Property Costs That Matter

Where Does the Money Go?

Damien and Jeremy run through the typical costs of acquiring and holding a property, and how much each one can influence performance:

• Stamp duty: A massive cost, often tens of thousands of dollars, but it has no impact on how the property performs.
• Buyers agent: Probably over $10,000, and it can significantly affect performance. In a hot market a buyers agent may get an investor in sooner than they could manage themselves, and can help prevent overpaying. As long as they've picked the right location, outperformance is likely. Damien adds that an agent acts as a second set of eyes, rather than relying on a building and pest report full of disclaimers.
• Legal and conveyancing: Around $2,000.
• Building and pest inspection: Perhaps around $1,000, depending on the area. To the untrained eye, something may not be obvious that a trained inspector would notice and that could cost $20,000, so there's a slim chance it's a very well-spent $1,000.
• Property management: Thousands a year. Damien points to the experience and training managers can draw on, access to a blacklist database, and their promotion of a property for rent. Jeremy notes that it keeps the property rented and in good condition, and that a better manager is preferable at the same percentage fee, but it doesn't affect capital growth, only perhaps cash flow.
• Insurance and council rates: Both run to thousands.
• Repairs and maintenance: Damien suggests allowing a bigger budget for an older dwelling, particularly early on, when the property manager first goes in and cleans a few things up. A newer dwelling needs less. Both agree this does affect a property's performance.
• Research and data: Jeremy and Damien both say they'd spend thousands on researching the next purchase, while acknowledging they're biased.

Why Research Gives the Best Bang for Buck

Jeremy uses a simple example. If one additional metric improved the capital growth of the next purchase by just 1% over a year, on a relatively cheap $500,000 property that's $5,000. Spending an extra $1,000 to be $5,000 better off after a year is, he says, a fantastic return on investment.

Damien adds that even a quick check can help. For example, an untrained investor could look up the DSR3 for a market, see that it's very weak, and decide not to look further, a quick sense check that could save thousands of dollars.

Jeremy also offers a rule of thumb: if you're spending $1,000 on research, you're probably doing it wrong, but if you're spending only $100, you're probably cutting corners. Damien notes it's quicker for them because they live and breathe it, and that someone newer to the data may not see the value now but will in five or ten years.

A Moderate Difference Compounds Quickly

Looking at a five-year period, Damien says a moderate difference in growth rate adds up. On the slide, a 5% per annum capital growth difference on a $700,000 property is $225,000 over five years. He gives examples of where such a gap could have appeared, such as a Townsville house compared with a Sydney unit, or a Melbourne market compared with a Perth one five years earlier, noting that in the five years before that point Melbourne had done better than Perth. That's the idea behind buying and selling, he says, though entry and exit costs make moving between markets expensive.

Jeremy shares an example from early 2014, when Sydney was booming. A publicly respected property expert said Sydney was overheated and advised clients not to buy there. Over the rest of 2014, then 2015 and 2016, Sydney delivered double-digit capital growth. Jeremy calculated the opportunity cost of taking her advice, compared with buying in Sydney, at around a quarter of a million dollars on a $500,000 property. The DSR was pointing to Sydney, he says, and that's the difference between good research and ordinary research, even from a so-called expert.

Damien recalls a similar delay with Brisbane units before COVID, when the DSR Plus score was strong but price movement took years to arrive. Buyers who got in early might have waited a while, but "now you'd be laughing." He notes the hardest part of property is that, unlike shares, it can't easily be bought and sold. A difference of one or two percent hurts more if it's an investor's only property, whereas with two or three properties diversification makes it easier, something they talk about a lot.

Damien says he's curious where investors are directing their extra surplus, whether paying down their own home loan, building an ETF or share portfolio, or putting more into super, and suggests a future episode on avenues beyond property. He adds that he's also keen to cover money management and saving, since he tracked his money daily for years and believes good processes come before building a portfolio.

What Should You Understand Before Buying?

Jeremy's first point is strategy: your personal situation, how a market fits your price range and cash flow requirements, and whether your goals are long term or short term. Damien adds that investors should understand their money management, including how much they're saving each month, whether an income reduction is coming up, and whether they're across where their money goes. He warns about expense creep when income increases, and about finance repayments on a new car, particularly with interest rates and fuel prices rising. For anyone worried about their strategy or next steps, he points to the services page on the Suburb Data research platform (suburbdata.com.au), where they can have an initial chat.

The next step is a risk check. Jeremy notes you can easily check the demand-to-supply ratio for any market you've heard about from your Uber driver, your buyers agent, or your best friend.

A Fair Challenge

Damien puts a fair challenge to Jeremy: they sell data, so is spending on research still worthwhile if you go elsewhere? Jeremy acknowledges they're biased, but says any amount of research, even with their competitors, is money well spent and is still likely to deliver a fantastic return compared with other things you can spend on.

Damien notes the harder question is who to choose as more algorithms come out, since competitors are often good too and sell their own numbers. Jeremy agrees it's tough, and that a novice investor may be drawn to more convincing marketing than historical performance. His message is to treat their advice with a serious degree of scepticism and think it through yourself. Of all the things to cut corners on, he says, research data is the one that gives the best bang for buck.

Example: Docklands Units

To illustrate, they look at Docklands units using August 2026 data (always lagging a month; the data is updated on the 6th of each month). The DSR3 is really weak and below average. The yield looks good, but Damien points out many Docklands units are high-rises, so strata costs would eat into that gross yield. The data is reliable, with over 12,000 units. Days on market is above average and stock on market is quite high. Market cycle timing is strong, but that's true across Melbourne because the market has been slow in recent times. Over five years, values are down 4%, over three years there's pretty much no growth, and over the last year they've declined about 8%.

Damien says that doesn't give him confidence. A buyer who visits for the Australian Open and sees brochures for Docklands units might think it's a fantastic investment, but a look at the DSR3 gives the answer quickly.

Key Takeaways

Jeremy sums up: not every property cost serves the same purpose. Most are essential, and they aren't suggesting anyone cut corners on them. Research is just one part of due diligence and not a guarantee of performance, but investors should understand the asset, the market, the risks, and the holding costs before buying. The point isn't to spend the most on research, but to be aware of the value for money it offers, and of all the things to cut corners on, he says, research isn't one of them.