Why Popular Investment Properties Usually Underperform

Why do so many investment properties underperform the market?

Depending on the data source and time period, Australian residential property has historically grown at roughly 5–7% per year over the long term.

In theory, you might expect around half of properties to outperform the average and half to fall below it.

But after speaking with close to 1,000 property investors over the years, my observation is different.

I would estimate that only around 20–30% of investors have beaten national average growth.

Why might investment properties perform worse than expected?

A recent job search gave me a clue

Recently, I helped a younger civil engineer with his job search.

He had 3–5 recruiters helping him while also applying directly.

Within three weeks, he interviewed with eight companies.

Six opportunities came through recruiters. Two came from his own search.

Interestingly, the two companies he found himself were stronger in terms of business size, brand and the offers.

The reason is worth thinking about.

Recruiters are generally paid by employers as a percentage of the candidate’s first-year salary.

The recruiters were not doing anything wrong. But the opportunities presented to a candidate are often shaped by who is willing to pay the recruitment and distribution cost, not necessarily by how suitable the role is for the candidate, how valuable the opportunity is, or how representative it is of the broader job market.

At the same time, companies with a strong culture, good offers and a strong brand can often attract good candidates more easily. They may not need to pay the same premium to get noticed.

The better opportunities do not need to be promoted in the first place.

Property can work the same way

There may be thousands of properties available across Australia.

But the 5–10 opportunities repeatedly placed in front of an investor are not necessarily representative of the broader market.

They may simply have the strongest marketing and distribution behind them.

And those costs have to be funded somewhere in the transaction.

In many cases, you, the consumer, are paying the premium that helped put that property in front of you.

This may also help explain why owner-occupied homes can perform better than many investment properties.

When people buy a home to live in, the decision is driven mainly by their own needs and preferences, rather than by which property has the strongest distribution behind it.

The key takeaway

The opportunities placed in front of you are often shaped by distribution incentives, not just investment quality.

Before considering an investment, ask: how did this particular property reach me?

And how much of the price am I paying for the marketing and distribution behind it?

General information only. This draft preserves MailerLite source copy for review and requires claim validation before public publication. It is not financial, legal or investment advice.