The wrong objective: why most investment mistakes happen before the search begins

By Jarrod McCabe 

Asset selection is the single most important factor when buying an investment property. 

We’ve said it before, and we’ll keep saying it. The mistakes we see most often don’t come from poor negotiation or bad timing. They come from the wrong objective driving the search from the very start.

When investors arrive with a fixed idea about what their property needs to deliver – maximum depreciation, the highest possible yield, a tax benefit locked in quickly – it shapes every decision that follows. 

The attributes they prioritise, the stock they gravitate toward and the price they’re willing to pay all flow from that initial objective. 

If the objective is wrong, the asset selection will be too. Worse, buyers who believe they’ve found a property that achieves their misguided goal will often pay a premium for it, compounding the error.

Chasing tax benefits over growth

The primary objective when buying an investment property should be capital growth. Tax benefits, yield and depreciation are all legitimate advantages of property investment – and you should absolutely maximise them – but they should never be the reason you buy a particular property.

Depreciation

Buyers focused on depreciation benefits are drawn to brand new or off-the-plan stock, because that’s where the tax write-offs are greatest. 

The problem is that a large proportion of the purchase price is tied up in improvements – kitchens, bathrooms, fixtures, fittings – that are at their absolute best on day one. From there, they start declining immediately. 

If the bulk of your asset’s value is in components that are depreciating, you’re paying a premium for the very thing that’s going backwards.

Negative gearing

Negative gearing itself doesn’t typically distort asset selection in the same way. Depending on how you structure your borrowings, the benefit can apply to most properties. The risk here is urgency. 

Buyers fixated on locking in negative gearing benefits as quickly as possible can rush the decision. A rushed decision in property is almost always a costly one.

Yield

Yield is where the tension with growth becomes most pronounced. Tenants pay for improvements – a nice kitchen, a modern bathroom – not for the underlying land. 

A high-yield property tends to be one where value is concentrated in the improvements rather than the land component, scarcity value and diversity of buyer profile that actually drive capital growth. Yield and growth frequently work at cross purposes for this reason.

And when buyers find a property delivering a strong yield, the temptation is to stretch the budget. “If we pay a little more, the yield only drops slightly.” The problem is you’re often paying a premium for what is fundamentally a riskier asset.

Letting emotion drive investment decisions

This is a conversation we have regularly. A client inspects an investment property we’ve identified and says, “I don’t like it – it’s not where I’d want to live.” The answer is always the same: we’re not buying it for you to live in.

When you’re purchasing your own home, personal taste is entirely valid – the style, the streetscape, the size, the suburb. But when you’re buying an investment, those preferences become noise. 

Emotion leads buyers toward properties that appeal to them personally rather than those with the attributes that generate growth. It’s also what causes buyers to pay premiums – and it’s one of the reasons our role as buyers’ advocates exists. We’re there to temper that impulse and keep the focus on fundamentals.

Taking advice from family and friends

It’s always well-intentioned. A family member or friend has had a good experience with property, and they want to share what worked. The problem is that you rarely know the full picture. 

Did they receive professional advice, or was their success more coincidental than strategic? How much homework did they actually do? Was the advice tailored to their budget and circumstances?

What suited someone with a larger budget or a different life stage may not suit you at all. A friend’s recommendation might mean you’re buying something more compromised than they had to, simply because your budget doesn’t stretch as far. 

Family and friends mean well, but their advice shouldn’t override a properly considered strategy built around your own objectives.

Trying to make one property serve multiple briefs

This is one of the most common – and most costly – mistakes. 

Buyers try to combine an investment purchase with a future lifestyle plan. “We’ll rent it out for five years and then use it as a holiday house.” Or, “We’ll buy near the university so the kids can use it.” Or, “This will be our downsizer when we retire.”

The intention to plan ahead is admirable. But it almost always compromises the asset selection. A property chosen partly for lifestyle and partly for investment typically ends up serving neither brief well.

And life has a way of changing the plan entirely. Children move interstate. Health needs shift. Grandchildren arrive in unexpected locations. A downsizer bought ten years early might not suit you at all by the time you get there.

If the purpose is investment, buy for investment. If it’s lifestyle, buy for lifestyle. Trying to tick both boxes with a single purchase is the surest way to end up with a property that doesn’t perform for either.

Take home message

Capital growth should be the primary driver of every investment property decision. Depreciation, negative gearing and yield are all benefits worth maximising – but they should be extracted from the right asset, not used to select it.

Buy the property with the growth fundamentals first. Then improve the kitchen and bathroom to lift the yield and generate depreciation benefits off the back of targeted renovations. 

That approach builds wealth. Buying off the plan because it maximises tax write-offs on paper does not.

Focus on the asset. Get the selection right. Everything else follows from that.

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