How do you ensure your rental property stays occupied?
If you're looking at investing in a rental property, it's vital that you understand your target market. What do they need and want? People's desires can vary greatly from state to state, suburb to suburb, even street to street!
We've seen phenomenal growth and consequently capital gains in both the Sydney and Melbourne real estate markets, but it's been a different story with rental rates.
According to CoreLogic RP Data, Sydney and Melbourne property values increased a whopping 76.5 per cent and 68.8 per cent respectively between December 2008 and September 2015.
We've seen phenomenal growth and consequently capital gains in both the Sydney and Melbourne real estate markets
Meanwhile, growth to rental rates across the country have slowed to an all-time low of 0.5 per cent, with all capital city rates diminishing over the September quarter. While it may not provide you with the same amount of profit in the long term, rent is vital in the short term as it helps to pay off your financial obligations.
Housing Industry Association Senior Economist Shane Garret affirms one of the contributing factors is the surge in construction of new homes from investors looking to take advantage of the favourable conditions, which has increased vacancy rates around the country.
"Australia's new home building market saw record levels of activity during 2014/15, with new dwelling commencements totalling about 215,000," he said.
In light of this, what can you do to ensure your rental property appeals to tenants and remains occupied?
Research your demographic
Ideally, this is something you should do before you invest in real estate, as proper research will inform you what kind of rental property will be most suitable for the area's population.
The Australian Bureau of Statistics (ABS) states that around a third of our country's population lives in rental properties. But there are a number of separate markets within this proportion – largely depending on the area.
The figures show the people most likely to be renting are individuals and couples under the age of 35, and single-parent families with dependent children. Using this information, you can determine whether the property is suited to the area.
For example, if you were looking at real estate in an area that is predominantly made up of students because of its proximity to a University, a premium family home is probably not the best investment.
While it's possible to find out the basic numbers online, it's a good idea to hit the streets and take a walk around the area. What's the pedestrian traffic like? What are the homes like? Burning a bit of shoe leather can help paint a clear picture of what kinds of people live there.
Provided you choose your property agent wisely, Sydney and Melbourne buyers' agents will have extensive knowledge on the various local markets, assisting you in making an informed decision.
What do they want?
Recent research and analysis from realestate.com.au of the keywords put in their search boxes by renters over the 12 months to October 2015 brought up some interesting findings.
When breaking it down to states, the top three most common keywords for NSW were "pool", "furnished" and "garage", while Victoria had "pool", "furnished" and "courtyard". It's clear that we value our outdoor living, and renters seem to prefer the flexibility of a furnished home.
In fact, a report from Distinctive Tile Imports Australia affirmed that our nation has the highest rate of pool ownership per capita in the world.
While these figures do reveal a lot, it's important to note that they cover state-wide preferences. There are a plethora of markets within each region, which emphasises the need for proper research and the services of a buyers' agent.
Investment property managers
In a perfect world, you would have tenants that sign on for long-term leases, look after the property like it's their own and only contact you to pay the rent (always on time too).
This can sometimes occur, but it's certainly not always the case. There are a number of problems that can arise with tenants living in your property, and as the landlord, it's often your job to resolve them.
If your tenants aren't happy, they can give you their notice and move on to another home
NSW Fair Trading asserts that there are many legal procedures you have to go through when managing a tenancy – at the beginning, during and towards the end. If your tenants aren't happy, they can give you their notice and move on to another home. This can be extremely costly, especially because a vacant home garners no short-term income!
While this can become exhausting, there is an easy solution. Investment property managers can take care of the day-to-day functions of owning a rental property, including:
- Marketing your home to the right demographic
- Interviewing tenants and choosing the most suitable renter
- Going through all the legal procedures and paperwork
- Collecting rent and using this to pay any rates
- Taking care of any maintenance or repairs (using the rent)
- Dealing with any tenant problems and settling disputes
- Conducting inspections to ensure the property is being looked after
NSW Fair Trading stresses the importance of choosing the right property agent, as you want to ensure you're placing your investment in the hands of someone with your best interests at heart.