Should you get multiple low value properties or one high value property?

Getting multiple low value property vs one high value property – which way to go? Again this is one of those questions that I get asked a lot by our fellow investors. And again there are pros and cons for each and should be considered based on each individual investors situation. So I thought I’ll touch on this topic today.

There are pros and cons of going each way. I will briefly touch on a couple of implications I can think of, using the following example:

Bob – bought 3 x $300K value of houses, total loan of $720K with each house renting at $300/week (5% gross yield)

Jane – bought 1 x $900K value of house, total loan of $720K with the house renting at $700/week (~4% gross yield)

1. Rental implications


Even though both Bob and Jane have accumulated 900K worth of property value with the same loan, but rental income is quite different and this difference in rent determines how much more Jane has to fork out to hold the property.

It is highly unlikely that $900K value of property can achieve a $900/week rent, or a gross 5% rental yield. For simplicity sake I’m putting weekly rent at $700/week which achieves a 4% gross yield. So the yearly gross rental return at 48 weeks, factoring in some vacancy and tenant relocation, would be $700/week x 48 weeks = $33,600.

Now let’s use the same logic for investor 1 who have bought 3 x $300K value properties each at 5% gross yield. Again factoring in 48 weeks rental return, it’s $300/week x 48 weeks x 3 properties = $43,200.

So given all things are equal Jane will be short of cashflow by approx. $9600 in comparison with Bob. Which means Jane will have to fork out more from her own income to hold her property portfolio.

The other factor is property vacancy. In Jane’s scenario, if her only IP goes vacant, then essentially there won’t be any rental income and she’ll have to carry all the loan repayments on the $720K loan.

In Bob’s scenario, the probability of all 3 IPs going vacant at the same time is so much lower in comparison. Even if 1 or 2 IPs goes vacant Bob would still have some rental income to support him financially with loan repayment.

Property investing is all about risk mitigation – so in the rental implication space, multiple low value property would offer better choice in controlling and mitigating vacancy and hence financial risk.

2. Capital Gain Tax (CGT) implications during selling


For simplicity sake, let’s assume that both Bob and Jane holds their property for 10 years, and each of the IPs grow at a consistent rate of 5% per year.

So their property portfolio would look like this:
Bob and Jane's Portfolio.jpg
Note: in year 10, Bob and Jane’s Portfolio value are the same i.e. $1,396,195.39.

Let’s say they both retire today and now wanting to sell down their IP and realise some profit. Approximately how much CGT would they have to pay?

Let’s look at Bob first. Bob has no income and goes head to sell his IP1. Using CGT estimator found online:
CGT Estimator - Bob.jpg
For simplicity sake assuming no cost whatsoever, he will realise a capital gain of $165,398 on IP1 and will need to pay $27,489 as CGT. He will pocket about $137,909 profit for IP1.

Now CGT is a tax, so the more profit you made in a financial year the more tax you’ll need to pay. Therefore a smart investor would spread out the profit over different financial year to minimize CGT.

In this case we can assume Bob knows this and decides to sell one IP per year (instead of selling all 3 IPs in one year), which means in total capital gain is $496,194 across 3 financial years. He will therefore need to pay $82,467 in CGT and will pocket $413,727 in total profit for 3 IPs.

Now how about Jane? Again assumes Jane has no income now (retired), and no selling cost whatsoever in the transaction:
CGT estimator - Jane.JPG
Unfortunately there is no way she can spread out the profit as it is only 1 property. Therefore she will realise a total capital gain of $496,195 on her IP1 and will need to pay $107,707 as CGT. She will pocket about $388,488.

Because of the fact she has to pay more CGT ($107,707 in comparison to Bob’s $82,467) therefore her profit will be less. Hence in this scenario it is better off to have multiple low value properties to minimize CGT implications at time of sale.

And a special thanks to Minh Pham who has kindly reviewed this section to ensure the content hasn’t violated any accounting rule ?

Disclaimer: I’m not a certified accountant and the advice above is general in nature. Please do see a certified accountant prior to selling property as they can advise the optimal solution to help you minimize paying tax especially if you are considering retirement.

Also the CGT Estimator used in the example above is taken from the internet and is not a reliable source. It may not have taken into consideration any tax levies or tax offsets that are available to Bob or Jane.

3. Maintenance cost and stamp duty implications


Maintenance Cost:
Assuming both Bob and Jane’s property are around the same age, the other factor to consider would be property maintenance cost. Given Bob has 3 IPs he’ll have a higher likely that he has to pay more maintenance cost. So while he may get a higher rental income, as soon as a major item require replacing (hot water system or Air Conditioner for example) then that could easily incur thousands per property in yearly maintenance cost. And they add up really quickly!

So from maintenance cost perspective, single high value property has advantage.

Stamp Duty at time of acquisition:
How about stamp duty, which is also a big lump sum at time of acquisition?

Using the online stamp duty calculator (assume both are NSW purchase):
Bob – 300K each IP – stamp duty for each is $9267. Times this by 3 comes to $27,802.
Jane – 900K IP – stamp duty for only IP is $36,267.

So from stamp duty perspective, you pay more for higher value properties which means multiple low value property has advantage.

I trust this gives everyone some idea about the pros and cons of investing in multiple low value properties vs single high value property. As usual, if you have any questions about any of the above content feel free to leave a comment or contact us directly.



  1. How does it work if Jane purchases a property in the same year of purchase? Would he get tax benefit as he reinvested?

    • Did you mean if Jane purchased another property in the same year of SALE?
      Jane does not receive any tax benefits for reinvesting the money ($388~k)
      The BENEFIT from the SALE of the property is that Jane now has a higher deposit for investing.

      Instead of selling Jane could have extracted the equity from the investment property to purchase another investment property which does have a tax benefit as the interest on the loan is tax deductible and Jane keeps both properties! (assuming the banks allow her serviceability).

      See link below for further details of equity

      This is just general advice.

      • Thanks for jumping in Minh to help with the question – much appreciated 🙂

        Naveen, this question is related to specific tax advice so it is always best to be discussed with your Accountant as I’m not qualified to provide tax advice. But hopefully Minh has given you some idea on the implication of such.


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