17 Jul One-Bedroom Unit in Mosman vs Term Deposit: Which Is the Better Investment?
Lately, I’ve been thinking about the most effective ways to make money work harder—especially in a high interest rate environment. With term deposits offering 5% returns and property prices stabilising in some areas, it got me wondering:
Is it smarter right now to buy a one-bedroom unit or put the money in a term deposit?
I crunched some numbers and thought others might find this comparison helpful too. This isn’t financial advice—just some musings from a property professional.
Let’s say you buy an entry-level one-bedroom unit in Mosman for $700,000, using a 20% deposit ($140,000) and financing the rest at a 6% interest rate.
🏡 Option 1: Buy a One-Bedroom Unit in Mosman
Upfront costs:
- Deposit: $140,000
- Stamp duty: $25,000
- Legal fees: $2,500
- Buyer’s agent: $18,000
- Total initial cash outlay: $185,500
Rental income:
- Around $550–600 per week, or approx. $29,000–$31,000 per year
Outgoings:
- Strata, council, water, insurance, maintenance: approx. $7,500/year
- Property management: 6% of rent (~$1,740–$1,860/year)
- Loan interest: 6% on $560,000 = $33,600/year
- Total holding costs (approx.): ~$42,840/year
- Gross rental income: ~$30,000
- Net income (before tax): -$12,840/year
Tax savings (top tax bracket):
If negatively geared, this loss could reduce your taxable income, resulting in an annual tax refund of approx. $5,500.
Capital Growth (at 3% p.a.):
- After 1 year: property grows to $721,000
- After 5 years: approx. $811,000
- After 10 years: approx. $943,000
That’s a gain of $243,000 over 10 years—even at just 3% growth, plus rental income along the way.
(For context, Mosman units have averaged 5.5% p.a. over the long term, which would result in even stronger returns.)
And remember—you only invested $185,500, but you benefit from growth on the full $700,000 value. That’s the power of leverage.
Something surprising?
Despite Mosman being a prestige suburb—where houses have sold for up to $40 million—there are still affordable investment opportunities. In fact, 12 units in Mosman have sold for $700,000 or less in 2025, plus 4 over-55s units in that price bracket.
💰 Option 2: Put $185,500 in a Term Deposit
With many banks offering 5% interest on term deposits, here’s how that looks:
Annual income:
- $9,275/year in interest
Tax:
If you’re in the top tax bracket, that could be taxed at 47%, leaving you with ~$4,916 net per year
The Upside:
- Safe, predictable, and liquid
- No headaches with tenants, vacancies, or maintenance
- Great short-term option while markets are uncertain
The Downside:
- No capital growth
- Income taxed at full marginal rate
- You’re not leveraging your money
🔍 So Which One Wins?
It depends on your goals:
If you value safety, stability, and don’t want to deal with property management, the term deposit wins in the short term—especially if you need access to funds soon.
If you’re thinking long-term, and comfortable with a little risk and short-term cashflow loss, the Mosman unit may outperform thanks to capital growth, leverage, and tax benefits.
⏰ An Interesting Time Horizon Insight
One fascinating pattern emerges from the comparison table: the property investment offers relatively modest returns in the early years—at 3 years, you’re only marginally ahead of the term deposit despite all the additional complexity, tenant management, and market risk.
However, the longer you hold the property, the more compelling it becomes. By year 5, the property investment starts to pull ahead meaningfully, and by year 10, the difference is substantial. This is the power of leverage and compound capital growth working in your favour over time.
➕ Other Property Considerations
Two-bedroom units tend to offer lower rental yields but stronger long-term capital growth. However, they also require higher loan repayments, so you’ll need a higher income to manage them.
Houses, particularly in suburbs like Mosman, typically see the strongest capital growth (on average 9% p.a. in Mosman) but have weaker rental yields. They’re also significantly more expensive to purchase, making them an unrealistic option for many investors.
📊 Side-by-Side Comparison
| Feature | Mosman 1-Bed Unit | Term Deposit ($185.5K) |
|---|---|---|
| Initial Investment | $185,500 (deposit + stamp duty + legals + buyer’s agent) | $185,500 |
| Loan Amount | $560,000 | N/A |
| Rental Income (annual) | ~$30,000 | N/A |
| Outgoings | ~$7,500 + management + loan interest | $0 |
| Loan Interest (6%) | $33,600/year | N/A |
| Total Holding Costs | ~$42,840/year | N/A |
| Net Income (pre-tax) | -$12,840/year | +$9,275/year |
| Tax Benefit (est.) | ~$5,500 (top bracket, negative gearing) | -$4,359 (taxed at 47%) |
| Net After Tax | ~-$7,340/year | ~$4,916/year |
| Capital Growth (3%) | +$243,000 over 10 years | $0 |
| Total Return (3 yrs est.) | ~$43K net (after holding costs + CG) | ~$15K (simple, taxed annually) |
| Total Return (5 yrs est.) | ~$74K net (after holding costs + CG) | ~$25K (simple, taxed annually) |
| Total Return (10 yrs est.) | ~$170K net (after holding costs + CG) | ~$49K (simple, taxed annually) |
| Leverage? | ✅ Yes | ❌ No |
| Risk/Volatility | Medium | Low |
| Liquidity | Low | High |
Final Thoughts
Sometimes doing nothing seems easier because the options feel confusing. But hopefully this helps clarify the trade-offs between different investment approaches.
Please note—this is not financial advice, just some property-focused thinking from someone who lives and breathes the market every day.
What would you choose right now: a term deposit or a Mosman unit?