What is a good strategy for property investment?
Discover property investment strategies to consider in Australia. Learn expert tips, risk factors, and how to plan for long-term growth and success.
Investing in property can be a great way to grow your savings, but it doesn’t come without its fair share of risk. If you’re on the hunt for a strategy for property investment that suits your circumstances, read on to learn more about your options.
Buy and hold
The buy and hold property investment strategy is a popular approach for many property investors. It involves purchasing an investment property that has a strong potential for long-term capital growth. That means that over time, your investment will appreciate or increase in value so that when it comes time to sell, you’re able to make a profit.
The key to this type of strategy for property investment is to do your research. You’ll want to find a suburb that’s primed for capital growth. Look for key drivers of growth, like future infrastructure developments, access to public transportation and proximity to local amenities that are attractive to homeowners, like shopping centres and schools.
Just keep in mind, when you follow the buy and hold strategy, you’re looking at along-term strategy. If you’re looking to make a quick buck, this approach isn’t going to be the right choice for you.
Renovate and hold
Renovating an investment property can be a great way to add value, but it also comes with added risk. From budget blowouts to overcapitalising on your investment (meaning you sink more money into your renovations than the property’s resale value), while renovations might seem like a good idea, there’s no guarantee that you’ll be able to attract a higher rental yield or boost the property value.
Put simply, the renovate and hold method involves purchasing an investment property and renovating it in the hopes of adding value. Once you’ve completed your improvements you could be in a better position to attract a higher rental yield. Plus, there’s also the potential to benefit from tax depreciation allowances, but it could be worth consulting an accountant for a little more guidance.
Property flipping
Generally, it involves purchasing a more affordable home with great potential and renovating the property with the intention of selling it within a short timeframe.
The key to this strategy is focusing on improvements that will maximise your bottom line.
Property gearing
As a homeowner, chances are you know that owning a property comes with its fair share of ongoing costs. In some cases, the rental income that you earn from your property is enough to cover the costs of maintaining your investment. This is known as positive gearing. On the other hand, if your property is costing you more than you’re earning from it, it’s called negative gearing.
Here’s an overview of how these two gearing strategies work.
Negative gearing
Negative gearing involves purchasing an investment property in a high-capital growth area where the net rental return isn’t enough to cover the cost of maintaining the property. Although running an investment at a loss might not sound like a great strategy on paper, when it comes to Australian tax law it can actually work out better than it seems. However, this benefit is more limited following recent changes to negative gearing for investors.
Under the new rules, if the property is:
- Newly built residential property - any net rental loss you incur during the financial year may potentially be offset against other income you earn, such as your salary.
- An established residential property purchased after 12 May 2026 - any net rental loss you incur during the financial year is unlikely to be available to offset against other income. The loss instead carries forward to future years and, if unrecouped, reduces the amount of the capital gain when you sell the property.
- An established residential property purchased before 12 May 2026 – these properties should generally continue to qualify for potential offset of net rental loss against other income (such as salary and wages).
You should consider speaking to your tax adviser or accountant for more information about how the announcements in the Federal Budget could impact you. You should also ensure that you have enough cash to cover the difference between your rental income and the property’s expenses.
Ultimately, negative gearing could potentially work alongside the buy and hold strategy - your goal is to cash in on the property’s capital growth in the long term rather than make an income over the shorter term through the rental yield.
Positive gearing
Positive gearing is the other type of property gearing strategy. Unlike negative gearing, when you positively gear a property the rental income exceeds the property expenses and provides you with a bit of extra cash flow.
As a general rule, if you’re able to positively gear a property chances are it won’t generate a huge amount of capital growth over the long term.
Subdivision
Subdivision involves finding a large block of land and splitting it into two or more smaller lots. From here, you can choose to sell off all or some of the separate land parcels. Alternatively, you might even choose to build homes on the newly divided blocks and use one as your main residence while renting out the other to generate rental income.
Before investing in a block with the hopes of subdividing the plot, it’s important to research local council regulations in case there are any minimum land size requirements. It’s also worth considering different factors like accessibility and the location of boundary fences and driveways.
Property subdivision doesn’t come cheap. Not only is there the initial cost of purchasing the property, but there are also all the expenses involved in the entire subdivision process. From infrastructure charges and statutory fees to surveying and approval fees, the subdivision process can be costly and time-consuming.
While property investment is a popular path to accumulating wealth, it’s not for everyone. Before purchasing an investment property it’s important to assess your long-term investment goals as well as your current financial situation.Like any investment strategy, property investment comes with a range of risks, so it’s essential to understand the potential drawbacks of investing in property. Want to learn more about investing in property? Check out our step-by-step guide to property investment.
Unloan is a division of Commonwealth Bank of Australia.
Applications are subject to credit approval, satisfactory security and you must have a minimum 10% deposit or 10% equity in the property (LVR below 90%). Minimum loan amount $10,000, maximum loan amount $10,000,000, and total borrowings per customer across all Unloan loans is $10,000,000. You cannot borrow more than $2,000,000 of above 80% LVR loans. In some cases depending on the property’s location or type, we may only be able to lend you up to 70%.
Unloan offers a 0.01% per annum loyalty discount on the Unloan Live-In rate or Unloan Invest rate upon settlement. On each anniversary of your loan’s settlement date (or the day prior to the anniversary of your loan’s settlement date if your loan settled on 29th February and it is a leap year) the margin discount will increase by a further 0.01% per annum up to a maximum discount of 0.30% per annum. Unloan may withdraw this discount at any time. The discount is applied for each loan you have with Unloan. The loyalty discount is applied to your variable rate at the relevant time, and this rate may increase or decrease over your loan term. For more information view our rates and features.
*At Unloan, we do not charge any annual, application, banking, account, transaction, late or exit fees. Government fees may also apply. Learn more about government fees here. Your current lender may charge an exit fee when refinancing.
Unloan is a division of Commonwealth Bank of Australia, and Commonwealth Bank does not provide tax (financial) advice under the Tax Agent Services Act 2009 (Cth). You should consider seeking independent tax advice from a registered tax agent, accountant or adviser before you make any decisions based on this information.
Applications are subject to credit approval, satisfactory security and you must have a minimum 10% deposit or 10% equity in the property (LVR below 90%). Minimum loan amount $10,000, maximum loan amount $10,000,000, and total borrowings per customer across all Unloan loans is $10,000,000. You cannot borrow more than $2,000,000 of above 80% LVR loans. In some cases depending on the property’s location or type, we may only be able to lend you up to 70%.
Unloan offers a 0.01% per annum loyalty discount on the Unloan Live-In rate or Unloan Invest rate upon settlement. On each anniversary of your loan’s settlement date (or the day prior to the anniversary of your loan’s settlement date if your loan settled on 29th February and it is a leap year) the margin discount will increase by a further 0.01% per annum up to a maximum discount of 0.30% per annum. Unloan may withdraw this discount at any time. The discount is applied for each loan you have with Unloan. The loyalty discount is applied to your variable rate at the relevant time, and this rate may increase or decrease over your loan term. For more information view our rates and features.
*At Unloan, we do not charge any annual, application, banking, account, transaction, late or exit fees. Government fees may also apply. Learn more about government fees here. Your current lender may charge an exit fee when refinancing.
Applications are subject to credit approval, satisfactory security and minimum deposit requirements. Full terms and conditions are found on our Unloan Terms and Conditions. Modified Terms and Conditions will be set out in our Notice of Variation Agreement, if you are approved. This article is intended to provide general information only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice.
Unloan offers a 0.01% per annum loyalty discount on the Unloan Live-In rate or Unloan Invest rate upon settlement. On each anniversary of your loan’s settlement date (or the day prior to the anniversary of your loan’s settlement date if your loan settled on 29th February and it is a leap year) the margin discount will increase by a further 0.01% per annum up to a maximum discount of 0.30% per annum. Unloan may withdraw this discount at any time. The discount is applied for each loan you have with Unloan. The loyalty discount is applied to your variable rate at the relevant time, and this rate may increase or decrease over your loan term. For more information view our rates and features.
*At Unloan, we do not charge any annual, application, banking, account, transaction, late or exit fees. Government fees may also apply. Learn more about government fees here. Your current lender may charge an exit fee when refinancing.
