Property Investing Basics

Yield vs Capital Growth

Every property investment decision comes down to a trade-off between two things: how much income it produces now (yield) and how much the value increases over time (capital growth). Most suburbs lean one way or the other.

Yield-focused suburbs

• Higher rental return relative to purchase price (typically 5%+)
• Often regional areas or lower-median-price suburbs
• Better for cashflow-positive strategies
• Risk: lower long-term price appreciation

Growth-focused suburbs

• Lower rental yield (typically 2–4%) but stronger price appreciation
• Often metro areas with infrastructure investment
• Better for long-term wealth building
• Risk: negative cashflow, requiring income to subsidise

Understanding Negative Gearing

If your rental income is less than your expenses (mortgage interest, management fees, maintenance, depreciation), the loss can be offset against your taxable income. This is negative gearing. It is not a strategy — it is a tax treatment. Do not buy a bad property just to get a tax deduction.

The Numbers That Matter

• Net yield — Gross rent minus costs, divided by property value
• Loan-to-Value Ratio (LVR) — How much you are borrowing vs property value
• Debt Service Ratio — Can you cover repayments from rental income?
• Capital growth rate — Historical and projected price growth
• Vacancy rate — How often the property sits empty

Decision framework

• What is my investment timeline? (Under 5 years = risky for property)
• Do I need cashflow now, or can I hold for growth?
• Can I afford the holding costs if the property sits vacant for 8 weeks?
• Have I stress-tested my cashflow against a 2% rate rise?
• Am I diversified, or is everything in one suburb/state?