Five Property Types That Actually Put Money in Your Pocket Each Month

I'm going to give you a number that sounds made up.

A 600-square-metre house in Melbourne, yielding 6.3% gross rental return. Nine hundred dollars a week in rent. Not a CBD apartment. Not a holiday rental. A regular suburban house in the outer southeast, bought for around $730,000.

That's our current average across the portfolio we manage. And before you ask — no, we're not renting it by the room to twelve backpackers. The tenants are families. Regular people who need a roof and are happy to pay fair rent for a well-maintained property with a bit of extra space.

The trick isn't finding some magical suburb nobody's heard of. It's understanding that certain property configurations generate dramatically more income than others. Five configurations, to be exact. Our team has tried all of them — some worked brilliantly, some nearly sent us broke, and one is still sitting unsold after twelve months because the previous owner couldn't figure out why nobody wanted it.

Here's what we learned.

Type 1: Dual occupancy — the one we keep coming back to

This is the money play. Two separate dwellings under one roof, on a single title, with independent access. Think of it as a house with a built-in apartment — except both halves are proper homes with their own kitchen, bathroom, living area, and entrance.

The economics are simple. You buy one property. You collect two rents.

A typical dual occupancy in Melbourne's southeast — say Hampton Park or Cranbourne — might cost $700,000 to $800,000 on a 600-plus square metre block 1. The front dwelling rents for $400 to $450 a week. The rear unit adds another $350 to $400. Combined rent: $750 to $850 a week. That's a gross yield pushing 5.5% to 6% before you've lifted a paintbrush.

"We keep circling back to dual occupancy because it's the only configuration that gives you genuine positive cash flow AND capital growth on the same asset," says Joey Don, Co-Founder & CEO at PremiumRea. "Most high-yield strategies sacrifice growth. This one doesn't — because you're still buying land in established suburbs."

The crucial detail: you want to buy existing dual occupancy properties, not build them from scratch. Building a dual occ from the ground up means your land-to-building cost ratio tanks below 50% 2. You end up with an expensive building on cheap dirt, which is exactly the wrong equation. Our approach is to find properties where someone else already did the conversion — often badly marketed, often sitting on the market longer than they should — and buy them at a discount.

We source roughly 30% of our dual occupancy deals off-market through our agent network 3. Most sellers don't even realise what they've got.

Type 2: What about sticking a granny flat out the back?

Type two. And honestly, this is the one most people picture when they think about boosting rental income.

The pitch is straightforward: buy a house on a big block, build a small self-contained unit in the backyard, rent both. Your main house might bring in $420 a week. The granny flat adds $340 to $390. Suddenly you're collecting $760 to $810 a week on a $700,000 property.

The numbers on paper are gorgeous. A 30-square-metre studio — one bedroom, one bathroom, kitchenette — costs roughly $110,000 plus GST to build 4. Expected rent: $370 to $390 a week including bills. That's an 18% gross return on the build cost alone. You'll recoup the construction expense in about five and a half years.

But here's what the YouTube property gurus don't mention.

Your block needs to be at least 550 to 600 square metres with a side driveway wider than three metres 5. That driveway isn't optional — it's how the crane truck gets materials into your backyard. No crane access, no build. And roughly 40% of the houses we inspect fail this test before we even look at the floorplan.

Then there's the bank problem. Lenders typically won't value a granny flat at its full construction cost. You might spend $110,000 building it, but the bank's valuer will add maybe $100,000 to $150,000 to your property's assessed value 6. Good, but don't expect to refinance and recover every dollar on day one.

Our advice: build modest. The 30-square-metre studio outperforms the 60-square-metre two-bedder on a return-per-dollar basis every time. Couples and single professionals are your target tenants — they don't need a second bedroom, and they'll happily pay a premium for something private and self-contained.

One more thing. Install a sub-meter reader for electricity. Cost: $500 to $1,000. Whatever you do, don't apply for an official separate electricity meter from the distributor. That'll run you $20,000 or more and blow your entire first-year return 7.

Type 3: Rooming houses — high returns, high maintenance, eyes wide open

Rooming houses are the yield kings. Full stop. But they come with strings attached, and those strings can strangle you if you're not paying attention.

The concept: take a standard three-bedroom house and convert it so each bedroom functions as a self-contained room with its own lock. Tenants share the kitchen and bathroom. Each room rents for $180 to $250 per week 8. A three-bedroom house renting at $420 a week as a single tenancy becomes a six-room boarding house pulling $1,080 to $1,500 a week. Yield: 8% or higher.

Conversion costs are manageable. You're looking at $6,500 to $10,000 for the basics — expanding a bathroom, adding a ramp for accessibility compliance, fire safety upgrades, locks on every door 9. The margins are huge.

But.

Victoria classifies rooming houses into two categories. Class 1a is three leases or fewer — no special permit needed, no council registration required. Class 1b is four or more leases, which triggers full registration with the council, annual inspections, and compliance with the Residential Tenancies (Rooming House Standards) Regulations 2021 10. The compliance burden is real. Fire extinguishers, smoke alarms on mains power, deadlocks, adequate lighting, ventilation requirements. Miss one item and you're looking at fines that wipe out months of rent.

The other catch: banks hate rooming houses. Most lenders treat them as commercial property, which means higher interest rates and lower loan-to-value ratios. If you're relying on the bank to recognise the enhanced rental income for your next purchase, you may be disappointed.

"I tell every client the same thing about rooming houses: if you've got time and you treat it like a business, the returns are incredible. If you want to sit on a beach and collect passive income, this isn't it," says Joey Don.

We've done dozens of these conversions. The ones that work are in areas with strong demand from international students, healthcare workers, and young professionals who'd rather pay $220 a week for a room near work than $350 for a studio forty minutes away. The ones that fail are in suburbs where there's no tenant pool for shared accommodation.

And for the love of everything — never buy a purpose-built rooming house at a premium. The whole point is converting an undervalued house. If the vendor is already pricing in the rooming house yield, you've lost your edge.

Type 4: Short-Term Rentals — Proceed With Caution

Airbnb. Stayz. Booking.com. The promise of $300 a night for a beachside cottage sounds too good to pass up.

And sometimes it is too good.

Short-term rental can generate spectacular gross income — particularly for coastal properties, properties near event venues, and inner-city apartments during peak seasons. A two-bedroom apartment near the MCG during the Australian Open could net $400 a night when the same unit rents for $400 a week on a standard lease 11.

The problem is the word "could." Short-term rental income is lumpy, unpredictable, and expensive to manage. Management fees in Melbourne average 18% to 20% of gross income 12. You'll need professional cleaning between guests ($80 to $150 per turnover), constant linen replacement, and someone to handle the 2am call from a guest who can't work the front door lock.

Then there's the regulatory risk. Victoria has been steadily tightening short-stay rules, with some councils requiring permits and the state government floating additional surcharges 13. If you're building your cash flow model around Airbnb rates, you're building on sand.

Our take: short-term rental is a side hustle, not an investment strategy. If your property generates strong yields on a long-term lease and you occasionally switch to short-term during peak periods — fine. But buying specifically for Airbnb? The numbers rarely stack up once you account for vacancy, management, wear-and-tear, and regulatory risk.

None of our client portfolio properties rely on short-term rental for their primary cash flow.

Type 5: Commercial property — big deposits, bigger tenants

Commercial property is the quiet achiever that nobody talks about at barbecues.

The reason is simple: the entry barrier is brutal. Commercial loans typically require 30% to 50% deposits, interest rates run a percentage point or two higher than residential, and if your tenant walks, you could be staring at twelve months of vacancy with zero rental income and full holding costs 14.

But when it works, it really works.

Commercial leases are net — meaning the tenant pays all outgoing costs including rates, insurance, land tax, and building maintenance. A commercial property yielding 5% to 7% net is genuinely 5% to 7%, because there's nothing coming off the top. Compare that to a residential gross yield of 5%, which nets down to 3% to 3.5% after you've paid rates, insurance, management fees, maintenance, and vacancy costs 15.

The sweet spot is medical and allied health tenancies — doctors, dentists, physiotherapists. These tenants sign long leases (often five to ten years with options), invest heavily in fitout, and rarely move because their patient base is geographically locked. A GP practice that's been in the same location for fifteen years isn't going anywhere.

But this is a game for investors with deep pockets and patience. Our recommendation for clients in the wealth-building phase: stick to residential. Commercial makes sense once your portfolio generates enough passive income that you can afford a $200,000+ deposit and weather a six-month vacancy without breaking a sweat.

For most people reading this, types one through three are where the action is.

So which one should you actually buy?

After trying all five — and watching clients succeed and fail with each — here's our honest ranking:

Dual occupancy is the best all-rounder. Strong cash flow, solid capital growth, straightforward management. If you can find one on an established block with good land value, it's the closest thing to a free lunch in property investment.

Granny flat addition is the best bang-for-buck upgrade if you already own (or are buying) a house on 550-plus square metres with side access. The 18% return on build cost is hard to argue with.

Rooming house is the yield king but demands active management. Treat it as a business, not a passive investment.

Short-term rental is supplementary income, not a primary strategy.

Commercial property is an advanced play for well-capitalised investors.

The common thread? Every one of these strategies works better when you buy the land right. Eighty percent of your purchase price should be land value — the same rule that applies to every property investment we make 16. The building is just the vehicle for collecting rent. The land is where your wealth grows.

And if you're starting out with one property and limited capital, dual occupancy in Melbourne's southeast is where I'd put my money. It's where we put ours.