5 handy property investment tips
A successful investment, in real estate terms, is a balance between rental income and capital growth – the former to assist in meeting loan commitments, and the latter to realise investment growth.
With capital growth generally tracking well nationally in the last year, it’s important not to neglect to review rental income to ensure the maximum return is being achieved.
Here are some tips to help you achieve a fair rental value.
Rental review – make it regular
It’s important to regularly undertake a rental review – about every six to nine months, to ensure the rent is commensurate with market rates for the specific property type and location.
Allowing rental reviews to lapse can cost a landlord hundreds, even thousands, of dollars in lost income each year. But not only from setting the rent to low, it can also happen when setting it too high.
With the construction of many new apartments in our capital cities, there is an oversupply of some property types, which creates downward pressure on weekly rents. While it may seem counter intuitive to lower the rent $10, or even $15 per week to be competitive, it makes more sense when you consider that failure to do so may result in a longer vacancy rate, which may cost far more in lost rental income in the long run.
It’s also important to consider the benefits of exercising discretion with rental increases if you have a quality tenant who takes care with your property – this means lower maintenance costs.
Presentation and condition
Presentation and condition are two of the most important factors when it comes to maximising rental income. Ensuring the property has privacy, an appealing façade and is in good repair – perhaps with a fresh coat of paint or some basic landscaping – can make a favourable impression on would-be tenants, and may generate interest and demand for the property.
The condition of kitchens and bathrooms often has a significant impact on the value of a property, and hence the rental income. Updating the cabinetry in the kitchen and bathroom can be a relatively low-cost initiative to increase rental income, and although slightly more costly, replacing appliances and bench tops creates instant appeal for buyers, with positive implications for rents.
The amenities of a property are very important. Do they provide what a tenant needs to be comfortable? Adding air-conditioning for warmer climates, and providing off-street car parking, as well as dishwashers and laundry facilities, can sway potential renters considering your apartment over another. Acquiring communal laundry facilities and incorporating them into an apartment, with permission from the owners corporation of course, can add size and functionality to an apartment or unit.
A less drastic measure may include adding laundry taps in the bathroom to accommodate a washing machine, so tenants don’t have to use external laundry facilities.
Creating a functional outdoor space is another way to increase the rental income of a property, remembering that entertaining areas give significant weight to a tenant’s decision to rent a property.
Whether you live in your own home or you rent one, we all have things we need to store, whether that’s just general knick-knacks or furniture, sporting and recreational equipment, tools, and so on.
Properties with adequate storage and built-in robes are often preferable to tenants, as they needn’t invest in additional furniture to accommodate their clothing and personal items. Properties with a separate storage room, or even a small garage, have a significant advantage over those that don’t, particularly in inner city areas where storage space is scarce.
Thinking outside the box
Some less conventional ways to maximise the rental income for a property include renting the rooms separately, rather than to just one tenant. Platforms such as Airbnb are a great way to advertise short stays and to rent the property for a premium during special events, such as the Grand Prix. But, be careful, some states have laws against this type of leasing without the required licensing.
Before setting the rent, ensure you undertake research into the local market, paying particular attention to properties that compare with your own, and speak with local real estate agents for a rental appraisal.