Investing in property can be one of the most rewarding financial decisions you make — but only if you know how to properly analyse a deal. Whether you’re a first-time investor or looking to scale your portfolio, understanding how to evaluate a property beyond just the listing price is crucial.
Here’s a step-by-step guide to help you analyse a property deal like a seasoned pro in the Australian market.
1. Understand the Location
Location is everything. Before diving into numbers, assess the suburb or region:
- Population growth: Is the area growing or declining?
- Infrastructure projects: Are there upcoming developments like transport, schools, or shopping centres?
- Rental demand: Is there a strong tenant pool?
- Vacancy rates: A low vacancy rate (below 3%) is ideal.
Tools to use: CoreLogic, SQM Research, Domain Suburb Profiles
2. Calculate the Gross Rental Yield
This is a quick way to assess how much income the property generates relative to its price.
Formula:
Gross Yield = (Purchase Price/Annual Rent)×100
Example:
If a property costs $600,000 and rents for $600/week:
Annual Rent = $600 × 52 = $31,200
Gross Yield = (31,200 / 600,000) × 100 = 5.2%
Aim for 4–6% in metro areas and 6–8% in regional areas.
3. Factor in All Costs
Don’t just look at the purchase price. Include:
- Stamp duty
- Legal and conveyancing fees
- Building and pest inspections
- Loan setup and LMI (if applicable)
- Ongoing costs: council rates, insurance, property management, maintenance
Pro tip: Use a spreadsheet or property analysis calculator to keep track.
4. Assess Cash Flow
Cash flow tells you whether the property will cost you money each month or generate income.
Formula:
Cash Flow=Rental Income−Expenses
Include mortgage repayments, insurance, rates, and property management fees. A positive cash flow property can help you hold onto it long-term, especially in a rising interest rate environment.
5. Evaluate Capital Growth Potential
Look at historical growth trends and future indicators:
- Past 5–10 years of price growth
- Gentrification signs (cafes, renovations, young professionals moving in)
- Infrastructure and employment hubs nearby
Use tools like RP Data, PriceFinder, or realestate.com.au insights.
6. Run a Deal Analysis Scenario
Ask yourself:
- What happens if interest rates rise by 1–2%?
- What if the property is vacant for 4 weeks a year?
- Can I still afford it if rent drops by 10%?
Stress-testing your deal helps you prepare for real-world risks.
7. Check the Legal and Physical Condition
- Review the contract of sale and title search
- Get a building and pest inspection
- Check for zoning restrictions or easements
These can affect your ability to renovate, develop, or even rent the property.
Final Thoughts
Analysing a property deal like a pro means going beyond the surface. It’s about understanding the numbers, the market, and the risks — and making informed decisions based on data, not emotion.
Whether you’re buying your first investment or your fifth, a solid analysis process is your best defence against costly mistakes.
