How to get rich through property, and the tips and traps you need to know
Successful property investors know the tips and traps around building serious wealth. Here is why it is wise to listen to them.
Australia’s 2.3 million residential real estate investors are on to something: putting your money into property can dramatically grow your net worth.
When house prices climb quickly, as they have in several states in recent years, homeowners enjoy windfall wealth gains, but property investors can get double, triple or more of an overall wealth boost because they hold multiple real estate assets.
Getting started is often the hardest step in property investment, and many people miss opportunities to get richer because they fail to act sooner.
There are traps, of course, but experts say these can be overcome by knowledge, good planning and the right advice.
Popularity and criticism
Property investor numbers in Australia have jumped 35 per cent in 20 years, more than overall population growth of 33 per cent.
Metropole Property Strategists founder Michael Yardney says property is popular because of its long-term capital growth; banks being more willing to lend against bricks and mortar than other assets; tax benefits such as negative gearing; and because you have more control of your investment than with shares and other assets.
Yardney says property investment’s popularity should continue but landlords are battling negative public perceptions of them as being greedy and locking first-home buyers out of the market.
“In the five decades I have been involved in property, the role of property investors has never been more scrutinised, and I have never seen as much of an us-and-them mentality,” he says.
“Property investors are not the villains they’re often made out to be. Instead, they’re providing a vital service by housing a significant proportion of Australians who, for various reasons, either can’t or don’t want to buy their own homes.”
Top tips
There are some key rules investors should follow when wanting to build property wealth.
Treat it as a business
Yardney says it is important to treat it as a business, not a hobby, and have a strategy that does not rely on luck and emotion.
“Begin with clear financial goals and a strategic plan tailored to your personal circumstances and risk profile,” he says.
Location, location, location
People should seek to buy investment-grade property in proven locations, Yardney says.
“Any property can become an investment – just kick the owner out and put a tenant in, and it becomes an investment, but that doesn’t mean it is investment-grade,” he says.
“Focus on suburbs with strong historical capital growth, especially those experiencing gentrification, characterised by high demand, attractive lifestyle amenities, good schools, and proximity to employment hubs.
“Avoid chasing hotspots or cheap areas that are likely to underperform over time.”
Have a clear strategy
The founder of Mecca Property Group, Abdullah Nouh, says growing demand for housing should increase property investment’s popularity, and he recommends starting with a clear strategy.
“Understand your long-term goals, whether it’s passive income, early retirement, or legacy building, and reverse engineer your purchases to match,” Nouh says.
“Focus on established houses with a good land component in high-demand, tightly held areas.
“Avoid high-density apartments or house-and-land packages in oversupplied estates.
“Property allows you to use other people’s money – the bank’s – to grow wealth, but manage risk by keeping buffers and understanding your borrowing capacity.”
Expert support
Experts recommend surrounding yourself with a team of experienced professionals, including an accountant, solicitor, mortgage broker, property strategist, buyers’ agent and other successful investors.
Focus on cashflow
Rethink Investing founder Scott O’Neill says investors should focus on good cashflow.
“With property prices now 12-plus times average income, you can’t afford to subsidise poor performers,” he says.
Investors should aim to buy below market value every time, O’Neill says.
“Target distressed sales, off-market opportunities, or properties needing cosmetic improvements to create instant equity,” he says.
“Invest where fundamentals are strong – growing populations, infrastructure investment, and economic diversification. Location determines long-term success.
“One property makes you a homeowner; multiple cashflowing properties make you wealthy.
“Focus on acquiring assets that fund the next purchase through positive cashflow.”
Power of equity
A majority of property investors are existing homeowners who use their home’s equity – the difference between its value and the mortgage debt – as a deposit to fuel further investment. This means no cash deposits are required, although their home may act as security for the investment property.
O’Neill says equity is not a requirement but is “certainly a significant benefit”.
While an investor’s debt will grow as their property portfolio increases, their overall equity should increase faster while tenants’ rental payments help cover mortgage costs.
“Use debt as a wealth amplifier, but ensure rental income covers most of your mortgage payment,” O’Neill says.
“Smart leverage builds wealth – over-leverage destroys it.”
Nouh recommends having at least $100,000 of usable equity as a solid starting point.
“But you also need to structure your lending so you can tap into it effectively without putting yourself at financial risk,” he says.
“Equity is how you scale, but cashflow is how you hold.”
Your bank won’t tell you about the power of equity because they are in the business of lending, not providing property investment advice.
“If someone wants genuine help, they should seek out professionals who’ve helped others build portfolios, understand market cycles, and know how to structure for growth,” Nouh says.
“Be cautious with ‘wealth advisers’ who push off-the-plan stock; they often work for large commissions, not your best interests.
“The key is to buy well, add value, create equity, and redeploy it. Once equity is created, through growth or upgrades, it can be used as a deposit for the next property.”
Patience is vital
Nouh says successful property investment takes time, but is one of the most predictable paths to wealth for people who buy well and are prepared to be patient.
“Timeframe-wise, serious wealth often comes over seven to 15 years, not seven months,” he says.
Yardney says investors should manage their risk and cashflow carefully, “stay the course and let compounding do the work”.
“Smart investors understand the power of compounding growth over decades,” he says.
“Don’t make a 30-year investment decision based on the last 30 minutes of news.
“Most serious investors adopt a 20- to 30-year perspective. The initial five to 10 years, focus on laying your foundation.”
Beware of these traps
There are plenty of ways new and experienced property investors can get caught out, and understanding the pitfalls is vital.
Thinking short-term
Yardney says one trap is focusing too much on high cashflow rather than a property’s potential for long-term value growth over time.
He says it’s a trap trying to time the market, when it’s “time in the market” that matters.
Emotion
Emotion is another trap, and investors should instead rely on data.
“Many beginner investors purchase a property near where they live, holiday, or plan to retire, however these are not always the best criteria for choosing an investment that will outperform,” Yardney says.
Unrealistic expectations
Many investors have fallen for get-rich-quick schemes over the years, Yardney says.
“Social media is full of spruikers making unrealistic claims including ‘no money down’ deals, or off-the-plan ‘bargains’ which often leave investors burnt,” he says.
Nouh warns of falling into the trap of slick marketing, “buying off-the-plan apartments or house-and-land packages sold with inflated promises”.
“These assets often underperform due to oversupply, lack of land value, and high selling commissions – sometimes upwards of $30,000–$45,000.”
O’Neill says be wary of property marketers pushing investments in small regional towns with promises of rapid short-term growth.
“These areas often lack economic diversity and population growth to sustain property values long-term,” he says.
Spreading finances too thin
Don’t spread your finances too thin.
“When interest rates rise, vacancies increase, and unexpected maintenance costs occur; it’s important to have a financial buffer to weather the property cycle,” Yardney says.
Waiting to pay off a mortgage
Many people plan to start investing once they have repaid their own mortgage, but this delay can be a wealth-stopping trap.
“For many Australians, their home is their biggest asset, and unlocking that lazy equity is the first step to building wealth,” Yardney says.
FOMO-driven buys
O’Neill says investors should never skip researching an area’s employment, infrastructure and demographic trends, and should be wary of oversupplied unit markets, such as those with high-rise complexes.
“Oversupply kills both rental demand and capital growth, leaving you with a depreciating asset that’s difficult to tenant,” he says.
“Avoid FOMO-driven purchases when markets are overheated. Patient investors who buy during quieter periods or market corrections typically achieve better long-term returns than those chasing hot markets.
“Never accept properties that drain your bank account monthly. In today’s expensive market, negative gearing benefits don’t justify ongoing losses – you need properties that contribute to your wealth, not subtract from it.”
Considering commercial?
Some investors take the commercial property path, which typically offers higher income yields but can have different deposit, borrowing and other rules.
O’Neill says the commercial market is becoming increasingly competitive “due to a surge in demand from thousands of residential investors now pivoting to commercial property investments for their superior cashflow returns”.
“We advise having a minimum of $400,000 in available cash or equity to secure a high-quality commercial property. With leverage applied, this positions you to acquire commercial assets valued at over $1m,” he says.
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