How to Work Out How Many Investment Properties Are Right for You
Updated: Nov 6
How many investment properties should you own? If you listen to property spruikers and the media you could be forgiven for thinking the answer is as many as you possibly can. In our experience nothing could be further from the truth. Less is more, and a few carefully selected high quality properties will often set you up for retirement better than a large portfolio.
Why owning more properties isn’t the goal
As in most pursuits in life greed tends to end in trouble, and in property it usually shows up as a get rich quick scheme. The result is poor property decisions and poor returns.
A huge portfolio makes headlines and sells newspapers and books. It also feeds FOMO (fear of missing out) and the idea that there’s a hidden secret only a select few know about. Frankly that’s nonsense. Spruikers will tell you six is the perfect number, then ten, then buy more! They’re most likely selling you property, so they have a vested interest in your purchase.
Over two decades working in property and financial advice we’ve very rarely seen people with more than 5 properties, let alone 10. When we have, they’ve often been asking for help to unwind the situation. They were too highly leveraged or had bought underperforming properties on the advice of people selling property while posing as property advisers.
How many properties do Australians really own?
The numbers tell the story. Nine out of 10 people retire owning one investment property or none at all. Only around 10% of the population own investment properties and most of them own one or two. About 8% own one investment property and 1.42% own two. Just 0.43% own three, 0.16% own four and 0.065% own five, while 0.068% own six or more. Anyone with three or more investment properties is in a very small group.
How the negative gearing rules have changed
When we first wrote this article in 2020 the Liberal Treasurer of the day was reportedly considering limiting the number of properties investors could negatively gear to improve housing affordability. We thought there was merit in the idea, because it would have limited the tax benefits of accumulating a very large number of properties.
Labor has since gone well beyond that. From 1 July 2027 negative gearing will only be available on new builds, with properties purchased before the 12 May 2026 budget grandfathered. For established residential property, rental losses can only be claimed against property income and carried forward, rather than offset against your wages or other income.
Could a two property limit make a comeback?
The politics is still moving. The Coalition has said it wants to unwind the reforms, while One Nation has proposed allowing negative gearing on up to two investment properties, which is the very idea this article explored back in 2020.
A two property limit would affect fewer investors than you might expect, since most investors own one or two properties. Whatever happens at the next election the lesson is the same: rules can change, so a strategy built on tax breaks alone is a fragile one. Buy a property because it’s a quality asset with a strong land to asset ratio and long term growth prospects, not because of the deduction.
You don’t need a negatively geared property forever
A cap on negatively geared properties would not limit you to owning 2 properties over your lifetime. If you hold a property for long enough it will eventually become neutrally geared and then positively geared as rents grow and your loan balance stays the same or reduces. That can take 5, 10 or 15 years depending on the property, its rental return, your holding costs and your level of gearing. When a property crosses that line it often becomes the trigger point to buy the next one.
Why 2 to 5 properties is right for most hard working professionals
David Johnston, the Property Planner, points to seven factors that make 2 to 5 the right number for the vast majority of people.
Time is our most precious commodity, and the more properties you own the more time you spend each year managing them. Risk matters too. Owning more than 5 properties means taking on a high level of debt, and most people are neutral to conservative when it comes to risk tolerance. Cash flow becomes harder to manage as your portfolio grows, particularly maintaining the surplus you need to invest in subsequent properties.
Your home also plays a part. It’s often the largest investment you’ll make and the most important purchase, so you spend more on it, which restricts how many other properties you can afford. Then there’s simply enjoying life. Most people like spending time with friends and family, and property can chew up your weekends and evenings.
Quality is the biggest factor of all. Selecting top quality property is difficult and the more you buy the more chances you have of getting it wrong. Three well selected properties will beat six poor ones any day. And the payoff is real: owning 2 to 5 properties at retirement can create enough wealth to put you in the top 1 or 2 percent of Australians.
Funding your retirement with property
If you had 3 relatively affordable properties you would need a plan to sell them and live off the equity. If you wanted to be fully supported by rental income you would need 8 to 10 properties, which brings all the risks above. For most people the better aim is to sell to fund retirement, which means your focus should be capital growth and time.
Stage of life matters here. If time isn’t on your side you may not have the luxury of choosing this strategy. There will always be outliers who need to focus on a lower price point, higher rental yield and a different time scale.
The flexibility stage of life
The flexibility stage is the new retirement, with more people scaling back work rather than stopping altogether. You’re making a lot of decisions through the transition to retirement, just as you did through the accumulation phase of your life. Staggering those decisions works in your favour, because the longer you can hold before selling the more your properties will grow in value.
It also pays to diversify. Your retirement will be funded by many different investments, including super, a family home you can downsize from and other investments outside of those. Whichever asset classes you choose, the goal is to make great decisions.
Young couples and singles: start now
If you’re a young couple or single, take action now. If you wait 5 years you may have more buying power, but having children will slow you down. The best thing for property investment is time in the market. You may not be able to buy a period home within 10km of the CBD, but you could get a townhouse in a good location.
Help your kids while you’re still here
We see a lot of reluctance from parents to sell down to fund their retirement, because they want to leave something to their children. There are other ways to help. Providing equity for your children to borrow against can help them buy their first home with a hand from mum and dad. Help your kids while you’re still alive.
Quality over quantity
We’ve held the same philosophy for over a decade: you only need to own 2 to 5 quality properties to set yourself up for the flexibility stage of life. That includes the family home, which is often forgotten when people talk about building wealth through property. A long-term property plan will serve you far better than a long list of addresses.
Success in property has never been about accumulating as many assets as you possibly can. It’s about working out your lifestyle goals and making sure each property decision takes you closer to them. Property can support those goals in two ways: by enhancing your lifestyle directly (your home or a holiday house) or by delivering a financial return. Our focus has always been, and always will be, quality over quantity.
For more information, listen to the Property Trio Podcast
In Episode 27 of the Property Trio podcast, David, Cate and Peter dig into why 2 to 5 quality properties is the right number for most Australians, and why more isn’t always better.
Need a hand?
If you’re working out how many investment properties are right for you, or want to talk through how the negative gearing changes affect your strategy, reach out to us.
Our support, service and advice is ongoing and continues throughout your property investment journey.
And if you haven’t reviewed your borrowing capacity or investment strategy in a while, get in touch with us. We’ll look at your current position, your goals and your timeline to help you decide on the right number of properties for you.
