Top Tips for Buying an Investment Property in WA

Over the past year, Perth’s property market has seen house and unit prices rise nearly 25%. This alone showcases why Perth is a prime investment location in Australia.

As a new investor in the property market, feeling out of your depth is completely normal. Ultimately, you need a budget that generates profit without straining your finances while also considering mortgage loans, property types, locations, and investment goals. As such, this guide lays the groundwork for making informed investment decisions to provide you with a strong starting point to help you begin.

It is worth noting that this guide provides general insights and does not account for personal goals or varying conditions. Given the variability of individual circumstances, please consult with a professional advisor before making any investment decisions.

Plan Out Your Finances

The main factor in buying an investment property is the finances, which is why qualifying for and securing a loan and setting a budget that aligns with your circumstances and investment goals is critical. Your finance specialist will be able to guide you through the loan pre-approval process.

Settle on a Deposit

Determining where to get a deposit for property investment home loans and how much you can afford is the first step.

Typically, a deposit is 20% of the purchase price for property investors who want to avoid paying lender’s mortgage insurance (LMI). This insurance policy protects the bank if you cannot make your mortgage repayments. It is usually either a one-off premium or an added fee to your investment property loan amount. You’ll also need to budget for other upfront fees, such as legal and conveyancing fees and stamp duty.

If you are a property investor who does not have the funds for a 20% deposit on their investment loan, you can use equity on an existing home, use a guarantor and the Family Security Guarantee, or, ultimately, pay LMI.

According to Investopedia, “Home equity is the difference between the amount you owe on a mortgage and what the home is worth. It’s essentially what you own in a home.” And what you own in a home is an asset, rendering it possible to secure low-interest loans by using home equity as collateral.

As for guarantors, they are individuals who agree to cover home loan repayments if the investor cannot (using their own assets). Similarly, the Family Security Guarantee enables family members to guarantee part of their home loan.

Set a Budget

According to Reiwa, the median house and unit prices in the Perth metro area are $750,000 and $500,000 for the 12 months ending in January 2025. However, that is a mere average, and each investor should set a budget that aligns with their financial situation.

Once investors know the deposit they can secure, they can evaluate their borrowing power. To set a budget, they can add their borrowing power and their deposit, but the success of budgeting lies in the details.

Create a detailed budget that includes everyday expenses, existing debts, and any financial commitments. Also, get a realistic estimate of the projected expenses and generated income from the investment property. These expenses are property expenses, maintenance costs, property management fees (if you are hiring a property manager), and other costs.

Develop an Investment Strategy

To settle on an investment strategy, it is crucial to determine the main investment goals behind property investment. How would you rate the importance of the following?

Capital Growth

If a property value increases over time, that increase is capital growth. Some investors rely on capital growth to make a profit. But because properties fluctuate in price, holding costs should also be considered with the potential gain.

Some hold these properties long-term to access growth, and some choose areas known for capital growth, where supply levels are historically low. .

Rental Income

Calculating the expected rental income is necessary if the goal is to make a steady stream of income on the investment property. It can be the gross rental yield, which is the total annual rental income compared to the market value, or the net rental income, which takes into account costs, fees, and depreciation.

For example, Perth is known for the strong rental yield of its investment properties. It does not typically dip below  3%, which is attractive to those investing in the city. In fact, Perth was at the forefront nationally in 2024 with a 13.2% increase in rental yield.

Tax Benefits

Tax implications should be part of any property investment strategy. In the end, no one wants an investment property whose rental income is lower than the cost of owning it. However, you can claim losses at tax time and reduce your taxable income, which is known as a negatively geared investment property.

For other investments, positively geared rental properties, there may be additional income tax implications. Therefore, you should research the capital gains tax and various tax deductions and consult your tax accountant for tailored tax advice.

Choose an Investment Property

When buying an investment property, you must consider the following factors to find the right property for your goals:

Property Type

Any investor should choose between units and houses. Units are typically cheaper and closer to city centres in inner-ring suburbs or near train lines, which could mean strong rental yield. However, higher supply levels could impact capital growth.

As for houses, they tend to be more costly to maintain though the higher percentage of land value component is likely to amplify the capital growth prospects when compared to units. Houses are also best suited for developmental opportunities and creating added value on an existing lot, whether via extension, construction of ancillary dwelling or subdivision and building.

Property Age

The age of the property affects the property investment. We have already alluded to home values and depreciation. The depreciation schedule estimates how much the value of the property and its contents will decrease over time (after claiming tax deductions).

Land values appreciate over time, as it is a finite resource, which boosts prices and rent. However, the Government or developers releasing new land can change that.

In comparison, the value of a dwelling will depreciate over time as it ages and maintenance requirements increase. That means a building will require more upkeep (depending on its condition). As such, it’s crucial to add these costs to your calculations.

Property Features

Certain features can help investors catch sight of an investment property with a strong long-term growth chance. However, they may not all apply to every scenario and should not serve as strict guidelines.

It is also worth noting that the features that matter to you may not matter to the target tenant demographic. You can make renovations to your investment property to add features that they prioritise (provided appropriate approvals are sought). This way, you can increase its value and boost your rental income. These existing or added features include:

• Garages, carports or other off-street parking
• Home offices
• Extra bathrooms or separate WCs
• Natural light
• Balconies
• Air conditioning and comfort features
• Extra storage
• Outdoor space
• Minimal maintenance
• Quiet residential street
• Flexible accommodation to suit the tenant demographic

Property Location

Finally, location is arguably the biggest factor impacting long-term property value. Researching the property location is possible via market data about the latest WA trends and insights.

When investing in property in the Perth metro area, for example, investors can narrow down their search by checking suburb reports. You might find many of the following suburbs having the best rental yield:

• East Perth
• North Perth
• Victoria Park
• Shenton Park
• Osborne Park
• Mount Claremont
• Mount Lawley
• Swanbourne
• Floreat
• Northbridge
• Mosman Park
• Claremont
• Wembley
• West Leederville
• Nedlands

Factors to consider are growth areas, lifestyle amenities, future developments, big infrastructure projects, low crime rates, low property taxes, proximity to good schools, hospitals, childcare, retail, restaurants, parks, coffee shops, public transport, a thriving job market (like Perth’s central business district), and other amenities.

These features may increase the investment property price, but they also attract more tenants, meaning lower vacancy rates and higher rents.

Afterwards, looking at the sale price and rental price of similar properties can help investors estimate their future rental yield. They should also compare properties in the area, considering their rental price and potential rental yield values.

Conclusion

To conclude, investing in WA properties should not be intimidating, and referencing guides like these will help you get started. If you make informed decisions about the finances, investment strategy, and chosen property investment, you will likely be pleased with the results.

Undoubtedly, these three will look different for everyone buying an investment property, which is why you should always consider your particular circumstances. If you want tailored advice, our committed team can help you with market insights and partner introductions to choose the right property for you. Contact us now! We are HERE to help.