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What are the pitfalls of property investment in Australia?

There are pitfalls of property investment and one may end up in losses instead of making profit. According to experts, Building inspection from a quality building inspector is important. A retails store will be happy to return a $10 cloth item but in the game of property market, it is far out more complex.

There are 2,207,905 property investors in Australia which mean around 20% of Australian households got an investment property (Source)

We do property investment for profit in terms of price growth and rental income. There are many pitfalls when making property investment and building and pest defects is one of them. Research says that 100% of properties have building defects and 40% have major ones. The cost of fix these defects can cause you serious losses. According to research, owners have to fork out $10.5 billion dollars on fixing the building defects. The average cost to repair building defects in houses and apartments is $5,839 and $6,434 respectively, but that is just average. 1 in every 20 house owners has to spend more than $20,000 dollars to fix the building defects. And in the case of apartments, the situation is even worse. 1 in every 20 apartment owners has to invest more than a whopping $50,000 to get the defects repaired.  Imagine you end up spending $50,000 or $1,00,000 on your investment property. This will delete all of your gains for years. 

In the case of investment property, you suffer loss from 2 sides. First the cost to repair building defects and second in form of lost rental income.

Properties are full of building issues and only an expert building inspector can figure it out. Following is the list of the top 15 building defects reported by building inspectors.

  1. Internal Water Leaks: The most common building defects found in almost half (46%) of the houses
  2. Cracking to external and internal walls: The 2nd most found building defective – 41% properties have cracks in external and internal walls.
  3. Water penetration from outside: Every 2 out of 5 properties (40%) have water penetration from outside.
  4. Guttering Faults: This is the fourth major defect found in 1/4th of properties inspected and can lead to be one of the pitfalls of property investment.
  5. Defective roof covering: 23% of the properties have been found to have the defective roof covering when inspected by building inspectors.
  6. Defective Plumbing: Defective plumbing has been reported in 22% of properties in the building inspection report.
  7. Tiling Problems: 1 in every 5 (20%) houses is reported to have a tiling problem in the building.
  8. Building Movement: 17% of the properties in Australia have building movement problems.
  9. Noise Break-through: Similarly, Building inspectors have reported noise break-through issues in 17% of the properties in Australia.
  10. Defective Balustrade: Due to the lack of strict guidelines, 15% of properties have defective balcony balustrades.
  11. Lack of or Defective Fire Safety Measures: A problematic fire safety system could be catastrophic still 1 in every 6 (15%) houses have defective or missing fire safety measures.
  12. Electrical faults: 14% of the properties have electrical problems which are the major causes of the fire.
  13. Inappropriate or Incorrectly Installed Material: More than 1 in every 10 houses has inappropriate or incorrectly installed material.
  14. Defective Machinery: 12% of the houses have been found to contain defective machines which may be quite costly to repair.
  15. Other: Building inspectors have reported other defects in almost 5% of the properties.

Building Inspection Council has encountered countless stories where skipping the building inspection turn out to be disastrous. It may take years for the victim’s family to come to terms with the loss. “Under no circumstances, avoid building inspection”. It can protect your property investment.

Be wary of pre-purchase building inspection and always hire an independent building inspector. With average value of A$934,091 of investment properties in Australia,  a small cost of $400-$600 is definitely worth on building inspection.

Building Inspection Council is a not-for-profit organization. We provide free quotes to Australian property buyers from expert inspectors in your area. The best part of being a not-for-profit organization is that we do not have to compromise for profit and you get genuine and honest advice. We have pre-verified building inspectors to provide you quotes and help you to avoid pitfalls of property investment to be a profitable endeavor. For free quotes, click here

What are the pitfalls of property investment in Australia