Getting started

Residential property investment could be for you if:

  • you like the idea of investing in bricks and mortar
  • you want to leave a nest egg for your family or help them get their foot on the property ladder
  • you're thinking about retirement
  • you own an existing property with good equity
Pros and cons

The pros and cons of investing in residential property

These are going to be different for everyone, but we've highlighted some of the advantages and the potential risks that can be associated with investing in residential property.

You get rental income There could be unexpected expenses such as maintenance, an untenanted property or an increase in insurance premiums or rates
Some expenses may be deductible against your taxable income, including interest paid on your loan Interest rates could rise, increasing your costs and reducing the money you're making from the property
You could make gains as the value of the property increases There may be little or no profit from rent after expenses and you may have to fund ongoing expenses, at least initially - property investment is often about long-term profit
You could use equity in your existing property to purchase your investment property The value of your property may not increase, depending on the market
It's 'bricks and mortar' so you have something tangible to show for your money If you need to sell, be aware that it may take some time, of you could even make a loss on the sale. Gains from the sale of a property may sometimes be taxed
Can I afford it?

Can I afford to buy an investment property?

The first question to ask yourself is, “Can I afford an investment property?”

Investing in property could cost less than you think, and you could be closer to achieving it than you realise. Crunching the numbers is a huge part of the process.

You can calculate your budget by working out:

  1. how much equity you have in your existing home
  2. how much money you have saved
  3. the costs involved
  4. how much you need to borrow

Talk to our Investment Property Lending Specialists


Equity: an example of what it means

Lin's story

Lin has a home worth $800,000, and owes $250,000 on her home loan. This means she has $550,000 in equity – equity is the portion of your property you’ve paid for. When Lin first put down a deposit for her home, the deposit was her equity in the home, but as she’s paid off more her equity has grown.

Lin decided to use $180,000 from her equity to purchase an investment property for $450,000, using this equity instead of needing to save for a deposit.

After her purchase Lin now has two homes worth a total of $1,250,000. She has borrowed a total of $700,000.

Remember that your equity is based on what your property is worth now, which is probably different to what you paid for it.

Equity example of what it means

The costs involved

It’s important to keep in mind some of the ongoing costs when working out if you can afford to buy a residential investment property. This will include things like the interest costs on your loan, property management fees (if you choose not to manage the property yourself), insurance for the property, insurance for yourself, repairs and maintenance and council rates.

We take a closer look at potential expenses of owning a residential investment property on the Do the maths page.

Planning your goals

Making a plan starts with you

Everyone brings their own goals and motivations to the table when they invest in property, so you should ask yourself the following questions:

  • why do I want to buy a residential investment property?
  • am I mostly concerned with setting myself up for retirement?
  • do I want a property that I can pass down to my kids, and make money from in the meantime?
  • do I want to generate an income from the property today, or in the future?
  • am I in it for the short term? Or am I after long-term gains?

The only person who can answer these questions is you, and that’s why it’s a good idea to sit down and make a plan for now and in the future.

Who can help you move forward?

You may find yourself doing a lot of your initial research, but once you’re ready, seek out the appropriate experts to help you. Having a team of people you trust is essential – this is often made up of your Investment Property Lending Specialist, your lawyer, your accountant, an Authorised Financial Adviser if you want help with investment planning for the future, and sometimes a trusted real estate agent.