First-Time Property Investor? Here Are Common Concerns and How to Overcome Them

Investing in property is not an easy decision to make. First-time investors often deal with a flurry of doubts: Do I have sufficient funds for a deposit? Will I choose the right property? Can I truly afford this? How can I get a loan for an investment property?

As we continuously support Australians in making informed choices in real estate, we’ve compiled a quick list of common worries among first-time investors. More importantly, we will share practical tips and strategies to address them.

Concern #1: Not Having Enough Funds for a Deposit

Why Is It a Concern?

Most first-time investors worry they don’t have sufficient funds for a property deposit, which ranges from 10% to 20% of the purchase price. It’s a valid and substantial hurdle, especially because housing affordability has become challenging. A PropTrack report indicated that an average-income earner would need to be budget-conscious and allocate 20% of their earnings for more than five and a half years to save for a 20% deposit on a median-priced residential property in Australia. 

What Can You Do?

• Consider using equity from an existing property if you own one. If you’re already a homeowner, you possess an asset that holds significant value beyond shelter. You can use its usable equity to buy an investment property through the help of cash-out refinancing or a home equity loan. 
• Look into securing a Lender’s Mortgage Insurance (LMI). With this insurance, your lender may allow you to get investment loans with a smaller deposit.
• Explore rentvesting. Instead of trying to come up with a huge deposit for an investment property in a high-priced location, purchase in an area you can easily afford. Just make sure that the rental income from the investment property can help you pay for mortgage payments and your rent elsewhere.

Concern #2: Choosing the Wrong Property

Why Is It a Concern?

Like in any business, selecting the right asset, in this case, a property, is vital for success. A poor choice can lead to lacklustre returns or even financial losses.

What Can You Do?

• Research thoroughly, focusing on areas with strong rental demand and growth potential. Eyeing Tasmania? Look for areas with project developments and major infrastructures that positively impact property values.
• Depending on your target tenant demographics, consider factors like proximity to schools or universities, public transport, and employment hubs.
• Engage a local mortgage broker. There’s nothing like getting insider tips and local insights that put you in a position to secure property that best suits your requirements and budget. 

Concern #3: Managing Tenants and Property

Why Is It a Concern?

Owning a rental property may sound enticing, but it takes hard work, especially when dealing with tenants. Property maintenance and its nitty-gritty can be time-consuming and stressful, especially for those new to property investment.

What Can You Do?

• Engage a professional property manager to handle tenant selection, rent collection, and maintenance issues.
• Educate yourself on landlord rights and responsibilities in your state or territory.
• Consider landlord insurance to protect against potential risks.

Concern #4: Negative Gearing and Tax Implications

Why Is It a Concern?

The tax aspects of property investment can be complex, and many first-time investors worry about the financial implications of negative gearing.

What Can You Do?

• Consult with a tax professional who specialises in property investment. For instance, purchasing a holiday home involves certain tax implications that need to be taken into account. You must report any rental income and be aware of the distinctions between deductions for personal use versus those for investment purposes.  Keep in mind that expenses related to travel for property inspections or maintenance may not be fully deductible. Also, you might face capital gains tax when it is time to sell or transfer the property.
• Understand the difference between negative & positive gearing and how each can affect your financial position. Negative gearing happens when the expenses of owning a rental property exceed the rental income it produces annually. This results in a taxable loss, which can typically be deducted from your other sources of income, such as wages or salary. 
• Keep detailed records of all income and expenses related to your first investment property. Proper documentation can benefit during the tax filing period and other relevant instances.

Concern #5: Interest Rate Fluctuations

Why Is It a Concern?

Changes in interest rates can significantly impact mortgage repayments and overall investment returns.

What Can You Do?

• Consider fixing your interest rate for a portion of your loan to provide some stability. More importantly, learn the differences between fixed, variable and split rates to ensure you pick the best option for your investment.
• Build a buffer into your budget to account for potential rate increases.
• Stay informed about economic factors that might influence interest rates.

Concern #6: Timing the Market

Why Is It a Concern?

Many first-time investors worry about buying at the wrong time, fearing they might enter the market at its peak or miss out on potential growth.

What Can You Do?

• Focus on long-term growth potential rather than trying to time the market perfectly.
• Research market cycles and trends in your target area. For instance, check out our recent articles if you are interested in investing in property in Tasmania in 2025 or are curious about property market forecasts in Hobart in 2025.
• Consider seeking advice from a local real estate expert familiar with changing market conditions.

Concern #7: Choosing the Right Location

Why Is It a Concern?

Location significantly impacts property performance, affecting rental yield and capital growth potential.

What Can You Do?

• Research areas with strong economic fundamentals, such as Tasmania’s promising suburbs like Launceston, Devonport, Moonah and Richmond.
• As mentioned, look into areas with planned infrastructure developments that could boost property values.

Concern #8: Investing in Off-the-Plan Properties

Why Is It a Concern?

Off-the-plan investments come with unique risks, including potential valuation shortfalls, construction delays, and uncertainty about the final product.

What Can You Do?

• Thoroughly research the developer’s track record and financial stability to ensure you leave your potential investment to capable hands. 
• Review the contract carefully, paying attention to sunset clauses and completion timelines.
• Consider the potential for oversupply in the area, which could affect future value and rental demand.

Final Tip

While these concerns are common, they shouldn’t deter you from property investment. You can overcome these challenges and build a successful property portfolio with proper research, planning, and professional advice. Also, for good measure, always consult with financial and property experts before making significant investment decisions. Contact us today for investment loan advice.