Investment Property Due Diligence Checklist: What to Check Before Buying in Perth

The difference between a successful investment property and a costly mistake often comes down to due diligence.

You know how everyone talks about Perth offering the best yields in the country right now?

That narrative has driven a massive influx of capital into Western Australia.

But high demand often masks serious defects.

We see investors get blinded by a 5.5% yield and miss the structural issues that will wipe out three years of profit.

That “bargain” purchase might have hidden costs that destroy your returns.

From what we have observed, the most successful investors are the ones who dig deeper than the listing photos.

They look for the problems that the agent isn’t legally required to tell them.

This comprehensive checklist covers everything Perth investment property buyers should verify before signing contracts.

The Due Diligence Mindset

Before getting into the specifics, you need to frame your approach correctly.

Due diligence is not just about finding reasons to walk away.

It is about understanding the asset so you can make a calculated offer.

We encourage you to use this data to:

1. Make informed decisions based on facts rather than FOMO (Fear Of Missing Out).
2. Negotiate the price down to cover necessary repairs.
3. Budget accurately for immediate post-settlement costs.
4. Avoid nasty surprises that insurance won’t cover.

Even a property with issues can be a solid addition to your portfolio if the price reflects the condition.

Part 1: Rental Market Analysis

You must evaluate the suburb’s economic health before you even look at the brick and mortar.

A cheap house in a suburb with declining employment is not an asset.

Suburb Rental Indicators

Vacancy Rates You should rely on data from SQM Research or REIWA rather than agent anecdotes.

• Target: Under 2% indicates a healthy landlord’s market.
• Ideal: Under 1% creates competitive tension among tenants.
• Warning: Anything over 3% suggests an oversupply of stock.

Perth has seen historically low vacancy rates recently, often hovering near 0.6%.

This tightness usually allows for strict tenant selection.

Rental Trends Review the 12-month rental price changes for the specific postcode.

• Compare current listings to properties leased in the last 30 days.
• Check if listing days on market are increasing.

Tenant Demographics We always look at what drives the local economy.

• Is demand diversified or reliant on a single industry like mining?
• Are the local renters families, students, or fly-in-fly-out (FIFO) workers?

Supply Pipeline Check the local council’s development applications.

• Are there major apartment projects approved nearby?
• Will a new land release in the next suburb dilute your demand?

Property-Specific Rental Assessment

Comparable Rentals Do not guess the rental value.

• Find 3-5 similar properties currently leased in the immediate area.
• Match the bedroom and bathroom count exactly.
• Adjust your expectations based on the condition of the kitchen and bathrooms.

Agent Rental Estimate Get a written rental appraisal from a local property manager who is not selling the house.

• Compare this figure to your own independent research.
• Ask them to justify their numbers with recent lease evidence.

Rental Yield Calculation Understanding your gross yield is the first step in financial filtering.

Metric	Calculation	Example
Formula	(Weekly Rent × 52) ÷ Purchase Price × 100	($650 × 52) ÷ $600,000 × 100
Result	Gross Percentage Yield	5.63%

Part 2: Property Inspection Checklist

Physical inspection reveals the expensive problems that professional staging hides.

We recommend attending the inspection with a notepad and a critical eye.

Structural Elements

Foundations Perth’s sandy soils are generally stable, but coastal areas can see movement.

• Look for stepped cracking in external brickwork.
• Check if doors and windows jam or stick when opening.
• Observe the floor line for any obvious unevenness.

Roof Condition

• Check for slipped or cracked roof tiles.
• Inspect metal sheets for rust, especially near the ocean.
• Look at the gutters and downpipes for rust or vegetation blockage.
• Scan ceilings for brown water stains that indicate active leaks.

Walls

• Note vertical cracks versus diagonal cracks (diagonal often indicates subsidence).
• Check the condition of the external render.
• Look for crumbling mortar in older brick homes.

Framing

• Check door and window alignment.
• Look for sagging ceilings, particularly in large open-plan rooms.
• Sight along the walls to check for bowing.

Building Systems

Electrical Old wiring is a major fire risk and insurance liability.

• Check the switchboard for modern circuit breakers and RCDs (Safety Switches).
• Verify the quantity and placement of power points in bedrooms.
• Test a few light switches to ensure basic functionality.

Plumbing

• Turn on the shower to test water pressure.
• Check the age of the hot water system (manufacture date is usually on the tank).
• Observe drainage flow speed in the sinks and shower.
• Look inside sink cabinets for damp wood or buckets.

Gas (if applicable)

• Check the condition of the gas bayonets.
• Verify the age and star rating of gas hot water systems.

Interior Condition

Flooring

• Lift rugs to check for hidden damage.
• Look for cracking or “drummy” (hollow sounding) floor tiles.
• Check timber floorboards for gaps or termite damage.

Walls and Ceilings

• Assess the paint condition for peeling or flaking.
• Look for bubbling paint which suggests rising damp.
• Check cornices for separation from the ceiling.

Wet Areas Waterproofing failure is one of the most common defects in WA homes.

• Check for swollen door frames in the bathroom.
• Inspect tile grout for holes or missing sections.
• Listen for exhaust fan operation.
• Smell for dampness or mould in vanity units.

Kitchen

• Open and close all drawers and cupboards.
• Check the benchtop for chips, burns, or water swelling at the joins.
• Inspect the plumbing under the sink for corrosion.

Exterior Assessment

Land

• Check that water drains away from the house, not towards it.
• Inspect retaining walls for leaning or cracking.
• Note the proximity of large trees to the foundation and plumbing lines.

Outbuildings

• Check the structural integrity of sheds and patios.
• Verify that the garage door opens smoothly.
• Walk the fence line to check for leaning or rot.

Gardens

• Test the reticulation (irrigation) system controller.
• Assess the maintenance level required for current plants.
• Check pool equipment and safety barriers for compliance.

Part 3: Professional Inspections

Your walkthrough is just the first filter.

We consider professional reports mandatory for any serious purchase.

Building Inspection

This report provides a verified assessment of the property’s condition in accordance with Australian Standards.

What It Covers

• Structural integrity of the main dwelling.
• Identification of major and minor defects.
• Safety hazards like loose balustrades.
• Maintenance recommendations for the next 12 months.

Cost Estimate: $450-$800 depending on house size. Timing: Include this as a condition of your offer (“Subject to Building Inspection”).

What to Ask the Inspector

• “Is this a major structural defect or a maintenance issue?”
• “What is the rough cost to rectify this?”
• “Are there signs of unauthorized DIY work?”

Pest Inspection

Western Australia has a high risk of termite activity.

What It Covers

• Detection of active termites (Coptotermes acinaciformis is common in Perth).
• Evidence of past termite damage in roof voids and subfloors.
• Conditions conducive to future attacks (like wood touching ground).

Cost Estimate: Often bundled with building inspections for $600-$900 total. Critical Context: Repairs for termite damage are rarely covered by building insurance.

Warning Signs

• Mud tubes on the exterior foundation walls.
• Hollow-sounding timber door frames or skirting.
• Soft spots in flooring.

Strata Inspection (Units/Apartments)

Buying into a strata complex means buying into its financial health.

What It Covers

• Financial statements and sinking fund balances.
• Minutes from the last 3 years of Annual General Meetings (AGM).
• Details of any upcoming special levies.
• By-laws regarding pets, parking, and renovations.

Cost Estimate: $280-$400. Essential For: Villas, townhouses, and apartments.

Red Flags

• Low capital works fund (sinking fund) relative to the building’s age.
• Repeated discussions about water ingress or concrete cancer in meeting minutes.
• Ongoing legal disputes between owners or with builders.

Other Specialist Inspections

Pool Inspection ($200-$300)

• Verifies barrier compliance with current WA safety laws.
• Checks pump and filter condition.

Methamphetamine Screen ($250-$400)

• Tests surfaces for chemical residue from drug use or manufacture.
• This is becoming increasingly standard in WA to limit landlord liability.

Electrical Safety Certificate ($180-$250)

• Verifies RCDs and smoke alarms meet the latest legislative requirements.

Part 4: Legal and Title Checks

You need to know exactly what you are buying and what restrictions apply to the land.

Title Search

What It Shows

• Current legal ownership.
• Exact land dimensions and boundaries.
• Registered mortgages or caveats.

Concerns to Identify

• Easements: Utility access lines that prevent you from building in certain areas.
• Restrictive Covenants: Rules on building materials or facade limitations common in newer estates like Alkimos or Baldivis.
• Encumbrances: Claims on the property by third parties.

Contract Review

Key Terms

• Settlement date (standard is often 21 or 28 days from finance approval).
• Deposit amount and where it is held.
• Exact inclusions (dishwasher, pool equipment, curtains).

Important Conditions to Include

• Finance Approval: Give yourself at least 21 days due to banking delays.
• Building and Pest: Ensure the clause allows you to terminate if major defects are found.
• Gas and Electrical: Clause requiring all gas and electrical equipment to be in working order at settlement.

Council Checks

Building Approvals

• Verify that the patio, shed, or granny flat has council approval.
• Unapproved structures may need to be demolished or retrospectively approved at your cost.

Zoning (R-Codes)

• Check the R-Code (e.g., R20, R40) to understand development potential.
• R40 zoning usually allows for higher density than R20.

Rates and Debt

• Confirm current council and water rates.
• Ensure there is no outstanding land tax attached to the property.

Part 5: Financial Analysis

The numbers must work on a spreadsheet before they work in reality.

Purchase Costs

Stamp Duty (Transfer Duty) Western Australia charges transfer duty on a sliding scale.

• Investors pay the full general rate.
• Budget approx 3-4% of the purchase price.

Other Upfront Costs

• Legal/Settlement Agent Fees: $1,500-$2,800.
• Building & Pest Inspection: $600-$900.
• Bank Application Fees: Varies ($0-$600).
• Title Insurance: Optional but recommended ($300-$500).

Ongoing Costs

Landlord Insurance Do not rely on standard home and contents insurance.

• Cost: $1,200-$2,000/year depending on coverage.
• Key Feature: Ensure it covers “Rent Default” and “Malicious Damage” by tenants.

Property Management

• Management Fee: Typically 8-9.9% of rental income in Perth.
• Letting Fee: Usually 2 weeks’ rent + GST for finding a new tenant.
• Routine Inspections: Charged quarterly ($60-$90).

Statutory Costs

• Council Rates: $1,800-$3,500/year (varies significantly by council).
• Water Rates: Approx $1,100-$1,400/year (landlord pays service charge, tenant pays usage).
• Strata Levies: Can range from $800 to over $2,500 per quarter for apartments.

Maintenance Buffer We advise setting aside 1% of the property value annually for repairs.

Cash Flow Projection

You should run a conservative monthly projection using 48 weeks of rent (allowing for 4 weeks vacancy).

Item	Monthly Amount
Rental Income	+$2,400
Mortgage (Interest Only)	-$2,900
Management Fees	-$240
Rates & Insurance	-$350
Maintenance Fund	-$100
Net Cash Flow (Pre-Tax)	-$1,190

Note: This does not include negative gearing tax benefits.

Return Calculations

Gross Yield (Annual Rent ÷ Purchase Price) × 100

Net Yield (Annual Rent - All Operating Expenses) ÷ Purchase Price × 100

Cash-on-Cash Return (Net Annual Income) ÷ (Total Cash Invested) × 100 This measures the return on the actual cash you put into the deal, not the bank’s money.

Part 6: Tenant Assessment (If Currently Tenanted)

Buying a tenanted property provides immediate cash flow, but you inherit the tenant’s history.

Lease Review

Terms

• Confirm the lease expiry date.
• Check the current rent against market rates.
• Review special conditions regarding pets or garden maintenance.

Legislative Context Recent updates to the Residential Tenancies Act in WA limit rent increases to once every 12 months.

• If the tenant just had a rent hike, you may be stuck at that rate for a year.
• Check if the lease allows for pets, as new laws make it harder to refuse them without grounds.

Tenant Quality Indicators

Payment History Ask for the tenant ledger.

• Look for consistent on-time payments.
• Check if the bond is lodged correctly with the Bond Administrator.

Property Condition

• How well was the property presented during the inspection?
• Are there unreported maintenance issues?
• Is the garden being watered?

Vacancy Considerations

If Vacant

• Why did the previous tenant leave?
• Is the asking rent too high for the current market?
• Does the property need a cosmetic refresh to attract quality applicants?

If Tenanted

• Does the fixed-term lease align with your plans?
• Removing a tenant on a fixed lease is difficult unless the agreement expires or they breach the contract.

Part 7: Growth Potential Assessment

Future capital growth is the primary driver of wealth in real estate.

Infrastructure Impact

Transport Major projects like Metronet are reshaping Perth’s connectivity.

• Morley-Ellenbrook Line: Check proximity to new stations.
• Armadale Line Transformation: Assess the impact of elevated rail and new public spaces.

Education & Health

• ECU City Campus: This major CBD development is set to increase student rental demand in the city center.
• Hospital Upgrades: Expansions at hospitals like Joondalup or Fiona Stanley drive local employment.

Suburb Trajectory

Demographics

• Is the suburb gentrifying?
• Look for an increase in owner-occupiers renovating older homes.
• Check if income levels in the area are rising faster than the Perth average.

Development Zoning

• Is the area zoned for higher density?
• While development adds value to land, an oversupply of new apartments can cap rental growth for older units.

The Due Diligence Timeline

Structure your process to avoid wasting money on properties you won’t buy.

Phase 1: Desktop Research (Free)

• Rental market analysis (Vacancy rates, yields).
• Suburb growth drivers (Infrastructure, zoning).
• Initial financial feasibility check.

Phase 2: Physical Inspection (Time Investment)

• Property walkthrough using the checklist.
• Discussions with the agent.
• Neighborhood drive-around.

Phase 3: Paid Due Diligence (Financial Investment)

• Offer accepted with conditions.
• Building and pest inspections ordered immediately.
• Conveyancer reviews the contract and title.
• Formal finance approval obtained.

Red Flags That Should Stop You

Some issues are deal-breakers regardless of the price.

We advise walking away if you encounter:

• Major Structural Failure: Subsidence requiring underpinning is high-risk and expensive.
• Active Termite Nests: Extensive structural damage to load-bearing timber.
• Legal Title Disputes: Boundary encroachments that cannot be easily resolved.
• Insolvent Strata: A complex with no money to fix serious capital defects.
• Unapproved Additions: Major extensions that violate council setback or height rules.
• Meth Contamination: Properties requiring professional remediation (stripping walls/ceilings).

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Want professional due diligence for your investment purchase?

Our investment property services include comprehensive assessments of every property we recommend, backed by our property evaluation reports that identify issues before they become your problems.

Book a consultation to discuss your investment property search.