Is this a good investment property? It is the question people bring me most often once they have found one, and it usually arrives with a deadline. Another buyer is interested, or the builder’s price holds only until Friday. I comprehend the pressure. But the question has two halves, and most buyers ask only the first.
The two halves of the question
The first half is whether the property is good: the land, the area, the rent it will draw, how it was built. The second half is whether it is good for you. A $750,000 house that one buyer carries easily can strain a single-income family for years.
What decides the second half
- The loan. How much, at what rate, interest only or principal and interest.
- The rent, less what it costs to hold: rates, insurance, management, repairs, a vacancy.
- Your income, and whose name the property goes in.
- How long you can carry it before the rent covers the cost.
- What happens if rates rise, the rent falls or a tenant leaves.
Example only. Two buyers look at the same established house: $750,000, rent appraised at $650 a week. Each would borrow $600,000, interest only. Sam earns $180,000. Kate and Jo will live on one income of $85,000 for a year or two while their first child is small. Run on their numbers, the house costs each household about $320 a week before tax. For Sam that is about an eighth of his take-home pay. For Kate and Jo it is about a quarter, and a rate rise or a month without a tenant takes more.
Assumptions: interest at 7.14 per cent, Canstar’s investor interest-only average on 2 October 2026; holding costs of about $7,700 a year (rates, insurance, management at 7 per cent, repairs); take-home pay at the ATO’s 2026-27 resident rates, with the 2 per cent Medicare levy. Because the house is established and bought after 7:30pm AEST on 12 May 2026, from 1 July 2027 that loss can no longer be claimed against wages; it is carried forward against residential rental income or the gain on sale (Treasury Laws Amendment (Tax Reform No. 1) Act 2026).
Why before you sign
After you sign, the numbers only tell you what you are in for. Before you sign, they tell you whether to be in it at all, whether a different loan or a different name would change it, and how much buffer you need.
Who this does not suit
Someone looking for a tip. I don’t tell people what to buy; I show what a property does to their numbers, and they decide.
Running a property against someone’s own numbers is what I do. The first conversation costs nothing, and the decision stays yours.
Nicholas Lockhart
General information only, drawn from Nicholas’s experience in real estate since 1997. It is education, not personal or financial advice.