Pros & cons of investing in property
An honest look at the benefits, leverage, capital growth, rental yield, tax, alongside the costs that don't get the same airtime.
The case for property
Leverage: a $100K deposit can control a $500K asset. If the asset appreciates 5%, you've made $25K on your $100K: a 25% return on capital. Few other asset classes give retail investors that ratio.
Tax efficiency: interest on the investment loan, depreciation on the building, and most holding costs are deductible against rental income (and other income, if negatively geared). Long-term capital gains have been taxed at half the marginal rate after 12 months of holding. Note that both settings are changing: negative-gearing of losses against other income is limited for established homes bought after 12 May 2026 (new builds excluded), and the 50% CGT discount is set to be replaced by cost-base indexation from 1 July 2027. Confirm the current treatment with your accountant.
Forced savings: a mortgage acts like a high-commitment savings plan, you pay it off whether you feel like saving that month or not.
The case against (the part finfluencers skip)
Illiquidity: you can't sell half a property to fund a medical emergency. Concentration risk: one property is one suburb in one city in one country, all correlated. Holding costs: strata, council, water, insurance, agent fees, R&M, vacancy, typically 1.5-2.5% of property value per year, eating most of the gross rental yield.
Negative gearing only works if your other income is high enough to absorb the loss. Property is a cash drain in years 1-5 of typical investments: calculate whether you can fund that out of salary.
Who actually does well
ATO data on rental properties: roughly 70% of investors own a single investment property and net under $5K profit/loss per year. The wealth-building image of property investing is concentrated in a small minority who scale to 5+ properties over 15-20 years and time the market well.
References
- ATO: Residential rental properties, Tax treatment for property investors
- ATO: Capital gains tax, CGT obligations on property sale
- ASIC MoneySmart: Investing in property, Plain-English investor guidance
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