1. What to Look For When Finding a Property
Think like an investor, not an owner-occupier. Key things:
- Location
- Population growth (areas with new infrastructure, schools, transport links).
- Vacancy rates (ideally <2% = strong rental demand).
- Proximity to jobs, shopping centres, universities, and hospitals.
- Check local council zoning & future development plans.
- Property Type
- Low maintenance is often better for the first investment (apartments, townhouses, newer houses).
- Strata vs freehold: strata means body corporate fees, but less maintenance.
- Avoid very unique properties that appeal to a narrow market (harder to rent/resell).
- Price Point
- Stick to your borrowing capacity + buffer.
- Compare with recent sales (CoreLogic, REA, Domain).
- Tenant Appeal
- Parking, air-con, outdoor space, storage.
- Safe neighbourhood.
- Close to amenities and public transport.
2. What to Watch Out For (Red Flags)
This is where many first-time investors trip up:
- Overpaying
- Don’t buy just because “it looks nice.” Always compare to recent sales data.
- Cash Flow Traps
- High maintenance properties (old homes with constant repairs).
- High strata/body corp fees on units (pools, gyms, lifts).
- Market Hype
- Buying in a “hotspot” after prices have already spiked (you want growth, not the peak).
- Low Demand Areas
- Mining towns or single-industry areas → can collapse if industry declines.
- Rental Risks
- Check vacancy rates. A property sitting empty for months destroys your cash flow.
- Legal/Title Issues
- Flood zones, heritage overlays, easements. Always get proper conveyancing advice.
3. How to Work Out Rental Yield (Like a Buyer’s Agent)
Buyer’s agents always crunch the numbers before recommending a property. Here’s how:
Step 1: Find the annual rental income
- Look up comparable rentals on realestate.com.au / Domain.
- Example: Property rents for $600/week.
- Annual rental income = $600 × 52 = $31,200.
Step 2: Work out purchase price & costs
- Example: Purchase price = $650,000.
Step 3: Calculate Gross Rental Yield
Gross Yield = Annual rent / Purchase price x 100
= $31,200 ÷ $650,000 × 100
= 4.8% Gross Yield..
Step 4: Calculate Net Yield (more accurate)
Subtract expenses:
- Council rates: $2,000
- Insurance: $1,200
- Maintenance: $2,000
- Property management: 7% of rent ≈ $2,184
- Total expenses = $7,384
Ney yield = Annual rent – expenses/purchase price x 100
= ($31,200 – $7,384) ÷ $650,000 × 100
= 3.7% Net Yield.
What Buyer’s Agents Do
- They target yields that balance with capital growth potential.
- In capital cities → yields may be 3–4% but long-term growth is higher.
- In regional areas → yields might be 5–6% but growth can be slower.
Quick Checklist for First-Time Investors
- Get pre-approval from your broker (know your borrowing limit).
- Research suburbs: growth, demand, vacancy rate, infrastructure.
- Compare rental yields (gross vs net).
- Add up all costs (stamp duty, solicitor, building & pest, ongoing expenses).
- Inspect property carefully (get B&P report).
- Don’t get emotional — numbers first, always.
- Have a buffer (3–6 months’ repayments in savings).
First-Time Property Investor Checklist
1. Financial Preparation
- Speak with your mortgage broker to know your borrowing capacity.
- Get loan pre-approval before searching.
- Save a deposit + upfront costs (stamp duty, solicitor fees, building & pest, LMI if applicable).
- Keep a cash buffer (3–6 months of loan repayments).
- Understand your borrowing strategy (interest-only vs principal & interest).
2. Research & Strategy
- Decide on your investment strategy:
- Capital growth (long term wealth)
- Cash flow (rental income focus)
- Balanced (mix of both)
- Research locations: vacancy rates, rental demand, infrastructure, schools, jobs, transport.
- Compare property types: house, townhouse, unit (consider body corp fees).
- Avoid high-risk areas (mining towns, oversupplied apartments).
- Check local council/zoning for future development.
3. Property Selection
- Analyse recent sales prices (don’t overpay).
- Estimate rental income using online portals + local agents.
- Calculate gross & net rental yield (use your Rental Yield Calculator).
- Assess tenant appeal: parking, air-con, low maintenance, safe neighbourhood.
- Get a building & pest inspection before going unconditional.
- Review strata/body corp fees if buying a unit/townhouse.
4. Risks & Red Flags
- Avoid properties with high maintenance costs (old wiring, leaking roofs).
- Watch for flood zones, easements, or heritage overlays.
- Be cautious of developer incentives or “guaranteed rent” deals (often inflated).
- Don’t buy based on emotion — stick to the numbers.
5. Managing the Investment
- Choose a reliable property manager (fees ~6–8% of rent).
- Set aside funds for repairs & maintenance each year.
- Protect yourself with landlord insurance.
- Track your property’s cash flow & tax deductions.
- Review your loan and interest rate every 1–2 years with your broker.
6. How to Calculate Yield (Quick Formula)
- Gross Yield % = Annual Rent ÷ Purchase Price × 100
- Net Yield % = (Annual Rent – Expenses) ÷ Purchase Price × 100
Example: $600/week rent on a $650,000 property =
- Gross Yield = 4.8%
- Net Yield (after costs) ≈ 3.7%
7. Final Reminders
- Think long term: property is not a “get rich quick” play.
- Diversify: don’t put all your wealth in one property type/area.
- Use professionals: mortgage broker (us) , solicitor, accountant, buyer’s agent (optional).
- Keep learning: property investing is a marathon, not a sprint.