What Makes A Poor Investment?

Buying property is one of the biggest decisions most people will ever make. Some choices set you up for long term stability and quiet confidence. Others leave you stuck with something that barely grows, costs a fortune to hold, and becomes harder to sell as the years go on.

After more than 30 years working with Victorian buyers and sellers, I’ve seen the same patterns repeat again and again. Most poor investments don’t fail because of one dramatic problem. They fail because a dozen smaller issues slowly stack up until the property is working against you instead of for you.

This article steps through the main things that tend to make a property a poor investment. None of this is theory. These are the real world issues I see in contracts, owners corporation reports, titles, Section 32 statements, planning certificates, and the day to day settlement problems that catch buyers unaware.

Once you’ve sorted your finance and found something you like, send me the contract to review before you sign. It can save you years of frustration.

Too Much Supply And Not Enough Demand

A property only grows when enough people want it and can’t find many alternatives. When the market is flooded with similar stock, price growth stalls.

This is most obvious with high rise apartments in Southbank and Docklands. Developers put up tower after tower, and each one adds hundreds of near identical units. When there are always dozens for sale at any one time, there is nothing to push values up.

Oversupply is not limited to the inner city. Some fringe housing estates release land in stages for years on end. Buyers think they are getting in early, but all they are doing is buying one lot in a sea of hundreds. When the developer keeps releasing new land at a similar price, your lot struggles to move.

If you want solid capital growth, choose areas where demand outpaces supply. Established suburbs with limited land supply and strong owner occupier interest tend to give you a much better run.

Poor Building Quality

A property can look attractive on the surface but hide a long list of problems underneath. Water ingress, structural cracking, cladding issues, failing balconies, or cheap materials all eat into long term value.

Buildings thrown up quickly in boom years often carry these risks. Once buyers realise a building has a history of defects, the stigma takes hold. Even if everything has been repaired, the reputation stays.

Poor building quality also drives up owners corporation fees. You might be paying for lifts, pools, gyms, concierge services, insurance hikes, and special levies. These levies can swallow your rental income and deter future purchasers.

Always get a proper building and pest inspection for houses, and always order a full owners corporation pack for units. Faults multiply, and a building with a history of problems rarely becomes a star performer.

A Building Or Complex That Lacks Owner Occupier Appeal

Owner occupiers are the heart of a healthy property market. They live in the building, take pride in it, attend meetings, approve improvements, and create community stability.

Buildings full of short term renters often suffer wear and tear, higher turnover, and less care for common areas. Many investors think rental demand equals long term appeal, but the opposite can happen.

If a building becomes known as a rental block, buyers who want to live there stay away. When demand shrinks to only investors, you lose the group that pays the best prices. Over time, this drags down capital growth.

Boutique complexes, older walk ups, and well maintained buildings with strong owner occupier numbers tend to outperform towers full of short term leases.

Properties With Ongoing or Future Special Levies

Nothing scares buyers more than a building with looming special levies.

If the owners corporation report shows the building needs major works and the sinking fund is low, that burden eventually lands on the owners. It might be structural repairs, lift replacement, fire system upgrades, cladding replacement, or waterproofing failures.

When buyers see these costs coming, they either walk away or offer less. This means your unit becomes harder to sell and attracts the wrong type of buyer: bargain hunters.

A poor investment is often one where the true cost of ownership is hidden until you’re inside the building.

Buying Into An Area With Weak Long Term Fundamentals

Some suburbs look attractive on paper because they offer new shops, fast food chains, and shiny new estates. But long term fundamentals matter more.

Poor public transport
Weak employment opportunities
Large distances from major hospitals and schools
No established parks, sports clubs, or community centres
High vacancy rates
Large amounts of future land still zoned for development

These factors limit growth.

Good investment areas don’t need to be fancy. They just need to be places where people want to live for practical reasons.

Falling Into The “Too Cheap To Ignore” Trap

A common mistake is buying something because it feels like a bargain. Bargains in real estate usually come with a story.

Why is it so cheap compared to similar properties?
Why hasn’t it sold?
Why are others avoiding it?
Is there something in the Section 32?

If you don’t know the full story, you’re not buying a bargain. You’re buying a problem someone else is unloading.

Sometimes a cheap property hides title restrictions, owners corporation issues, planning overlays, or problems revealed by the building inspection. Your best protection is understanding why the price is low and getting the contract reviewed before you sign.

Buying Something That Appeals Only To A Niche Group

If a property appeals to a narrow slice of the market, your resale and growth potential shrinks.

Examples include:

Very small studios
Apartments with no natural light
Properties without car parking
Converted office towers
Serviced apartments
Student accommodation
Tiny townhouse developments without any privacy

These can all work for particular people, but that’s the point. If only a small group wants them, your market is thin.

Good investments appeal to the widest group of buyers possible.

Ignoring Location Within The Suburb

Even strong suburbs have weak pockets. A property in the wrong pocket can underperform for years.

Backs onto a freeway or busy road
Opposite industrial land
In a flood prone street
Next to a nightlife strip
Near problem housing
Far from transport within the same suburb

The suburb might boom but your pocket might not.

Buyers often forget that location is not just the suburb name. It’s the exact street, orientation, block shape, access, noise, and immediate environment.

Overpaying In A Hot Market

Sometimes the property is fine but the price you paid was not.

When markets run hot, buyers rush in, bidding gets out of control, and fear of missing out makes people push past reasonable limits. If you overpay by a large margin, it can take years for the market to catch up.

A good investment is one where the fundamentals are sound and the price is sensible.

Not Understanding Owners Corporation Rules And Restrictions

Many buyers don’t read the owners corporation rules or look closely at the Section 32 disclosures.

Rules about pets, renovations, short term letting, balcony use, storage, parking allocation, and visitor parking can affect the experience for future buyers. If the rules are burdensome, you end up owning something that feels restrictive.

Prospective buyers pick up on these issues. It affects their willingness to purchase and, over time, your capital growth.

Poor Rental Prospects And Weak Tenant Demand

An investment property needs steady rental income. If an area or building has high vacancy rates or tenants are always shifting, your yield drops and you’re constantly paying out of pocket.

Poor rental prospects often come from:

Too many similar units nearby
High turnover buildings
Areas with few local jobs
Properties far from transport
Properties without car spaces

If tenants aren’t competing to live there, buyers won’t compete to buy it.

Areas With Structural Long Term Decline

Some areas go backwards for reasons outside the owner’s control.

Changes in industry
Loss of major employers
Poor council planning decisions
Traffic congestion
Crime perception
Flood risk found later
Insurance issues that make premiums jump

A property might have been a decent buy ten or twenty years ago, but external factors change. If the broader area is heading in the wrong direction, the best maintained home in the world cannot fight that tide.

Letting Emotions Drive The Purchase

A common reason for poor investment outcomes is buying something because it “feels right” even when the facts suggest otherwise.

You might like the colour scheme, the balcony view, or the convenience of the café downstairs. But the long term value of a property depends on objective factors, not personal taste.

A good investment is driven by calm analysis, not impulse.

Focusing Only On Yield While Ignoring Capital Growth

High yield alone does not make something a good investment. Some lower priced properties in fringe areas offer high rents compared to their purchase price, but they barely grow in value.

When you sell ten or fifteen years later, the property has gone nowhere while other areas have doubled.

A strong investment balances both.

Not Checking Planning Controls And Zoning

Planning controls shape the future of an area. A quiet street today might be earmarked for medium density tomorrow.

Zoning changes, overlays, heritage restrictions, bushfire zones, drainage issues, and proposed developments all influence price growth.

Failing to check these can leave you with a property that gets overshadowed by new buildings, blocked views, or planning restrictions that limit renovations or extensions.

No Scarcity Value

A good property has something that cannot be easily replaced. It might be land, character, a unique position, or something that offers scarcity.

A poor investment is often something that can be replicated endlessly.

If a developer can build another hundred identical units across the road, your asset lacks scarcity.

Scarcity drives growth.

Ignoring The Exit Strategy

You should always think about the future buyer.

If the person you are trying to sell to one day will look at the property and see problems, you’re holding something that may underperform.

Poor investments are often properties without a clear exit. You buy it because you can afford it, but the next buyer may not feel the same way.

Conclusion

A poor investment is usually a predictable one. The warning signs are in the contract, the building’s history, the planning rules, the supply levels, and the long term fundamentals of the area.

Once you’ve sorted out your finance and think you’ve found the right property, send me the contract to go through. I’ll pick up the issues that might not be obvious at first glance and help you avoid buying into a problem that could follow you for years.