The purchase price is often the first figure investors compare — but it is rarely the number that determines long-term performance.
What ultimately matters is the total cost of ownership, tenant demand, rental stability and the risks that only become apparent after settlement. A lower purchase price can look attractive upfront, yet higher holding costs, unexpected maintenance or extended vacancy can quickly change the outcome.
Looking beyond the headline price does not mean overcomplicating your decision. It means focusing on the factors that most often influence cash flow and long-term returns.
Ongoing Costs Matter
Two similar properties can have very different holding costs. Strata levies (including special levies), council rates, water charges, landlord insurance and property management fees all affect net yield. Routine items such as garden maintenance, smoke alarm compliance, gutter cleaning and general repairs also accumulate over time.
A property that is slightly cheaper to buy may be more expensive to hold if these ongoing costs are higher than expected.
Condition and Build Quality
Presentation can be deceiving. Roofing, waterproofing and drainage issues are among the most expensive problems investors face. Older electrical systems, plumbing, hot water services and heating or cooling systems can also create compliance and replacement costs sooner than anticipated.
External elements such as balconies, decks, fences and retaining walls often require more maintenance than buyers expect. Building and pest reports should be read carefully — particularly any sections recommending further investigation.
Strata Considerations
For apartments and townhouses, strata arrangements influence both costs and control. The adequacy of the sinking fund, upcoming capital works, building defect history and by-laws that impact leasing can all affect your investment over time.
Understanding the financial position and future works schedule of the owners corporation is essential before committing.
Tenant Demand Is Property-Specific
Suburb-level vacancy rates only tell part of the story. Demand can vary significantly depending on property type, parking availability, natural light, layout and proximity to transport, schools and employment hubs.
Competing new developments or a high concentration of similar rental stock can also place pressure on rent and increase vacancy risk. Local property managers are often best placed to provide practical leasing insight beyond published data.
Cash Flow Timing
Annual figures do not always reflect real-world cash flow. Settlement timing, initial vacancy, seasonal leasing patterns, planned upgrades and interest rate changes can all create short-term pressure.
Building in a buffer and planning for common “timing shocks” is often more important than marginal differences in projected yield.
Tax and Depreciation Considerations
The structure and components of a property may influence deductions available over time. The distinction between repairs and improvements can affect tax treatment, and many income-producing properties may be eligible for depreciation deductions on certain building and asset components, depending on circumstances.
A professionally prepared depreciation schedule can assist your accountant in applying the relevant rules accurately, and it is often simplest to organise this early while purchase documentation is readily available.
Practical Next Steps
Before purchasing, it is prudent to review the contract of sale, building and pest reports, strata records (if applicable), comparable rental evidence and insurance considerations. After settlement, keep all purchase documents, renovation invoices and warranty information well organised.
If you are weighing up an investment property, consider seeking advice from your local PRD property management team regarding achievable rent, likely tenant profile and any potential “watch points” based on comparable properties in the area.
And if you would like expert advice on depreciation deductions available on your investment property, you can contact BMT Tax Deppreciation on 1300 728 726 or request a quote directly through their website.
