Top Tips to Choose an Investment Property in Highett

Choosing an investment property that delivers reliable rental income and long-term capital growth means looking beyond what you'd want to live in yourself.

The property that suits your family may not suit the rental market, and in Highett, where stock ranges from 1960s units near Highett Road through to modern townhouses closer to the station, understanding tenant demand is where most local investors start. The second layer is understanding how lenders view different property types, because borrowing capacity for an investment purchase is calculated differently to owner-occupied lending, particularly when rental income is part of the application.

Does Location or Property Type Matter More for Rental Returns?

Both matter, but location sets the baseline for tenant demand and property type determines how much of that demand you can capture. In Highett, proximity to the train station and Southroad shopping precinct drives consistent rental inquiry, particularly from tenants working in the city or Monash employment hubs. Units and townhouses within a kilometre of Highett station typically rent faster and hold their value better than comparable stock further east toward the Moorabbin border.

Consider a buyer looking at a two-bedroom unit on Were Street versus a similar unit further along Bay Road. The Were Street property sits 600 metres from the station and within walking distance of cafes and the Highett Village shopping strip. At a purchase price near the suburb's current median for units, rental appraisals came back at around $480 per week, with an expected vacancy period of two to three weeks. The Bay Road property was $30,000 cheaper but appraisals sat at $440 per week with a longer expected vacancy. The difference in annual rental income was roughly $2,000, which over a typical hold period compounds significantly, and the Were Street property also offered stronger capital growth prospects due to tighter supply in that pocket.

Lenders also view location as a risk factor. Properties in areas with higher vacancy rates or lower demand may attract higher interest rates or require a larger deposit, particularly if you're applying for an investment loan with a loan to value ratio above 80 per cent.

How Do You Calculate Whether a Property Will Generate Positive or Negative Cash Flow?

Cash flow is rental income minus all holding costs, including loan repayments, body corporate fees, council rates, insurance, property management, and an allowance for maintenance. A property generates positive cash flow when rental income exceeds those costs, and negative cash flow when it doesn't.

For Highett investors, negative gearing has historically been part of the strategy, allowing rental losses to offset other income. Under changes introduced in the Treasury Laws Amendment (Tax Reform No. 1) Act 2026, properties purchased after 7:30pm on 12 May 2026 will have rental losses quarantined from 1 July 2027 unless the property qualifies as an eligible new build. Losses can still be carried forward and offset against future rental income or capital gains, but they can no longer reduce your tax on salary or business income.

This changes how you assess cash flow. A property that costs $400 per month to hold after rent might have been viable when that loss could be claimed against a marginal tax rate of 37 per cent. From July 2027, unless the property is a new build, that $400 monthly cost is a true out-of-pocket expense until the property starts generating positive rental income or is sold.

When running cash flow projections, use conservative rental estimates and factor in at least two weeks of vacancy per year. Body corporate fees in Highett vary widely, from around $800 per quarter for older walk-up units to $1,500 or more for newer complexes with lifts and shared facilities. Property management typically costs 6 to 8 per cent of gross rent, and maintenance should be budgeted at roughly 1 per cent of the property's value annually, even if nothing goes wrong in the first year.

What Property Features Do Highett Tenants Actually Want?

Tenants in Highett prioritise car parking, low-maintenance outdoor space, and modern kitchens and bathrooms. Single-level townhouses and ground-floor units with courtyards attract families and downsizers, while upper-level units with balconies suit young professionals and couples.

Properties without car parking take longer to rent and achieve lower weekly returns, particularly for two-bedroom and larger configurations. In our experience, a two-bedroom unit without parking in Highett might sit vacant for six to eight weeks, while a comparable property with a single secure car space rents within two to three weeks. That difference in vacancy alone costs more than most investors expect.

Outdoor space doesn't need to be large, but it does need to be functional. A small courtyard or balcony that can fit a table and chairs is more attractive to tenants than a larger shared garden or no outdoor access at all. Internal features that reduce tenant maintenance requests, such as stone benchtops, quality appliances, and split-system heating and cooling, also improve tenant retention and reduce your management costs over time.

How Does Lenders Mortgage Insurance Affect Your Deposit Strategy?

Lenders Mortgage Insurance is a one-off premium charged when your deposit is less than 20 per cent of the property's value. The premium increases as your loan to value ratio increases, and for investment lending, LMI premiums are typically higher than for owner-occupied purchases.

For a property purchased at $650,000 with a 10 per cent deposit, LMI might add $15,000 to $20,000 to your upfront costs, depending on the lender. That cost is usually capitalised into the loan rather than paid in cash, but it increases your loan amount and your ongoing repayments. Whether that's worthwhile depends on your alternative. If you wait another two years to save a 20 per cent deposit, you avoid the LMI premium, but you also delay rental income, potential capital growth, and any tax deductions on loan interest and holding costs.

Lenders assess rental income at 80 per cent of the appraised market rent when calculating your borrowing capacity, and they apply the serviceability buffer at 3 percentage points above the interest rate. If you're planning to hold the property on an interest-only loan initially, make sure your cash flow projections account for the eventual switch to principal and interest repayments, because lenders will assess serviceability on a principal and interest basis even if you take interest-only terms.

Should You Buy an Established Unit or a New Townhouse?

Established units in Highett offer lower entry prices and are typically closer to the station and existing retail, but they may come with higher body corporate fees and older fixtures that require updating. New townhouses and apartments offer depreciation benefits, modern fixtures, and lower maintenance in the early years, but purchase prices are higher and location is often slightly further from the station.

From July 2027, new builds also retain access to negative gearing under the existing rules, allowing rental losses to offset other income. For an investor in a higher tax bracket, that difference is material. A new townhouse generating a $5,000 annual rental loss could reduce tax by $1,850 at a 37 per cent marginal rate, while the same loss on an established unit would need to be carried forward.

New builds are defined as dwellings constructed on previously vacant land or where the development increases the number of dwellings on the site. A knock-down rebuild that replaces one dwelling with one dwelling does not qualify. If a new build is occupied for more than 12 months before being sold to you, it also loses eligibility, so if you're considering a new property, confirm its status with your broker and your accountant before exchanging contracts.

How Do You Know If You're Paying Too Much?

Comparable sales in the same street or complex are the most reliable guide, particularly for units where body corporate fees, floor level, and aspect can all affect value. For Highett, units within 800 metres of the station have typically traded at a 10 to 15 per cent premium compared to similar stock further south or east, and that premium has been consistent over multiple market cycles.

Your lender will order a valuation as part of the loan approval process, and if that valuation comes in below your purchase price, the lender will use the lower figure to calculate your loan amount. That means you'll need to make up the difference in cash, or renegotiate the purchase price, or walk away if your contract allows it.

Before making an offer, review recent sales through your conveyancer or buyers advocate, and speak with a property manager about realistic rental expectations. If a property is being marketed on a rental yield that seems unusually high, ask for evidence of comparable rentals, not just an appraisal. Appraisals can be optimistic, and overpaying based on an inflated yield assumption is one of the costliest mistakes an investor can make.

Call one of our team or book an appointment at a time that works for you to discuss your deposit, your borrowing capacity, and which investment loan options suit your circumstances and the property you're considering.

Frequently Asked Questions