Keys to Successful Property Investing
There’s an old saying that no investment is as safe as bricks and mortar. It’s something most Australians have grown up hearing, that property is a sure path to wealth and security. But is that really the case? Or have we simply come to believe it because of what appears to be the never ending rise in property prices?
While it’s easy to assume that investing in property is a fail-safe way to make money, history shows that it’s not always the case. Property can deliver strong long-term growth, but it also comes with risks, costs, and challenges that are often overlooked.
In this blog, we’ll explore the key lessons and common mistakes many investors make and how being better informed can make all the difference.
Why Property Prices Have Risen and Why That Matters
Over the past few decades, Australian property prices have increased significantly. But many economists agree that much of this growth can be explained by two main factors.
First, the deregulation of the Australian banking sector allowed more competition, which meant more lenders offering home loans to more Australians. Second, interest rates remained at historically low levels for an extended period. Together, these factors meant that buyers were able to borrow more money and as a result, pay higher prices come auction day. In addition to low rates and deregulation, constant population growth has helped to fuel demand.
This long period of growth has given many Australians the belief that property prices can only go one way and that is up. But markets move in cycles, and even real estate isn’t immune to downturns. Understanding this is an important step toward becoming a more informed, realistic investor. Below are some of the key mistakes that we see investors make:
1. Do the Numbers and Don’t Just Assume Profit
One of the most common mistakes in property investing is failing to run the numbers properly before buying.
It’s tempting to believe that capital growth will always make up for any short-term losses, that even if the rent doesn’t cover the mortgage and expenses, you’ll make it back when the property increases in value. But that assumption doesn’t always hold true.
Before purchasing, investors should have a clear picture of cash flow, the difference between rental income and all outgoings such as interest and repayments, maintenance, insurance, rates, and property management fees.
A good question to ask is: What happens if the rent doesn’t cover all the costs for several years?
And equally, what rate of capital growth would I need to make a profit over the long-term?
Understanding these numbers and stress-testing them under different scenarios can highlight whether the investment really makes financial sense or if it could create unnecessary strain.
2. Understand the Tax Implications
Many people are drawn to property because of its tax benefits. Concepts like negative gearing and depreciation deductions often come up in conversations about property investing.
However, the tax outcomes depend heavily on each person’s situation. For example, newer properties often allow investors to claim more depreciation on fixtures, fittings, and construction costs. This can reduce taxable income on paper, but it doesn’t necessarily improve long-term returns.
It’s important to understand that property investing isn’t just about tax. Tax deductions can help with cash flow, but they don’t turn a poor investment into a good one. The key is to understand all the numbers not just the potential tax benefits before making a decision.
3. Borrow Responsibly and Don’t Stretch Too Far
Another trap many investors fall into is borrowing more than they can comfortably afford. When enthusiasm is high and lenders are willing, it’s easy to assume that future income growth or rising property values will make things easier later.
But life can change, interest rates can rise, tenants can move out, and repair costs can appear when least expected. If an investor is already stretched thin, these surprises can create financial stress.
It’s worth considering what level of shortfall would be manageable if things didn’t go to plan. For example, if you were initially comfortable covering a $200 weekly gap between rent and loan repayments, would you still feel the same after two or three years if rates or costs increased?
Having a buffer, whether that’s savings or flexible loan features, can help manage these risks and provide peace of mind.
4. Don’t Ignore Interest Rate Risk
For many years, we enjoyed some of the lowest interest rates in history. This made property investment look particularly attractive and affordable.
But recent years have reminded everyone that interest rates can rise quickly in response to inflation and broader economic conditions. Even small increases can have a significant impact on repayments, especially for investors with high levels of debt.
Understanding how rate changes affect repayments and cash flow is crucial. It can be helpful to model your numbers under higher interest rate scenarios to see if the investment still works financially.
5. Research, Research, Research
Not all properties or suburbs are created equal. A well-researched property investment is one based on evidence, not emotion.
Some buyers focus solely on location, but it’s important to understand the broader picture. Factors such as rental demand, infrastructure projects, local employment trends, population growth, and vacancy rates all influence long-term performance.
A common pitfall is overcapitalising, spending too much on renovations or improvements relative to what the market will pay. For example, spending $100,000 on upgrades that only add $50,000 in value when selling can significantly erode potential returns.
Similarly, paying too much for a property because of competition or emotion can set an investor back years. Taking the time to analyse recent sales, speak with local agents, and understand comparable rental returns can lead to more informed decisions.
6. Think Long Term
Successful property investing is rarely about quick wins. Short-term speculation, buying purely in the hope of rapid capital gains can be risky, especially if market conditions change.
Instead, a long-term mindset allows investors to ride out fluctuations and benefit from both capital growth and rental income over time. Holding property for longer periods also helps offset transaction costs such as stamp duty, agent fees, and legal expenses.
7. Understand the Costs Beyond the Purchase Price
When people think about property, they often focus only on the purchase price. But the true cost of owning an investment property includes much more:
Stamp duty and legal costs
Loan application fees
Ongoing maintenance and repairs
Landlord insurance
Property management fees
Council rates and strata levies
Land tax
Factoring in these costs upfront helps avoid unpleasant surprises later and gives a clearer picture of potential returns.
The Reality of Property Market Cycles
Property prices don’t rise in a straight line. According to the Australian Bureau of Statistics, since the 1990s there have been several periods where average house prices fell, sometimes by as much as 10% in a single year.
These downturns remind investors that even assets seen as safe can fluctuate in value. Market corrections are a normal part of the investment cycle and can be influenced by changes in interest rates, government policy, and economic growth.
Recognising this helps set realistic expectations. Property can still be a strong long-term investment, but like any asset, it carries risk and success comes from preparation, patience, and perspective.
There is risk in any investment, property included, even if it doesn’t always feel that way. Australian housing has historically delivered strong returns, but it’s not immune to downturns.
The most successful property investors tend to be those who:
Do their research thoroughly
Understand their financial limits
Consider the long-term view
Make informed, well-planned decisions
Ultimately, knowledge is the best protection against property investment failure. Understanding how property markets work, what influences prices, and where the risks lie can help investors approach opportunities with confidence and caution without falling for the myth that property is always a guaranteed path to wealth.
About Us
After working as an advisor for a decade, Joel founded Unified Wealth.
Unified Wealth specialises in helping clients who are facing life’s big decisions.
Whether you’re contemplating your first property, growing your family or starting your investment journey we can help you focus on the simple steps to help you make your goals reality.
Our priority is making sure you have all the right information available to make the best possible decisions for you and those you love.
Our company values are:
Unity - We are most effective when we work together as a team
Trust - We are trustworthy and act in your best interests
Transparency - We are honest and communicate openly
Education - We are committed to lifelong education
At Unified Wealth our team is highly experienced and provides goal-based advice and solutions for a range of advice strategies.
Speak to our team today.
Disclosure
The information in this blog and the links has been prepared for general information purposes only and does not take into account your personal objectives, financial situation or needs. It is not intended to provide commercial, financial, investment, accounting, tax or legal advice. You should, before you make any decision regarding any information, strategies, or products mentioned in this website, consult a professional financial advisor to consider whether it is suitable and appropriate for you and your personal needs and circumstances. Before making a decision to acquire a financial product, you should obtain and read the Product Disclosure Statement (PDS) relating to that product, together with the Target Market Determination (TMD)