NEVER Buy These 3 Types of Investment Properties
By: Niro Thambipillay
September 2, 2026
Some investment properties look attractive because they are new, offer tax deductions or promise unusually high rent, but those features can hide serious risks. The wrong asset can leave an investor overpaying, competing with endless new supply or depending on a single employer for both tenants and resale demand.
In this article, Niro Thambipillay explains the three property types he would avoid, the real numbers behind their risks, and the fundamentals he prefers when helping clients build long-term wealth.
TL;DR
Niro would avoid fringe house-and-land packages, off-the-plan high-rise apartments and properties in mining or single-industry towns. These assets can combine above-market purchase prices, construction and valuation risk, investor-heavy demand, easily increased supply and unstable employment. A strong investment should work because of capital-growth and rental fundamentals, with tax deductions treated only as a bonus.
Key Takeaways
- New does not mean low risk: builder failure, long delays and construction interest can begin before rent exists.
- Tax benefits do not create wealth: recovering part of a cash-flow loss still leaves the investor with a loss.
- Off-the-plan valuations can create large funding gaps: the bank lends against its valuation, not necessarily the contract price.
- High yield can hide employment concentration: when one industry contracts, rents and values can fall together.
- Strategy matters: the property should support capital growth, rental growth, borrowing capacity and the investor’s longer-term plan.
Which Investment Properties Should You Avoid?
The three biggest red flags are not defined by appearance alone. They are assets where the investor pays a premium, supply can expand quickly or demand depends on a narrow group of buyers, tenants or employers.
1. Fringe House-and-Land Packages
House-and-land packages in endless new estates are often promoted through depreciation and negative-gearing benefits. The first risk is builder failure. Niro cites a major Sydney builder entering voluntary administration with a reported 15,000 homes left in limbo, while more than 1,500 construction firms collapsed in New South Wales during the latest financial year.
An investor may pay rent for their current home and interest on construction progress payments while an unfinished property produces no income. Even when the build succeeds, new stock commonly carries a premium. If a comparable established house costs $800,000 and the new equivalent costs $900,000, the market must rise by $100,000 before the investor has created any equity.
Tax deductions do not erase the underlying loss. If an investor loses $50,000 in cash flow and receives $20,000 back at a 40% marginal tax rate, they are still $30,000 behind. A property should work as an investment first, with taxation treated as a secondary benefit. The incentives form part of the government’s housing-supply response, but that does not automatically make the asset suitable for an individual investor.
Investor-heavy estates also lack the owner-occupier depth that often supports prices in difficult markets. More than 70% of Australian homes are owner-occupied. During the 13 rate rises across 18 months in 2022 and 2023, investor-heavy outer estates and apartment towers were among the areas most exposed, while established owner-occupier suburbs often found a floor more quickly. Repeated new stages also keep adding competing supply.
2. Off-the-Plan High-Rise Apartments
An off-the-plan buyer agrees today to pay for an apartment that may not be completed for two or three years. At settlement, the bank values the finished property independently and lends against that valuation, not automatically against the signed contract price.
Niro describes a buyer who contracted at $850,000 and paid an $85,000 deposit. At completion, the bank valuation came in $93,000 below the contract price. Her choices were to find the extra money or abandon the unconditional contract and lose the deposit. She walked away, losing $85,000. Hundreds of near-identical units completing together can also compete for the same tenants, while future towers keep adding supply and limiting scarcity.
3. Mining Towns and Single-Industry Markets
A very high rental yield can reflect a temporary labour shortage rather than a durable property market. If most tenants are present for one mine or employer, a downturn can remove jobs, renters and buyers at the same time.
Niro recalls houses in Newman, Western Australia, selling for about $1.5 million and renting for more than $3,000 a week during a mining boom. When the cycle turned, some properties were worth roughly one-fifth of the purchase price, around $300,000, and owners struggled to find tenants.
The essential test is simple: if the main employer disappeared tomorrow, who would rent the property and who would buy it from you? A market supported by several major industries is safer than one dependent on a single mine, employer or tourism cycle. This is one reason choosing areas with genuine property fundamentals matters more than chasing headline yield.
4. The Silent Risk: A Property That Does Not Fit Your Strategy
Not every damaging investment produces an obvious crash. Some properties simply grow too slowly, consuming time and borrowing capacity. One client held two properties for five years and gained only $30,000 across both. After Investment Rise helped her purchase one strategy-aligned property, it increased by $110,000 over the following 12 months.
The opportunity cost of slow growth can prevent an investor from buying again. Before purchasing, assess the drivers of capital growth, the likelihood of rent growth, ongoing holding costs and whether the asset supports the next step in the portfolio.
5. What Niro Prefers Instead
Niro’s preferred approach is an established, already-built quality property in an area where owner-occupier demand exceeds available supply and tenant demand exceeds available rentals. That combination supports both capital growth and rising rent, helping cash flow and future borrowing capacity.
The Verdict: Buy for Fundamentals, Not Incentives
A shiny finish, depreciation schedule or unusually high yield cannot compensate for weak demand, oversupply or concentrated employment. The property must make sense without relying on a government incentive or perfect market conditions.
For investors: compare the purchase price with established homes, examine future supply, identify who owns and rents locally, and stress-test the main employment drivers.
For buyers: make sure the asset advances your five, ten or fifteen-year strategy. The largest loss may be the years spent holding a property that quietly goes nowhere.
Summary
- Fringe house-and-land packages can combine builder, delay, premium-price and oversupply risk
- A $50,000 cash-flow loss does not become a winning investment because $20,000 is recovered through tax
- Owner-occupiers, not investor-only demand, provide much of the market’s price support
- Off-the-plan buyers can face a settlement shortfall when the bank valuation is below the contract price
- High-rise towers create many similar properties that compete for tenants and resale buyers
- Mining and single-industry towns can lose values and rents together when employment contracts
- A slow-growth property can waste years and borrowing capacity even without falling in value
- Established quality property with owner-occupier demand, rental demand and limited supply is the preferred alternative
Frequently Asked Questions
No. A tax deduction returns only part of an investor’s loss. In Niro’s example, a $50,000 cash-flow loss produces a $20,000 tax benefit at a 40% marginal rate, leaving the investor $30,000 behind. The property must work as an investment first.
The bank values the apartment at completion and may value it below the contract price. The buyer must fund the shortfall or risk losing the deposit. Large towers also create many similar units competing for tenants and buyers while future towers add more supply.
Niro prefers established, already-built quality properties in areas where owner-occupier demand exceeds available supply and tenant demand exceeds available rentals. Those fundamentals support capital growth, rent growth, cash flow and future borrowing capacity.
A high yield in a mining town may depend on one employer or industry. If jobs disappear, tenants and buyers can leave together, causing rent and property values to fall at the same time. Investors should prefer markets supported by several major industries.
They can carry substantial risks when located in fringe estates with ongoing new supply. Investors may pay above established-market value, earn no rent during construction, face builder failure or delay, and rely on investor demand rather than owner-occupier competition.
About the Author
Niro Thambipillay
Niro is the founder of Investment Rise, one of Australia’s most trusted property buyers agencies. He has helped hundreds of first-time investors build property portfolios and was voted one of the most trusted Real Estate entrepreneurs in the Asia Pacific region (APAC 2022). Niro is also the author of “How to Build a Property Portfolio That Pays You an Income Every Month.”
