rates, or are building a large portfolio where each property must contribute to cash flow.
Which Strategy Suits Your Income?
| Your Income | Marginal Tax Rate | Negative Gearing Value | Preferred Approach |
|---|---|---|---|
| Under $45,000 | 19–21% | Low | Positive gearing or neutral |
| $45,001–$135,000 | 32.5–34.5% | Moderate | Blended — mild negative OK |
| $135,001–$190,000 | 39% | High | Negative gearing highly effective |
| Over $190,000 | 47% | Very High | Negative gearing + depreciation optimal |
Note: Effective marginal rates shown include the 2% Medicare levy. The base rate for income between $18,201–$45,000 is currently 16% (effective from 1 July 2024); this is already legislated to fall to 15% from 1 July 2026, slightly improving the after-tax position for lower-income investors. Always get personal tax advice from a registered tax agent for your specific situation.
For a deeper look at the tax side of investment property — including land tax, CGT, and the potential negative gearing reform risk — see our property investment tax guide.
Want the Complete Investor Toolkit?
Our free PDF guide includes printable checklists, a borrowing capacity worksheet, a renovation cost estimator, and state-by-state stamp duty tables — everything you need to use on your first purchase.
Download the Free Guide →How to Finance Your First Investment Property
Financing is where many beginners feel most overwhelmed. There are a lot of moving parts — deposits, LVRs, DTI ratios, loan types, lender policies — but once you understand the framework, it becomes much clearer. Let's walk through what you actually need to know.
How Much Deposit Do You Actually Need?
The standard benchmark is 20% of the purchase price. On a $750,000 property, that's $150,000. This avoids Lenders Mortgage Insurance (LMI), which is a premium charged by lenders when the borrower has less than 20% equity — it protects the lender, not you, and can add $15,000–$30,000 to your costs.
You can borrow with as little as 10% deposit plus LMI, which makes entry possible sooner. Whether LMI is worth paying depends on how fast you expect prices to grow versus how long it would take to save the extra 10%. In a rising market, paying LMI to enter sooner can make financial sense. In a flat or falling market, it's money lost.
Don't forget stamp duty, legal fees, building and pest inspection, and a buffer for early repairs. Total upfront costs beyond the deposit vary widely by state — on a $750,000 purchase: roughly $23,000–$28,000 in Queensland, $35,000–$40,000 in Victoria, and $28,000–$32,000 in Western Australia (investor rates, no concessions). For a detailed breakdown by state, see our complete guide to investment property deposits.
Understanding LVR and Borrowing Power
LVR (Loan-to-Value Ratio) is simply your loan amount as a percentage of the property's value. A 20% deposit gives you an 80% LVR — you're borrowing 80% of the property's value. Most lenders cap investment property loans at 80–90% LVR without LMI.
DTI (Debt-to-Income Ratio) is the total amount you owe divided by your gross annual income. APRA, Australia's banking regulator, has pushed banks to cap investor DTI at 5–6 times income. At a combined income of $180,000, your theoretical maximum debt would be around $900,000–$1,080,000 — though what you actually qualify for depends on lender-specific policies, existing debt, and living expenses.
Banks also stress test your repayment capacity at 3% above your actual rate. With a current standard variable rate around 6.5–7%, you're assessed at 9.5–10%. This significantly reduces how much you can borrow compared to what the headline rate suggests.
For a full explanation of how APRA's DTI rules work in 2026, read our complete APRA DTI guide.
Loan Types: What Should You Choose?
Principal & Interest (P&I)
Advantages:
- ✓ Reduces loan balance every month
- ✓ Build equity faster
- ✓ Lower rate than IO loans
- ✓ Better for long-term holders
Considerations:
- • Higher monthly repayments
- • Less cash flow flexibility
Interest-Only (IO)
Advantages:
- ✓ Lower monthly repayments
- ✓ Maximises negative gearing deduction
- ✓ Better cash flow in early years
- ✓ Useful for short-hold strategies
Considerations:
- • Available for 3–5 years then reverts to P&I
- • Higher rate than P&I
- • Loan balance doesn't reduce
- • Lenders more cautious post-2020
Fixed vs Variable in 2026
On 3 February 2026, the RBA raised the cash rate by 25 basis points to 3.85% — the first hike this year, driven by inflation picking back up and stronger-than-expected private demand. This makes the fixed vs variable decision more consequential for new borrowers.
Fixed rates offer certainty — you lock in a rate for 1–5 years regardless of RBA moves. Variable rates move with the cash rate. In a rising rate environment, fixing can be protective. But fixed rates often price in expected future rises, meaning you're not always getting a better deal — just certainty.
Many investors use a split loan: fix 50–70% of the loan for rate certainty while keeping 30–50% variable (allowing extra repayments and redraw flexibility). This is a pragmatic middle ground.
Pro Tip
Get pre-approved by a mortgage broker before you start searching for property. Pre-approval (valid for 90 days from most lenders) tells you exactly what you can borrow, strengthens your negotiating position, and prevents the heartbreak of finding the perfect property only to discover you can't finance it.
What Documents Do You Need for Pre-Approval?
Gathering your documents before approaching lenders makes the pre-approval process much faster. Here's what most lenders need from an investment property applicant:
Income Documents
- ✓ Last 2 payslips (PAYG employees)
- ✓ Last 2 years tax returns and Notices of Assessment
- ✓ Employment contract if recently changed roles
- ✓ Last 2 years financial statements (if self-employed)
- ✓ Evidence of any additional income (rental, shares, etc.)
Asset & Liability Documents
- ✓ Last 3 months savings account statements
- ✓ Existing loan statements (home loan, car loan, personal loan)
- ✓ Credit card statements (note: credit card limits reduce borrowing, not just balances)
- ✓ Superannuation statement (some lenders consider this)
- ✓ Evidence of gift funds if applicable (statutory declaration)
Identity Documents
- ✓ Passport or driver's licence (100 points required)
- ✓ Medicare card (if required for 100 points)
- ✓ Proof of residential address (utility bill, bank statement)
Common Traps
- ⚠ Cancel unused credit cards — limits count against you
- ⚠ Don't apply with multiple lenders at once — each hard credit enquiry affects your score
- ⚠ Don't take on new debt (car finance, personal loans) between pre-approval and settlement
- ⚠ Pre-approval is conditional — final approval occurs after valuation
A mortgage broker can lodge applications with multiple lenders simultaneously and knows which lenders are most favourable for investors at any given time. Given the recent RBA rate hike to 3.85% and evolving lender policies on DTI ratios, using a broker rather than going direct to a single bank is particularly valuable in 2026.
How Depreciation Reduces Your Tax Bill
Depreciation is the non-cash deduction that most beginner investors overlook — and it can be worth $5,000–$15,000 in additional tax deductions every year, without spending a cent. Here's how it works.
Division 43 — Building Allowance
Division 43 of the ITAA 1997 allows you to claim 2.5% of a building's original construction cost as a tax deduction each year, for 40 years. This applies only to buildings constructed after 15 September 1987. On a newer investment property where the construction cost is $400,000, that's a $10,000/year deduction — for 40 years — without spending any money.
If the building is pre-1987, no Division 43 is available. This is one of the reasons newer properties can be more attractive for high-income investors — even though older properties often have stronger land-to-asset ratios and capital growth potential.
Division 40 — Plant and Equipment
Division 40 covers individual items in the property that have a finite life — appliances, carpet, blinds, hot water systems, air conditioners. These can be depreciated at various rates using either prime cost or diminishing value methods. A standard residential property might have $3,000–$5,000 in Division 40 deductions in Year 1 alone.
Note: Since 2017, Division 40 deductions on second-hand plant and equipment are no longer available for properties where the items were not new when you purchased the property. This applies to existing properties. New properties are unaffected.
Why You Need a Quantity Surveyor
A quantity surveyor (QS) creates a formal depreciation schedule for your property. This schedule itemises every depreciable asset — both Division 43 and Division 40 — and calculates the maximum allowable annual deduction for each. The schedule costs $500–$800 and can generate thousands in deductions annually that you couldn't otherwise prove to the ATO.
Your accountant uses this schedule when preparing your tax return. Without it, you can only claim deductions you can specifically substantiate — which means you almost certainly leave money on the table.
Important
Commission your depreciation schedule in the same financial year you purchase the property. You can apply it retrospectively in some cases, but it's much simpler to have it ready from settlement. Most quantity surveyors offer online ordering and can complete the schedule remotely.
Step-by-Step: Your First Investment Property Purchase
The process of buying an investment property follows a predictable sequence. Here are the 10 steps, from goal-setting to having a tenant in place.
Decide whether you're targeting capital growth, cash flow, or a blend. Set a target investment horizon (minimum 7–10 years). Define your budget including purchase costs, ongoing holding costs, and a 3–6 month cash buffer.
Engage a mortgage broker who works with investors. Get a formal pre-approval letter — it defines your borrowing capacity and gives you credibility as a buyer. Review your credit file and address any issues before applying.
Identify 2–3 target markets based on your strategy. Study vacancy rates (SQM Research), auction clearance rates, median price growth history, and upcoming infrastructure projects. Narrow to 5–10 target suburbs.
For each property you shortlist, calculate: gross yield (annual rent ÷ purchase price), estimated holding cost (mortgage + rates + insurance + management), and total upfront cost (deposit + stamp duty + costs). Run numbers, not emotions.
Submit offers at or slightly below the asking price with a cooling-off period attached (in most states). Avoid auctions for your first purchase if possible — they can create pressure. Include finance and building inspection conditions.
Order a building and pest inspection ($400–$800). Review the title search and Section 32/contract. Verify rental estimates with local property managers. Commission the quantity surveyor to prepare the depreciation schedule.
Your solicitor or conveyancer exchanges contracts with the vendor's representative. You pay the initial deposit (typically 10%) which is held in trust. Check your cooling-off rights — they vary by state.
On settlement day, the balance of the purchase price is paid and the property transfers to your name. Your lender advances the loan funds. You'll need to have stamp duty and other costs ready to pay at this point.
Before settlement, engage a property manager in the local area (interview 2–3, compare fees and tenant screening processes). They'll market the property, screen tenants, and manage the tenancy on your behalf. Standard management fees are 7–10% of rent plus letting fee.
Each financial year, review the property's performance: rental income, expenses, tax position, market value estimate, and whether the strategy is on track. Adjust loan structures if needed, consider refinancing to access equity, and plan for the next acquisition.
Pro Tip
Steps 3–6 (market research, property analysis, due diligence) are where most beginner mistakes happen. Our free downloadable PDF guide includes printable checklists for each of these steps. Download it at /investment-guide.
Real Investor Case Study: Sarah and Mark's First Property
Abstract numbers can only take you so far. Here's a realistic example of what a first investment property purchase actually looks like for a working Australian couple — numbers, tax position, cash flow, and a 5-year projection included.
Their Starting Position
Sarah and Mark are Sydney renters. They can't afford to buy in their local market (Sydney house median: $1,290,537) but have accumulated $200,000 in savings over four years. They decide to invest interstate where prices are more accessible and growth fundamentals are strong.
The Property They Chose and Why
After 3 months of research, they purchase a 4-bedroom house in Brisbane's northside for $750,000. Their reasoning:
- • Brisbane's annual growth has been 14% — strong fundamentals ahead of the 2032 Olympics
- • Northside vacancy rate: 1.1% — tenants compete hard for properties
- • The property is a 2021-built house — good depreciation schedule available
- • 4-bedroom homes rent well to families — lower tenant turnover than units
- • Land component is high relative to the total price ($400K+ land value)
Year 1 Numbers
| Item | Amount | Notes |
|---|---|---|
| Purchase Costs | ||
| Purchase price | $750,000 | |
| 20% deposit | $150,000 | From savings |
| Stamp duty (QLD) | $26,775 | Investor rate, no concession |
| Legal & conveyancing | $1,500 | |
| Building & pest inspection | $750 | |
| Total upfront (excl. buffer) | $179,025 | |
| Cash buffer remaining | $20,975 | For early repairs, vacancies |
| Annual Income & Expenses | ||
| Gross rent ($600/week) | $31,200 | Income |
| Loan: $600K at 6.5% P&I, 30yr | $45,504 | Repayments |
| Property management (8.8%) | $2,746 | Expense |
| Council rates | $2,000 | Expense |
| Water rates | $1,000 | Expense |
| Building insurance | $1,800 | Expense |
| Maintenance allowance | $1,500 | Expense |
| Loan interest component (Year 1) | $38,950 | Of the $45,504 repayments — tax deductible |
| Tax Position | ||
| Total deductible expenses | $47,996 | Interest + management + rates + insurance + maintenance |
| Gross rental income | $31,200 | |
| Taxable rental loss | −$16,796 | Claimed against salary income |
| Tax saving at 37% (combined income $180K) | +$6,215 | Effective reduction in tax bill |
| Depreciation deduction (Div 43 + 40) | $10,000 | From QS schedule — non-cash |
| Additional tax saving from depreciation | +$3,700 | At 37% rate |
| Net annual out-of-pocket cost (after tax savings) | ~$12,835 | ~$247/week — includes equity repayment |
The 5-Year Projection
Brisbane's house prices have grown at an average of around 8–14% per year over the past 3 years. Even using a more conservative 8% annual growth assumption for forward-looking projections:
| Year | Estimated Value (8%/yr) | Loan Balance (P&I) | Equity |
|---|---|---|---|
| Purchase | $750,000 | $600,000 | $150,000 |
| Year 1 | $810,000 | $593,500 | $216,500 |
| Year 2 | $874,800 | $586,600 | $288,200 |
| Year 3 | $944,800 | $579,400 | $365,400 |
| Year 4 | $1,020,400 | $571,800 | $448,600 |
| Year 5 | $1,102,000 | $563,800 | $538,200 |
Over 5 years, Sarah and Mark's equity grows from $150,000 to approximately $538,000 — a $388,000 increase — while their total out-of-pocket cost over 5 years (net of tax savings) is approximately $64,000 (~$247/week).
At Year 5, they can also access their equity (~$200,000+ available at 80% LVR) to fund a deposit on a second investment property — without selling the first. This is the compounding effect of property investment done right.
Note on Projections
This projection uses a conservative 8% annual growth rate. Actual growth will vary significantly by location, market cycle, and macroeconomic conditions. Past performance is not a reliable indicator of future results. These figures are illustrative, not financial advice.
8 Common Mistakes First-Time Property Investors Make
Most beginner mistakes aren't about bad luck — they're about avoidable decisions made under pressure, without sufficient preparation. Here are the 8 most common errors, and how to avoid them.
The property feels right. It reminds you of your childhood home. You love the street. These are the wrong reasons to make a $750,000 financial decision. Investment property is a numbers game. Run the cash flow, check the vacancy rate, verify the growth history. Buy with your spreadsheet, not your gut.
Beginners often focus on the gross rental yield and forget the full cost stack — management fees, council rates, water, insurance, maintenance, and body corporate. A property with 5% gross yield can easily drop to 3.5% net yield after costs. Always model the net position.
What happens when your tenant leaves and the property sits vacant for 4 weeks? Or the hot water system fails in the first year? You need a minimum 3–6 months of holding costs as a buffer, sitting in an offset account or savings. Many beginners drain their savings entirely on the purchase and have nothing left for the unexpected.
Putting an investment property loan in your personal name when a trust structure would be more tax-efficient. Using P&I when interest-only maximises deductions in early years. Not using an offset account to reduce interest. Loan structure matters enormously — get advice from a mortgage broker who specialises in investment loans.
A $600 inspection can find $50,000 worth of problems — rising damp, termite damage, roof issues. Never waive this condition to make your offer more attractive. If a vendor won't allow it, walk away. The cost of discovering structural problems after settlement is catastrophic for a first-time investor.
Your property manager is the most important person in your portfolio. A bad one lets rent slide, ignores maintenance, accepts poor tenants, and creates legal exposure. A good one keeps the property full, maintains the asset, and protects your investment. Don't pick on price — pick on track record, communication, and tenant screening process.
High-rise apartment blocks in Brisbane CBD, Gold Coast units, new development corridors with hundreds of identical properties — these often advertise attractive gross yields. But when supply is high and the resale market is crowded with identical units, capital growth is weak and vacancy can spike. Yield without growth is a treadmill.
Markets change. Your financial situation changes. Interest rates change. An investment property you set up in 2023 may need a different loan structure, refinancing to release equity, or even a sale decision in 2026. Build an annual review into your calendar — check the rental income, market value estimate, loan balance, and tax position every year.
Building Your Property Investment Team
Successful property investment is a team sport. The most expensive mistakes beginners make almost always stem from trying to do everything alone — or from choosing the wrong professionals. Here are the key people you need in your corner.
Mortgage Broker (Investment Specialist)
Not all brokers understand investment lending. Find one who works primarily with property investors, understands DTI limits, knows which lenders are favourable for investors, and can model different scenarios (P&I vs IO, trust structure vs personal name).
Accountant (Property Tax Specialist)
Your accountant must understand investment property tax — depreciation, negative gearing, CGT, land tax, and if relevant, SMSF compliance. A general accountant who does your payroll tax may not have this expertise. Ask specifically about their investment property client base.
Buyers' Agent (Optional but Valuable)
A buyers' agent researches markets, shortlists properties, conducts due diligence, and negotiates on your behalf. For investors buying interstate or time-poor professionals, this can be worth many times the fee in avoided mistakes and better purchase price.
Property Manager
Your first property manager sets the tone for your investment experience. Interview at least 3 local agents before committing. Ask about their average days to lease, tenant screening process, maintenance response times, and fee structure. Poor management costs far more than the management fee saved.
Conveyancer / Solicitor
A conveyancer handles the legal transfer of property. Use a qualified solicitor for anything complex (trusts, SMSF purchases, commercial property). For a straightforward residential purchase, a licenced conveyancer is usually sufficient and cheaper.
Quantity Surveyor
Commission a depreciation schedule from a registered quantity surveyor immediately after settlement. Do not skip this step — even on older properties, Div 40 deductions may be available. The fee is also tax deductible.
The combined cost of a good accountant, conveyancer, building inspector, and quantity surveyor on a $750,000 purchase is typically $3,000–$5,000. That's less than 0.7% of the purchase price — and small relative to the mistakes these professionals help you avoid. Getting your ownership structure wrong, for example, could cost tens of thousands in land tax and CGT over a 10-year hold.
Continue Learning
How Much Deposit Do You Need?
State-by-state breakdown of deposit requirements, stamp duty, and LMI options.
Using Your Super to Buy Property
How SMSF property investment works, eligibility, and the LRBA framework.
APRA DTI Rules 2026
How the debt-to-income ratio cap affects your borrowing capacity.
First Home Buyer Guarantee 2026
Understanding government schemes and how they interact with investment property.
SMSF Borrowing Strategies
Limited recourse borrowing explained — strategies, risks, and 2026 updates.
Property Investment Tax Guide
Negative gearing, CGT discount, depreciation, and land tax explained.
Disclaimer: This article is for general educational purposes only and does not constitute financial, tax, or investment advice. Property investment involves significant risk, including the potential loss of capital. Always seek independent financial, tax, and legal advice tailored to your personal circumstances before making any investment decision. Past performance is not a reliable indicator of future results. Market data sourced from CoreLogic, RBA, and PropertyInvestmentProfessionals.com.au — figures are current as at February 2026.