Investors making a comeback

During the past couple of years property investors have been less active as interest rate rises began eating into their profits. However, as 2024 begins, it’s clear more investors are returning to the real estate market.

According to the ABS lending indicators report for October, new loan commitments for investors increased by 5% in one month, up 12.1% over the year.i

Investors making a comeback

As market conditions slowly improve, vacancy rates remain extremely tight, and interest rates tipped to fall later this year, some savvy individuals are jumping back in before a new investor wave rolls around. However, before diving straight in there are some simple steps needed to test the waters first.

Before launching into a real estate investment, whether it’s your first or the next in your portfolio, be sure to figure out your property purpose. Are you seeking long-term capital growth or an immediate cash flow? Understanding your goals will help shape a successful investment strategy and will help guide your decision-making.

Capital growth versus positive cash flow

If it’s a steady passive income you’re after, a property with positive cash flow may be the right path. On the other hand, if you’re focused on long-term wealth accumulation, an investment with the possibility for substantial capital growth could be more suitable. The two don’t have to be mutually exclusive either, it can be possible to have both at the same time.

Deciding which strategy would work best for your personal financial circumstances is crucial and planning should start well before the house hunting does. By creating a detailed budget, you can ensure your investment aligns with any future income expectations. Crunch the numbers to find out what the personal pros and cons could be for either strategy.

Those investors prioritising capital growth may need to accept a negative cash flow in the short term with the expectation of substantial profits one day upon resale. Those taking the direction of positive cash flow may have to ride with rental market fluctuations and be prepared to pay income tax on their earnings.

Understand the positive versus the negative

Positive gearing occurs when rental income exceeds expenses, resulting in a profitable cash flow that is taxable income. On the flip side, negative gearing is when expenses such as home loan interest, maintenance, and council rates exceed any rental income leading to a tax deduction.

Setting up your investment to fit either scenario should be part of your forward planning. Understanding the ‘for’ and ‘against’ of each option is vital when deciding how to structure your investment portfolio. Therefore, it makes great financial sense to seek the advice of a professional who can provide valuable insights tailored to your specific situation.

Get to know the risks

Every investor has a different level of risk tolerance. It’s essential to assess your comfort level with certain financial risks before investing in real estate. Consider factors such as market volatility, rental vacancies – and the most recent challenge of interest rate fluctuations. Anyone with a low risk tolerance may want to lean towards those investments with a lower risk profile possibly meaning smaller returns but greater stability. Alternatively, if you’re comfortable with more risk, then explore properties with the potential for higher returns.

Do the homework on values and hidden costs

Thoroughly research the rental market in your desired location to estimate sale prices and the potential rental income. Then research where you believe local property prices and demand (by both tenants and future buyers) are headed so you’ll be able to get an idea of long-term capital growth.

Additionally, determine what your mortgage repayments will be while working in a buffer for any more interest rate movements and periods when the property could be sitting vacant. Carefully consider letting and property management fees, any strata costs, insurances, council rates, maintenance expenses, renovation budgets, as well as any other potential ongoing charges.

If you feel you’re ready to take the next step towards property investing, seek professional advice from your mortgage broker today.


Important: This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.

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Authorised Representative 298494
Interprac Financial Planning Pty Ltd 

Darryl Jopling

Senior Adviser

I have worked in the financial services industry since 1982 and as a Financial Adviser since 1999.

I have worked for large Financial Planning businesses, Membership based organisations and looked after the financial planning needs of clients within an Accounting Practice before starting my own business.

I am married, have 4 older children and a grandson and I am keen golfer with mixed results like many .

I have been through many of the strategies I talk with clients about myself and with my family.

I have been through the journey of seeing my parents move into Aged care and negotiated the difficulties and pitfalls of understanding the system for them and this gives me an excellent insight into what is required to assist families at this difficult time.

In a previous roll I used to run retirement seminars looking at Centrelink and Retirement Incomes and how to make these work for you. I have helped many of my clients with Aged Care advice when their parents needed to move into Nursing Homes. For many clients I assist them with superannuation, building wealth and protecting their loved ones with insurance.

I am supported by his, Licensee, Interprac Financial Planning’s in-house resources and ongoing technical, systems and training.

I am committed to understanding your needs and identifying strategies and products to help you achieve your goals.

My guiding principle as an Adviser is to design plans which help to provide my clients with clarity of purpose and the opportunity to build a solid financial foundation.
I will take the time to listen, explain things clearly and keep you informed throughout the advice process.

My experience is complemented by professional qualifications including:

  • Certified Financial PlannerTM Professional
  • Diploma of Financial Planning

At Choice Financial Advice we work with you along the way on life’s journey.

Whether you are getting married, starting a family, embarking on the trip of a lifetime, planning to enjoy your years after work or assisting elderly parents with Aged Care and Nursing Home placements, we can help.