In this episode, Damien and Jeremy walk through the major categories of risk property investors should be aware of, along with practical ways to mitigate each one.
General Market Risk
Damien opens by describing general market risk as external factors outside an investor's control, with interest rates being the most significant one at present, given their impact on property values and cash flow over the past six to twelve months. Jeremy adds that broader events like recessions, pandemics, and wars fall into this category too, but notes that people will always need housing, so these periods can be weathered with the right preparation.
Interest Rates
Damien observes that despite high interest rates, many markets are picking up due to a lack of supply. He stresses that the key mitigation strategy is holding cash buffers, generally six to twelve months' worth, tailored to personal comfort level. For investors with smaller buffers (only one or two months), having strong job security and a support network to lean on becomes especially important. Jeremy reinforces that these periods of market stress are temporary, so investors need to be prepared to ride them out rather than assume conditions will stay difficult indefinitely.
Location Risk
Damien explains that location risk relates to the specific area an investment is in, and recommends using the DSR to shortlist suburbs based on price point and desired yield, focusing on markets showing an upswing in DSR. From there, he suggests narrowing down to specific local government areas and suburbs, supplemented by on-the-ground research using tools like Google Maps. Jeremy agrees, noting that while the DSR points to markets already positioned for capital growth due to demand exceeding supply, avoiding long-term oversupply risk is relatively straightforward: buying in a built-up area, since space for further development is limited. Damien adds that checking whether stock-on-market percentage is tight across an area is also useful, noting this issue tends to show up more with units than houses.
Legislative Risk
Damien breaks this down by level of government: federally, this could include changes such as the removal of negative gearing benefits; at the state level, rent control measures or changes to stamp duty; and at the council level, local zoning changes or new building regulations. Jeremy notes that a previous federal proposal to abolish negative gearing contributed to an election loss for the party that proposed it, and that while negative gearing has been removed and reintroduced before, changing it again seems unlikely, though not impossible. He considers changes to superannuation more probable, and observes that property investing can act as a hedge against super-related policy risk. He also expresses frustration with recent state-level rent control proposals, viewing them as more about political positioning than genuine policy, especially given that landlords and tenants both represent significant voting blocs, and given that such measures actively discourage investment at a time when supply is already limited. He recommends checking council zoning and maintaining cash buffers as ways to manage this category of risk.
Area Economic Risk
Damien describes this as the underlying health and stability of a local market, noting that areas with strong job markets and diverse industries tend to carry lower risk, whereas areas with high unemployment, economic decline, or reliance on a single industry, such as isolated mining towns, carry higher risk. Jeremy agrees, but points out that even state capital cities aren't immune, citing Perth around 2015, when a downturn in the resources sector caused prices to fall by roughly 20 to 25% over about five years. He notes that tracking the DSR closely gives investors plenty of warning before such downturns, since large markets tend to move slowly.
Damien shares an example of a client who purchased three properties in Perth within close proximity to each other roughly six to seven years prior, funded through savings rather than equity, expecting the properties to double in value over seven to ten years as commonly cited in books. When that growth didn't materialise, they conducted a hold-or-sell analysis on the properties, recommending one be sold, which the client did. Damien notes this illustrates that concentrating investments in a single area carries risk, even though it can also perform well if that market takes off. Jeremy adds that holding for long enough generally works out, but if an investor doesn't have time on their side, getting the initial market selection right matters more. Damien suggests diversifying across a few different markets, such as Perth, Adelaide, and Brisbane, as one way to reduce this concentration risk.
Supply and Demand Dynamics
Damien reiterates that the DSR helps assess whether a market is under- or oversupplied, and recommends keeping an eye on greenfield estates in particular, using tools like Google Maps, or contacting developers or councils directly to understand upcoming supply. Jeremy notes that protecting against long-term oversupply is fairly simple in principle: buy in a built-up area, since housing supply is constrained by available vacant land.
Damien adds that stock-on-market percentage tends to be higher in newer, greenfield suburbs, though this doesn't automatically make them a poor choice, just a higher-risk one. He recalls a client example in a Victorian suburb near Donnybrook, where multiple developers were releasing farmland into house-and-land packages with no existing established area, which he considered a significant risk. He contrasts this with a Lendlease-style masterplanned development example, where a large pool of registered buyers is competing for a much smaller number of blocks released periodically, which tends to see that stock absorbed quickly and values increase as a result. His overall guidance is to keep an eye on stock-on-market percentage as a risk indicator for oversupply.
New Infrastructure
Jeremy raises the risk of infrastructure changes occurring after a property is purchased, giving the example of a client who bought near the Bruce Highway through a buyers agent, only for the highway to later be extended, resulting in noise and traffic changes. Though the property was later sold with some capital gain still achieved, Jeremy notes it illustrates the risk of proximity to major roads that may be widened or extended.
Jeremy also references a Queensland University of Technology study analysing historical Brisbane data from the 1980s, when a new flight path was introduced at Brisbane Airport. Suburbs affected experienced inferior growth for around four years following the change, but growth patterns returned to match the broader Brisbane market afterward. Jeremy's takeaway is that even negative infrastructure impacts can be temporary, though checking infrastructure plans (such as via infrastructure.gov.au) is still worthwhile. Damien adds that when purchasing, it can be worth deliberately choosing a location a little further from a highway to avoid this kind of risk from the outset.
Environmental Risk
Damien highlights bushfire risk as a significant example, referencing the impact on the New South Wales south coast a few years prior, alongside broader risks like cyclones and floods in bush-adjacent areas. He suggests using Google Maps to understand surrounding terrain, and contacting a couple of different insurers for quotes to gauge whether premiums are unusually high, which can be a signal of elevated risk in that location.
Market Sentiment
Damien notes that buyer perception of a location, whether shaped by positive or negative news, can influence values, though he points out that historical data suggests a high crime rate doesn't necessarily hurt a suburb's future growth prospects. Jeremy agrees that negative sentiment driven by media coverage tends to be short-term in nature. Both note that headline growth figures reported in the media can be misleading, sometimes reflecting a mix of new versus established properties selling, or statistical anomalies in the changing median, rather than a genuine shift in the underlying market.
Property Risk
Damien identifies poor asset selection as one of the most significant property-level risks, recommending building and pest inspections, and suggesting a direct call to the inspector if the written report feels overwhelming, to clarify whether there are any major issues. For older properties, he suggests addressing smaller issues (such as water damage or leaks) promptly to avoid escalating costs. On body corporate risk, Damien notes that owners in strata or gated estates may have limited voting power compared to owners holding multiple properties within the same complex, and generally recommends investors favour houses with land content and single title over body corporate arrangements. Jeremy agrees, noting that land appreciates over time while the building itself depreciates.
Tenant Risk
Damien describes tenant risk as encompassing both vacancy risk and negative cash flow risk, suggesting investors use DSR data not just for the specific suburb but also surrounding suburbs to check for unusually high vacancy rates. He also recommends that when buying a property with an existing tenant, investors request the rental payment history and ask the property manager whether they'd be comfortable providing a positive reference for that tenant, sharing that skipping this step in the past led to a difficult tenant situation. As a related point, he notes repair risk, essentially how well a tenant looks after the property, also falls under this category.
Management Risk
Damien shares a past experience with property managers who overpromised on how quickly a property would be tenanted, then failed to communicate, which was frustrating given how busy he was elsewhere. Jeremy compares owning an investment property to running an accommodation business where the property manager functions as an employee, suggesting they should be vetted with a similar level of scrutiny as hiring for a role, given the relationship is long-term. Damien notes that while property management does see high staff turnover, outcomes still depend heavily on the individual manager rather than only the agency.
Leverage Risk
Damien draws on his experience building financial plans for clients, describing surplus cash flow, not just loan-to-value ratio, as the more important metric to track. He gives an example of investors going aggressive with two properties and then needing to use a lender known for lenient serviceability criteria to secure a third, which can leave them vulnerable if that lender later raises interest rates, since they have limited ability to refinance elsewhere. Jeremy shares that this happened to him personally during the Global Financial Crisis, when his interest rate rose to 11.5% with the only lender willing to work with him at the time. Damien's overall advice is to maintain solid cash buffers, whether in an offset account or in a liquid share portfolio that can be accessed within a few days, rather than pursuing aggressive leverage without that safety net.
Planning Risk
Damien frames planning risk as fundamentally about money management: understanding how a new purchase will affect lifestyle and cash flow. He walks through an example of an investor saving $3,000 per month who, after factoring in a negatively geared property's holding costs (say, $1,000 per month after tax benefits), would see their monthly savings drop to around $2,000. He questions whether lengthy 40-to-60-year financial plans are always necessary, suggesting that solid money management and quality asset selection, alongside maintained buffers, often matter more. He also highlights the importance of factoring in foreseeable life events, such as potential job loss, holidays, family planning, a new car, or school fees, into cash flow planning, rather than depleting reserves and then experiencing a shock. Jeremy adds that long-range plans inevitably become outdated as circumstances change, so more frequent review is often more useful than an overly detailed long-term plan, though some events, like having children, can't be undone once decided. Damien notes that events like parental leave can meaningfully affect income and require planning ahead of time. Both agree job security remains a central consideration throughout.
Advice Risk
Damien stresses the importance of vetting financial or property planners, asking about their experience, track record, and whether they genuinely understand the client's goals and circumstances before recommending anything. Jeremy shares that one of his own early mistakes as an investor was assuming an advisor was an expert without verifying it, and notes that some advisors genuinely believe in their own expertise despite lacking it, while others have built entire careers on self-promotion rather than substance.
Jeremy highlights asking "how do you get paid" as a useful question to surface potential conflicts of interest, since some property developers position themselves in ways that obscure their actual role, presenting growth projections that are effectively marketing material. Damien shares an example of a client who used an external financial planner to set up a self-managed super fund, purchasing two properties (one personally, one within the fund) that performed poorly, with the fund taking a larger hit, though other assets in the portfolio helped offset it.
Jeremy adds that professionals or firms with a strong marketing or sales background often lead with that skill rather than the substance of the service itself, and cautions that case studies highlighting standout past client results are often best-case exceptions rather than typical outcomes. He recommends specifically asking for average, not just best-case, past performance data, treating reluctance to share this as a red flag. Damien agrees, noting that some firms are transparent about their performance relative to national benchmarks, while others are not, and that investors should ask this directly. Both note that fee or commission structures can create pressure for advisors to move plans through quickly, so investors should feel free to ask thorough questions without feeling rushed.
Opportunity Risk
Damien raises a final consideration: differing advice between professionals, where one advisor might recommend holding a property long-term regardless of performance, while another might run detailed analysis and recommend selling based on opportunity cost. He also cautions against over-leveraging in pursuit of investment growth without accounting for near-term life plans, such as buying a family home, since investment properties may not have had sufficient time to grow before that transition. His closing message is to avoid rushing into a purchase out of a fear of missing out, sharing an example of a client based in New York who, feeling they'd waited too long, invested off-the-plan in a unit development that performed poorly, before later selling and looking to purchase a higher-quality asset elsewhere in Australia. He acknowledges the balance required, since excessive procrastination can just as easily lead to a rushed decision later.
Closing
Damien and Jeremy note that while property investing carries risk, understanding each category and applying the right mitigation strategies goes a long way toward managing it.