Should You Buy One $1M Property or Two $500K Properties?

When it comes to investing in the Australian residential property market, one common dilemma arises: Should you opt for the allure of a single $1 million property or diversify with two $500k properties?

A number of buyers are currently weighing up this exact dilemma in Perth versus Sydney. Perth has certainly done well over the last year or two which is why there is a current attraction, but what some buyers are not aware of (or choose to ignore) is the 15 years of the reasonably flat period between 2006 and 2022.

Source: CoreLogic

As always, there’s never one answer that will suit everyone, but let’s delve into some of the considerations you should explore.

Capital growth or rental yield

If you want to create long term wealth through residential property, it’s ultimately capital growth that makes the real money as it’s untaxed until sold (if you ever do sell) and you get tax back (negative gearing) on any cash flow losses. It’s $1m doubling to $2m that creates a retirement fund, rather than earning an extra $50 a week.

Capital growth potential

With a $1 million budget, you can get into most suburbs in the country given that Sydney’s median price is $1.1m and buying around 10-20% of that value means most locals should be able to afford to buy or rent it. With that choice, you can then decide (financially rather than emotionally) where to buy based on what is going to give you the most capital growth, rather than what is in your home state or local location.

Total investment

Whether you have $1m in one property or $1m in 2 properties, you’ve still got $1m invested and that’s what the graphs show will rise in value. Whilst you might think that 2 x $500k houses are bigger than a $1m unit, they still rise by a percentage and typically $1m in a blue-chip suburb will rise by more than 2 x $500k properties further out of town over the long term i.e. decade after decade. That $1m might get you 1,000 acres in the outback, but are you going to have 50-100 people queuing to buy or rent it in the middle of summer?

Rental yield

More expensive properties typically rent for less percentage than cheaper properties and so a $1m property in a blue-chip suburb might only get you 3% – 5% yield whereas a $500k property might get you 4% – 6% yield depending on where you buy it, and it may then be closer to cash neutral with our current higher interest rates. If you’re on a lower income and don’t have much extra disposable income after paying your monthly bills, you may not have any choice than to go for a nearly cash neutral property. For those on a high income with a large tax bill, having a high capital growth property with a lesser yield may well suit you better as you get tax relief in the form of negative gearing on your cash losses and don’t pay tax on your capital growth until sale.


Buying two properties in two different locations will give you more diversity and reduce your risk from buying a lemon and so that can be a definite bonus compared to buying one residential property. However, by having a $500k budget, you won’t be buying in the prime blue-chip areas and there is then a greater chance that you need more skill in finding the right area to buy in.


When it comes to borrowing money from a bank to fund your purchase, banks often come out with black spot suburbs (or the media leaks those confidential lists) where lenders are nervous over the supply of new properties in an area and are concerned about over lending. These areas don’t tend to be the established blue-chip areas, they are more likely to be areas that perhaps might have been industrial, turning to residential or areas where the councils have increased height restrictions and developers can then build thousands of new houses or high-rise units to provide more affordable housing for the local community. Buyers in these areas need to be cautious as wealth is generally created where there is a lack of supply of housing and plenty of demand from high income buyers and renters, not the other way around.

Ultimately, the decision hinges on your financial objectives, risk tolerance, and market insights. While there’s no one-size-fits-all answer, conducting thorough research, consulting professionals, and aligning your investment strategy with your goals will guide you towards the right choice.

What Next?
If you have personal questions about your property portfolio strategy, book a free confidential Discovery Session with Chris Gray now:


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It’s the perfect place to get started.

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