Deciding what to buy
Investment property suitability
Gross versus net yield, vacancy risk, tenant demand and competing supply — the figures that matter for an investment property beyond the purchase price.
- Net yield (after ongoing costs) is a far more realistic figure than gross yield alone.
- Vacancy risk varies meaningfully by area and property type, particularly in supply-heavy pockets.
- Check how many similar properties are competing for the same tenant pool nearby.
- Land tax, fees and vacancy all reduce net return — compare on the full picture, not the yield headline.
- From 1 July 2027, negative gearing is limited to new builds — an established dwelling loses the immediate loss-deduction treatment.
Assess the numbers, not just the property
An investment property's suitability depends on figures a home buyer doesn't need to weigh as heavily: achievable rent, vacancy risk, ongoing costs, and the pool of future tenants and buyers competing for similar properties nearby.
Yield and cash flow
Gross yield is annual rent divided by purchase price. Net yield subtracts ongoing costs — rates, insurance, owners corporation fees, maintenance and management fees — from that rent before dividing, and is a far more realistic figure for comparing properties. Vacancy periods reduce actual income below either figure, and are a real risk that varies by area and property type — a supply-heavy pocket of near-identical apartments generally carries more vacancy and rent-growth risk than a tightly held, differentiated property.
Tenant demand and supply
Consider who is likely to rent this specific property — students, young professionals, families — and whether the property type, size and location genuinely match that group's needs. Check how many similar properties are currently advertised for rent nearby: a market flooded with near-identical listings generally means more competition and softer rents for yours too.
Costs and tax
Land tax, owners corporation fees, insurance, maintenance, agent management fees and periods of vacancy all reduce net return — build these into your comparison, not just the yield headline. Tax treatment of rental income and expenses is genuinely different from an owner-occupied home; the ATO is the authoritative source, and this is general education, not personal tax advice.
A significant, recent change: legislation passed in 2026 limits negative gearing to new-build residential properties from 1 July 2027 — an established dwelling acquired after the Budget announcement (12 May 2026) won't get the immediate loss-deduction treatment existing investors currently have, with losses instead quarantined and carried forward rather than offsetting other income in the year incurred. New builds, and dwellings supporting government affordable-housing programs, remain exempt. This is a major, still-evolving area — get current advice from a registered tax agent before relying on any negative-gearing assumption for an established property.
Practical checklist
Assessing an investment property
- Calculate net yield, not just gross yield, using realistic ongoing costs
- Check how many similar properties are currently advertised for rent nearby
- Identify the likely tenant profile and whether this property genuinely suits them
- If considering an established (not new-build) property, get current advice on negative-gearing treatment given the 2026 reform
- Get specific tax advice on rental income and expense treatment from a registered tax agent
Relevant Delora tool
Questions for a professional
- Based on comparable rentals nearby, what net yield and vacancy risk should I realistically expect for this property?