Buying Property for Investment

Successful property investing calls for one key ingredient - planning. A rental property is a substantial financial commitment and you’ll achieve the best results if you take the time to get good advice and plan carefully before you act.


How to get started

Property investing in 2022 & beyond

Investing in property is easier than you think with the right plan in place.

If you're starting your property investment journey and don't know where to begin, your local Mortgage Choice broker can provide expert advice to get you started. You may even be able to use the equity in your current home to help purchase your investment property.

With many rental markets in Australia still performing strongly, now is a great time to invest!

Factors to consider when investing in property

  • 1

    Your current financial position

    Are you well placed to afford an investment property, particularly during the inevitable periods of vacancy?

    When investing in property it’s important to not only consider how much you can borrow, but also how much you can afford to repay given your financial situation. You can use our repayment calculator to understand what your ongoing loan repayments may be.

  • 2

    Can you afford a quality property?

    Can you afford a property that will attract decent tenants and deliver healthy long term price increases?

    No matter how affordable a property is for you, it will not be a successful investment if it doesn’t attract quality tenants. When planning to invest, there are several factors to consider that can enhance tennant appeal, such as a location with good transport links, plenty of local amenities like shops, schools, entertainment facilities and proximity to employment opportunities.

  • 3

    Where are you heading?

    Are you prepared, and can afford, to hold onto your investment for the long term? Will you need access to your capital (money invested) in the near future?

    Understand where your investment sits in your overall financial plan. Will your rental property eventually be used to live in or is it a stepping stone to purchasing more investment properties to build your portfolio. 

  • 4

    How much money will you need?

    As with your home, purchasing an investment property can involve significant upfront costs and ongoing maintenance expenses.

    Understanding the ongoing and upfront costs of investment properties can help you plan your investment accordingly and ensure that you’re in the right financial position. 

  • 5

    How much can you afford to borrow?

    Getting an idea of your borrowing capacity is the first step in finding out the type of property and location you can afford.

    Understanding your serviceability is essential before looking at properties to invest in. You can take a few minutes to calculate your capabilities by taking into account your income and expenses with our home loan quote here.

  • 6

    Do you need a cash deposit?

    If you own your home, did you know you may be able to use home equity instead of a cash deposit?

    Using home equity allows you to purchase an investment property without having a cash deposit saved up. From there you can use the rental income from this investment property to help pay off the loan.

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Property investor guide

Our free, downloadable guide explains the costs and steps associated with the purchase of an investment property, positive/negative gearing as well as pros and cons of houses vs. units.


Download now

The ideal property

Your investment property will ideally meet two key criteria - being affordable for you, and appealing to a wide range of tenants.

Affordability

In the first few years of being a landlord, it's likely your property will be negatively geared, which means it costs more to own the property than it earns in rental income. While this can offer tax savings, you still need to be confident that you can cope with the expenses. Even the best properties experience some periods of vacancy, so you also need to be able to cover loan repayments when the property is not generating income.

Tenant appeal

No matter how affordable a property is for you, it won’t be a successful investment if it doesn't attract quality tenants. Consider properties objectively and think about whether you’d be happy to live there. If you're not sure, prospective tenants are likely to think twice too. See our section on finding the right investment property for more details on enhancing tenant appeal.

Once you have a clear picture of your current position, your personal goals and your ability to afford an investment property, you’re ready to start creating - or adding to - your investment property portfolio!

Investment property costs

What are the ongoing and upfront costs of investing?

These are essential to avoid any nasty surprises like building defects, illegal work or pest problems that could be expensive to fix.

If you’re investing in a unit, apartment or townhouse, a strata search is essential. It will identify whether there are existing disputes within the building, if there are outstanding repair bills, or if the quality of repairs has been sub-standard.

Stamp duty is a state government tax based on the price paid for the property. The cost of stamp duty is added to the capital value of your property, so it will reduce any capital gains tax that may apply when you sell your investment. See our stamp duty calculator to figure out what you might need to pay.

These may include a loan application fee, lender's valuation fee, and Lenders Mortgage Insurance (LMI) which involves a single premium based on the amount you borrow relative to the property's value. LMI applies if you borrow 80% or more of the purchase price.

Also known as 'conveyancing' fees, these cover the cost of having the property transferred out of the vendor's name and into yours, and is normally completed by your solicitor. Find out more about conveyancing here.

As a landlord, you’ll have a variety of expenses associated with owning and tenanting your investment property. Most of these costs can be claimed on tax (always check with your accountant), which makes the bills more manageable. See our tax and gearing section for more details.

Typical ongoing costs include:

1. Accountant/ tax agent fees

2. Body corporate fees

3. Council and water rates

4. Insurance -  landlord insurance offers a comprehensive level of protection for investors

5. Lease expenses including legal fees for drafting leases

6. Land tax

7. Letting and re-letting costs - including advertising costs

8. Loan interest - factor the possibility of higher repayments into your budget if you use a variable rate loan

9. Management fees paid to real estate agents - expect to pay around 7% of the gross rental

10. Repairs and maintenance including cleaning or gardening costs

Tax and gearing

Understanding investment property tax benefits

Rental properties enjoy generous tax concessions and this is one of the reasons why residential property is highly favoured by Australian investors.

Read more to get an understanding of the tax benefits associated with an investment property what you can claim.

Or explore how both positive and negative gearing works to find out which one is right for you.

Investment by state

Get the latest property investment updates for your state or city

How to invest in real estate for beginners

We've put together a Beginner's Guide to Property Investment to help you understand what to be aware of when first getting into property investing. 

Additional resources

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Planning to invest? Get your free home loan quote today.