Now is the time to invest in a rental… but how do you secure a good property?
Originally published on Linkedin.
Now is a great time to invest in rental property. It can be tough (and competitive) to find good quality rentals, but the returns can be significant.
Data from the recent Domain Rental Report highlights the strongest annual growth in rentals in the past 13 years. Housing rents have jumped in all major cities, and by as much as 16.7 per cent in Canberra, while unit rentals have also increased in all cities, with Darwin being the biggest gain there at 16.3 per cent. Even the market with the smallest gains – Melbourne – reported an increase in median rental costs of 3.4 per cent and four per cent for houses and units, respectively.
…make sure you know the property that you’re buying, and don’t invest sight unseen."This news isn’t great for renters, and as a report on Domain notes the escalating cost of rentals is “cleaving a wider gulf in Australia between the haves – who own property – and the have-nots, who are forced to fork out for the higher rents.”
However, it is really good news for the investors and now is the time to make sure that you’re one of the “haves”. The rate in which rental prices is increasing is exceeding the inflation rate, meaning that they’re a good investment for those concerned about the declining value of the dollar. Furthermore, landlords have their choice of tenants, with properties going quickly, and inspections often attracting 20 or more applicants. This is helping the landlords protect their investments by ensuring that only the right tenants are getting into the property.
At Hello Haus, we’ve started to see more enquiries about rentals – even from people who are renters themselves. These properties are a great way to make a first step into the property market, as they’re generally less expensive than a property that you’d buy to occupy, and they provide an income that can assist with the repayments.
The approach to finding and acquiring these properties does need to be a little different than what you would do when buying a house for yourself, however.
Insider’s tips & tricks on acquiring investment property in the current market
One proven strategy when looking to acquire rental property is to look regional, rather than in the cities. Regional growth areas that have current up upcoming infrastructure spending, and new hospitals, schools, community centres, shopping centres and major link roads (or rail) are all indicators that a town is about to experience an acceleration in growth and, with that, the value of nearby land.
However, one thing to avoid is mining towns. Such towns have a boom period, while the mine is running hot, but that is later followed by a period of severe decline, and it can be very difficult to offload a property. The goal should be to hold on to an investment property for the long term, while mining towns are always short-lived entities.
Finally, you should also look to buy a house, rather than an apartment. Houses have a greater up-front cost, particularly in regional towns (where apartments tend to be even more cost-effective), but the value of a house will out-grow an apartment over the same period of time.
Otherwise, the standard Hello Haus advice stands; make sure you know the property that you’re buying, and don’t invest sight unseen. A view from the “ground” will give you a better sense of both the property and the opportunity for the town to grow up around it, so make sure you take a trip out and actually investigate before talking to the agents and/or sellers.
If you need help negotiating the right price for a property, or exploring the value of a particular regional area in Australia, be sure to contact Hello Haus for help.