5 Common Mistakes to Avoid When Investing in Property in Australia
Investing in property can be an excellent way to build wealth. The figures bear this out. According to CoreLogic, the total value of residential property as of January 2025 was $11.1 trillion – exceeding the combined value of superannuation funds at $4.1 trillion and the Australian stock exchange at $3.3 trillion.
But buying an investment property won’t necessarily bring a stellar return on investment if you take the wrong approach. Here are the five mistakes first-time property investors often make and how to avoid them.
Mistake #1: Not getting professional advice
Some first-time property investors choose to go it alone. With a little Google research and an overconfident attitude, they jump in boots and all. This is a surefire way to make costly mistakes, like buying the wrong type of property or purchasing in an area with poor prospects. This could result in a loss when reselling the property, setting back your wealth-building goals.
To maximise your chances of success, work with experts such as:
- An investment property buyer’s agent (also known as a property investment strategist) who has in-depth knowledge of the local housing market and can help you develop an investment strategy tailored to your goals and budget. A buyer’s agent is an invaluable partner who can help you identify properties with strong rent and capital growth potential. They can hold your hand throughout the process, including shortlisting suitable properties, negotiating the price with sellers or bidding at an auction.
- A solicitor or conveyancer who specialises in property law to manage the legal process of buying an investment property.
- A mortgage broker who can help secure an investment property loan at a competitive rate.
- A property manager to handle tenants and property maintenance if you intend to rent out the property.
Mistake #2: Buying with your heart, not your head
Buying a home you intend to live in versus buying an investment property are two different scenarios. Often, new investors make judgment calls based on the type of home they would like to live in.
Set your personal preferences aside and assess the property from an investment perspective. What would your ideal tenant want?
Do they want to live in the CBD or in the suburbs near public transport?
Are they looking for an office space so they can work from home?
More importantly, is the area growing in population, becoming an economic hub, and offering strong rental returns?
Remember, the goal isn’t to fall in love with a property – it’s to buy a property that makes financial sense.
Mistake #3: Underestimating the costs
The listing price on a property is not all you’re going to pay. Make sure you account for extra costs, such as building inspection fees, stamp duty, legal fees and mortgage establishment fees.
Owning a rental property also comes with ongoing costs, such as:
- strata fees if you buy an apartment or townhouse
- property maintenance and repair expenses
- property management agency fees
- insurance
- council rates
- land tax, if applicable in your state
These property costs may add up to more than your rental income, which will mean your property is negatively geared. However, you can offset the loss against your taxable income.
Lastly, should you sell the property for a net capital gain, you will pay capital gains tax. You’ll receive a 50% reduction on capital gains tax if you hold the property for over 12 months.
Mistake #4: Buying an investment property you can’t afford
Bigger isn’t always better. Some investors assume a larger, more expensive property will deliver higher returns – but stretching your budget too far can put you at risk of defaulting on your investment loan.
A better strategy could be to buy a cheaper property with promising growth and use the equity acquired as leverage to buy the next property. An investment property strategist can help identify scenarios that would be more successful at building an investment portfolio.
Mistake #5: Not having a long-term investment strategy
Many new investors are keen to buy their first investment property without considering their long-term strategy.
Acquiring wealth through property usually means playing a long and strategic game. This could involve building an investment portfolio with a mix of houses and apartments or residential and commercial properties. It could mean holding properties for an extended period to maximise capital growth or flipping properties for a quick profit.
All these strategies come with benefits and drawbacks. An investment property strategist can explain the pros and cons and recommend the best property investment strategies that align with your investment goals.
BFP Property can help you confidently navigate the complexities of buying an investment property or building a wealth-generating property portfolio. If you’re a first-time investor, we can help you avoid the pitfalls that lead to buying a property that doesn’t support your goals. To discuss your scenario, book a call with one of our experienced buyer’s agents.
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