First Investment Property Checklist

Your first investment property either becomes the foundation of long-term wealth or an expensive lesson that takes years to unwind. The difference is rarely luck. It comes down to the work you do before you sign anything. What follows is the sequence we use on a first investment property purchase, stage by stage, in the order the decisions actually arrive.

This is education, not a sales pitch. The steps hold whether you engage a buyer's agent or run the process yourself.

1 Before You Start

Work out exactly where you stand financially before you look at a single listing. Getting this wrong is the most common way first-time investors come unstuck.

• Get mortgage pre-approval. A broker or your bank can issue formal pre-approval, which sets your maximum borrowing capacity and gives your offers credibility. It typically lasts 90 days.
• Understand your true borrowing capacity. What a lender approves and what you should borrow are two different numbers. Factor in the assessment buffer (lenders currently test repayments at around 3% above the actual rate), vacancy periods, and how much repayment you can carry without losing sleep.
• Account for all upfront costs. The purchase price is only the start. Budget for stamp duty (it varies significantly by state; NSW and VIC apply different thresholds and rates), conveyancing or solicitor fees, building and pest inspections, loan establishment fees, and landlord insurance.
• Consider your ownership structure. How you hold the property carries lasting tax and asset protection consequences. The main options are personal name, joint tenants, tenants in common, a family trust, a company structure, or a self-managed super fund (SMSF), each with its own rules on tax deductions, capital gains, asset protection, and borrowing. Get an accountant's view before you commit, because changing structure later is difficult and expensive.
• Build a cash buffer. Hold at least three to six months of holding costs (mortgage repayments, insurance, council rates, maintenance) in cash or offset before you buy. Vacancies and repairs are not a question of if, but when.

2 Define Your Strategy

There is no single right way to invest. Decide what you are chasing, and over what timeframe, before you start searching.

• Capital growth vs rental yield vs both. High-growth suburbs, typically inner-city and established metro areas, tend to come with lower rental yields. High-yield properties, often regional or outer suburban, tend to grow more slowly in value. Some investors want cash flow from day one; others accept negative gearing for long-term growth. The right answer depends on your income, tax position, and investment horizon.
• Residential vs commercial. Most first-time investors start with residential: lower entry costs, simpler financing, broader tenant demand. Commercial can deliver higher yields and longer leases, but carries higher vacancy risk and more complex due diligence.
• Metro vs regional. Metro markets tend to offer greater liquidity, steadier demand, and stronger long-term capital growth. Regional markets can offer higher yields and lower entry prices, but they carry economic concentration risk, dependence on a single industry or employer, and thinner rental demand.
• New build vs established. New builds bring depreciation benefits and low early maintenance, usually at a premium to comparable established stock. Established properties can offer better value for their land content and location, but often need maintenance sooner.

The best strategy is the one you can hold through a full market cycle, not the one that looks best in today's conditions.

3 Research Phase

Research is what separates an informed investor from a speculator, and Australian investors have plenty of free and low-cost data to work with.

• Population growth. Sustained population growth in a suburb or region drives housing demand over time. The Australian Bureau of Statistics (ABS) publishes regional population data, and state planning departments publish projections.
• Infrastructure spending. Planned transport links, hospitals, schools, and commercial developments feed future demand. Check the pipeline: Infrastructure Australia publishes a national priority list, and each state government maintains its own infrastructure plan.
• Vacancy rates. Below 2% generally signals a landlord's market with upward pressure on rents; above 4% points to oversupply. SQM Research publishes free weekly vacancy data by postcode at sqmresearch.com.au.
• Median prices and rental yields. CoreLogic, Domain, and SQM Research all publish suburb-level median price and rental data. Read current medians against five- and ten-year trends to see where a suburb sits in its cycle.
• Council development applications (DAs). Your local council's DA tracker shows what is being built nearby. A pipeline of approved apartment developments can signal future oversupply.
• Days on market. How quickly stock sells. Lower days on market generally means stronger buyer demand. Most data platforms report it at the suburb level.

Cross-reference several sources. No single data point tells the full story on its own.

4 Shortlisting Properties

With your target suburbs set, filter individual properties against the traits that tend to correlate with strong performance.

• Strong tenant demand. Properties near public transport, employment centres, schools, universities, hospitals, and retail draw a wider pool of tenants and sit vacant for less time.
• Low maintenance requirements. Brick or brick-veneer construction, concrete tile or Colorbond roofing, and low-fuss landscaping keep holding costs down. Be wary of expensive-to-maintain features: swimming pools (unless the rental premium justifies one), extensive timber decking, or ageing plumbing and electrical systems.
• Multiple income potential. A granny flat, dual occupancy potential, or room to add a secondary dwelling (subject to council approval) can lift rental yield materially.
• Land content. Land appreciates while buildings depreciate. A higher land-to-improvement ratio tends to deliver stronger capital growth, which is one reason houses generally outperform apartments over the long term, though apartments can offer better yield and lower entry costs.
• Avoid over-capitalisation risk. Treat properties renovated well above the suburb norm with caution. The premium you pay for that finish can be hard to recover on resale.

5 Due Diligence

Due diligence is where you confirm the property is what it appears to be, structurally, legally, and financially. Never skip it and never rush it.

• Building and pest inspection. Engage an independent, qualified building inspector to assess structural condition, flag defects, and check for termite activity or damage. It typically costs between $400 and $800 and can save you tens of thousands in unexpected repairs.
• Strata reports (if applicable). For a unit, townhouse, or anything in a strata scheme, obtain a strata inspection report. It reveals the owners corporation's financial health, any pending special levies, outstanding maintenance, and the history of disputes and insurance claims. In NSW, a strata report is available under Section 184 of the Strata Schemes Management Act.
• Title search. Your solicitor or conveyancer runs a title search to confirm ownership, surface encumbrances (easements, covenants, caveats), and check for restrictions on how the property can be used.
• Zoning verification. Confirm zoning with the local council and check that the current use, and anything you intend to change, is permitted. Zoning also governs future development potential.
• Rental appraisal. Get a written rental appraisal from at least two local property managers. Two independent estimates of achievable rent let you sanity-check your cash flow projections.
• Body corporate records. For strata properties, read the minutes of recent annual general meetings and committee meetings. They often surface what formal reports miss: neighbour disputes, deferred maintenance, proposed rule changes, or upcoming special levies.
• Flood and bushfire mapping. Check state government mapping tools for flood zones, bushfire-prone areas, and other natural hazard overlays. They drive insurance costs and, in some cases, whether the property can be insured at all.

Due diligence is not a formality. It is your last chance to find the problems before they become yours to fix, and to price them into your offer.

6 Making an Offer

How you make an offer in Australia depends on the method of sale and the state the property sits in.

• Private treaty. In a private treaty sale you submit an offer, usually through your solicitor or conveyancer, and can attach conditions such as subject-to-finance and subject-to-building-inspection. It is the standard method for most commercial acquisitions and gives you more flexibility on contract terms and settlement timing.
• Cooling-off periods. These vary by state. NSW gives five business days after exchange, with a 0.25% penalty if you withdraw. Victoria gives three business days. Queensland gives five business days. South Australia has no statutory cooling-off period for auctions, and the rules differ for private sales. Confirm your state's position with your solicitor.
• Subject-to-finance clauses. If your finance is not yet formally approved, include a subject-to-finance clause with a realistic timeframe, typically 14 to 21 days for residential or 14 to 28 days for commercial. It protects you if the lender declines the specific property.
• Deposit. The standard deposit is 10% of the purchase price, payable at exchange of contracts. For budgeting, allow roughly 20% of the price for residential (deposit plus costs) or 30% for commercial, plus about 8% in purchasing costs covering stamp duty, legal fees, and inspections.
• Engage a solicitor or conveyancer early. Have your legal representative review the contract of sale before you sign anything. They will pick up unusual conditions, sunset clauses, and terms that are not in your interest.

7 Pre-Settlement

Between exchange and settlement, typically 14 to 21 days for residential or 14 to 28 days for commercial, several tasks need to happen.

• Arrange insurance from exchange. In most states risk passes to the buyer at exchange of contracts, not at settlement. For residential, put building insurance and landlord insurance (if tenanted) in place from the date of exchange. For commercial, arrange building insurance, loss of rent insurance, and public liability insurance. Your lender will also want evidence of insurance before releasing funds.
• Pre-settlement inspection (optional). On request, a pre-settlement inspection confirms the property is in the same condition as at exchange and that every inclusion listed in the contract is present. It is not standard practice for most investment acquisitions, but it can be arranged if you want it.
• Utility and outgoings transfer. For residential, connect or transfer electricity, gas, water, and internet into your name (or your property manager's) from the settlement date. For commercial, work through the transfer of outgoings obligations with your solicitor and review the GST position; commercial acquisitions are typically structured as going concerns, with GST applying to the transaction.
• Appoint a property manager. If you have not already, sign a management agreement with a local property manager before settlement. A good one handles tenant sourcing, rent collection, maintenance, and compliance with your state's tenancy legislation.
• Confirm settlement with your solicitor. Your solicitor or conveyancer coordinates settlement, including the exchange of funds and documents. Confirm the date, time, and any outstanding requirements with them in the final week.

8 After Settlement

Settlement is the start of the investment, not the finish line. A handful of actions in the first few weeks will improve your financial position.

• Order a depreciation schedule. Engage a qualified quantity surveyor to prepare a tax depreciation schedule. It sets out what you can claim on both the building structure (Division 43) and plant and equipment (Division 40) such as carpet, blinds, hot water systems, and air conditioning. It typically costs $600 to $800 and can return thousands in deductions each year, particularly on newer properties.
• Arrange landlord insurance. Standard building insurance does not cover tenant-related risks: loss of rent, malicious tenant damage, or legal liability. Specialist landlord policies, from providers such as Terri Scheer, EBM RentCover, or your general insurer, are essential on an investment property.
• Understand your tax deductions. You can claim mortgage interest, property management fees, council rates, water rates, insurance premiums, repairs and maintenance (but not capital improvements, which are depreciated), and, in certain circumstances, travel to the property for inspections. Keep detailed records of every expense. The Australian Taxation Office (ATO) publishes a full guide to rental property deductions at ato.gov.au.
• Set up proper record keeping. Run a dedicated bank account, or at least clean records, for all property income and expenses. It simplifies your annual return and stops you missing legitimate deductions.
• Review your loan structure. Make sure the loan is set up for an investment property, typically interest-only for the initial period if cash flow is the priority, with an offset account linked to your owner-occupied loan (if you have one) for tax efficiency. Work the structure through with your mortgage broker or accountant.

9 Common Mistakes to Avoid

First-time investors fall into the same handful of traps. Knowing them is most of the battle.

• Buying where you would live, not where the numbers work. Emotional attachment to a suburb or a style of home works against sound investment. The place you would happily live in is often not the one with the best risk-adjusted return. Let the data decide, not your taste.
• Underestimating total costs. Stamp duty alone can add tens of thousands: on a $700,000 property it is roughly $26,000 in NSW and roughly $37,000 in Victoria. For residential, add solicitor fees ($1,500 to $3,000), building inspection ($400 to $800), strata report ($200 to $400), and loan establishment costs. Commercial runs much higher: solicitor fees from $6,000, building inspection $800 to $1,500 or more, strata report ($400 to $800), and loan establishment fees typically from $4,000 as a percentage of the loan. Budget conservatively.
• Not having a financial buffer. A hot water system fails, a tenant leaves without warning, rates rise. Any one of these routine events causes stress if you have no cash behind you. Keep at least $10,000 to $15,000 in accessible reserves beyond your deposit and upfront costs.
• Skipping due diligence to secure a deal. In a hot market the pull to waive a building inspection or skip a strata report is real. Resist it. A missed structural defect or a looming $30,000 special levy costs far more than losing a property to another buyer.
• Ignoring cash flow realities. A negatively geared property only works if you can comfortably fund the shortfall from your wage or other income. Model cash flow conservatively, assume at least two to four weeks of vacancy a year, and stress-test what happens if interest rates rise by 1-2%.
• Over-relying on a single source of advice. Property spruikers, developers, and some buyer's agents have incentives that do not line up with yours. Get independent views from your accountant, solicitor, and mortgage broker, and check any suburb or property recommendation against your own research.

The most successful property investors are not the ones who found the best deal on their first purchase. They are the ones who avoided the worst mistakes and built the discipline to hold through market cycles.

Treat this as a starting point, not a substitute for advice tailored to you. Every investor's finances, risk tolerance, and goals differ. Before you commit to any property decision, talk to a qualified accountant, solicitor, and mortgage broker who know your situation.