What is property investing?

Property investing involves buying real estate – residential, commercial or industrial – with the goal of generating income or growing your wealth over time. Unlike buying your home to live in, investment properties are purchased primarily for financial returns.

It works like this:

  • You buy a property (usually with a deposit and home loan)
  • You rent it out to tenants and collect regular rental income.
  • Over time, the property’s value may increase.
  • You might refinance or sell to unlock the profit.

How to make money through property?

Many investors benefit from tax perks like negative gearing, depreciation claims and capital gains, tax discounts if the property is held for more than 12 months. Here are two main ways property investment can deliver returns:

Rental income

Tenants pay rent, which helps cover your mortgage and expenses. Ideally, you make a small profit or at least break even while the property continues to grow in value.

Capital growth

This is the increase in the value of your property’s market value over time. When you sell for more than you paid, you earn a capital gain.

Pros and cons of property investment

Here’s a side by side look at the upsides and downsides.

Advantages

  • Long-term capital growth: Property values may rise over the long run, driven by population growth, housing demand, and limited land supply.

  • Potential for equity growth: As you pay down your mortgage and your property value rises, you build equity. You can then use the equity for further investment.

  • Tangible asset you can control: Unlike shares or ETFs, property is a physical asset that you can manage directly, giving a sense of security.

  • Passive rental income: A well-chosen investment property has the potential to deliver regular income through rent, which helps cover costs and can become a passive income stream.

  • Tax benefits and deductions: Australian tax laws allow property investors to claim various deductions, including loan interest, property management fees, repairs, maintenance, depreciation, insurance, and council rates.

Disadvantages

  • Market fluctuations: Property values can fluctuate short-term due to interest rate hikes, economic slowdowns, oversupply, or changes to lending rules.

  • High upfront and ongoing costs: Property investment requires significant upfront investment and ongoing expenses like mortgage repayments, maintenance, and fees.

  • Lack of liquidity: Property cannot be quickly converted to cash, possibly taking weeks or months to sell.

  • Interest rate sensitivity: Rising interest rates increase repayments, reducing rental profits or creating negative cash flow. Having an emergency buffer is crucial.

  • Tenant and vacancy risks: Property sitting empty or difficult tenants can lead to loss of rental income and additional costs for repairs and legal action. Proper management and landlord insurance can mitigate these risks.

Is property still a good investment?

It depends on your circumstances and lifestyle. Investing in property in Australia can be beneficial as it has the potential to offer long-term growth, regular income, tax advantages, and is a secure, physical asset. However, it's not a quick way to get rich. It’s also worth keeping in mind that selling an investment property might come with capital gains tax (CGT) implications. 

 If you plan to invest, you should:

  • conduct thorough research
  • calculate costs and returns
  • prepare for interest rate change
  • assess your risk tolerance
  • seek professional advice before making decisions.

Estimate the value of your property

Unlock valuable insights with NAB instant property reports, including an estimated rental yield.

Download a free property report , opens in new window

Explore other life moments

Avoiding mortgage stress

Ready to buy a home? Plan ahead to keep your finances under control and avoid mortgage stress.

6 common property investment strategies

Explore six common property investment strategies.

Negative gearing vs. positive gearing

The difference between positive cash flow and negative gearing.

Related products and services

Landlord Insurance

Cover your investment with landlord insurance from NAB. Compare policies now.

Personal loan for a home renovation

Renovations can be full of surprises but your finances shouldn't be. Get A NAB Personal Loan for all your home renovations.

Super and investments

Insignia Financial is NAB's preferred provider of superannuation and retirement solutions.

Contact us for home loan related queries

This is how you can get in touch.

Start a conversation with a banker

  1. Log into either NAB Internet Banking or the NAB app.
  2. Tap on the message icon.
  3. Type ‘speak to a person’ in the conversation window.

Call us

Speak to a home loan expert about a new or existing home loan.

Monday to Friday, 8:00am to 7:00pm (AEST/AEDT)
Saturday to Sunday, 9:00am to 6:00pm (AEST/AEDT)

13 78 79

Book an appointment

Make an appointment to see us at your nearest branch, ask a mobile banker to come to you or ask us to call you back.

Book an appointment

Terms and Conditions

The information contained in this article is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on this information, NAB recommends that you consider whether it is appropriate for your circumstances. NAB recommends that you seek independent legal, financial, and taxation advice before acting on any information in this article.

Target Market Determinations for these products are available at nab.com.au/TMD.