Buying a rental property is one of the most popular long-term investment options in Australia. While there are no guarantees in the world of investing, the real estate market is a relatively safe option. Real estate investments represent tangible assets that can generate regular cash flow and long-term capital appreciation.
That said, you can’t sit back and watch the money come in. If you want to get the most out of your investment property, you need to be involved in the process. So let’s take a look at six ways to maximize your rental yield.
1. Find the right tenants
The first major part of the rental process is finding the right tenants. Most real estate professionals will recommend finding good long-term tenants, even if it means a slight cut in your rent. Benefits of long-term tenants include stable positive cash flow, reduced vacancy rates and generally well-maintained real estate.
With steady cash flow, you can afford maintenance fees as well as upkeep and maintenance costs. In addition, a regular income allows you to calculate the ROI of the property over the lease term. With this data, you can evaluate other investment opportunities in the future. In the meantime, a lower vacancy rate means that you are less likely to have an empty rental home for a longer period of time. Good long-term tenants are also more likely to keep the property clean and well-maintained. By having good tenants, you don’t have to pay for major home repairs and renovations in between leases.
In the long run, all of these benefits can help you earn and save a significant amount of money, despite not charging your ideal rental price.
2. Minimize vacancy
Make sure you have a plan in case your property’s lease is not renewed. It is not ideal for you to start looking for new tenants only after the lease has expired. Not only can this extend the time you are without a tenant, it will also put a significant financial strain on you.
It’s a good idea to start the lease renewal process early. Communicate with your current tenants and see what their future plans are. If they indicate that they want to move at the end of the rental period, put this in writing and start advertising for new tenants in advance. Real estate professionals recommend that you advertise the property three weeks before the end of the current lease. By listing the property early, you can reduce the time that your rental property is vacant. This allows you to reduce the amount you lose due to vacancy.
3. Make a good first impression
Make a good first impression when listing your property. Potential tenants will likely see your home for the first time through photos on the website. That is why you should consider hiring a professional photographer to take high quality photos of your property. There are many professionals who specialize in real estate photography. Their high-quality photos are likely to pique the interest of good long-term renters and increase the chances of them visiting your property in person.
You can even have professionals make a video tour of your rental property. This gives potential tenants a better idea of the space, the colors and the atmosphere of the building. While photos are a great way to attract good tenants in the beginning, they are limited in what they can show. By supplying a video, you give the tenants an authentic view of the property. This builds trust, which hopefully is the start of a good tenant-landlord relationship.
If you have the resources, you might even consider offering a 3D virtual tour. This allows potential tenants to inspect the property at their own pace. It also allows them to inspect specific areas of the property that can be crucial to their daily lives. For example, it is important for tenants with mobility problems that they check the accessibility of the property.
4. Study the market
During your time as a real estate investor, the market will likely go through several changes. An important economic factor that will affect your rental yield is inflation. Simply put, inflation raises the price level of the economy and lowers the purchasing power of the dollar. This can affect your tax, maintenance and insurance costs.
Real estate is one of the most effective ways to hedge against inflation. Investing in real estate helps you keep up with inflation in two ways: capital appreciation and increased rental income.
According to CoreLogicMelbourne homes had increased in value by 7.7% in the past twelve months to July 2021. CoreLogic also reports that the national median home value has grown at an annual rate of 6.8% for the past 25 years to 2018. of the dollar, the annual increase in value causes your property to rise in price at the same time. This can help offset the adverse effects of inflation, such as limited spending and reduced purchasing power.
Another way to hedge against inflation is through rent. By increasing the rent on your property, you give yourself extra cash flow and can combat the effects of inflation. Even a small increase in rent can go a long way toward maximizing your rental yield, despite changes in the economy.
When increasing the rent, make sure you understand the relevant laws and regulations in your state or area. In Victoria, for example, there was a recent law reform that prevents landlords from increasing the rent more than once in a 12-month period. When in doubt about such matters, it is important to consult legal and real estate advisors.
5. Consider renovations and upgrades
You should also think about ways to improve the attractiveness of your property. One way to do this is through renovations. To enhance the appeal of your home, consider hiring professional landscapers to spruce up your yard and lawn. When it comes to your home decor, common renovation ideas include repainting the walls, adding double glazing, or installing a new HVAC system. Meanwhile, your outdoor spaces can benefit from a new patio or pergola.
While these upgrades won’t directly affect the value of your home, they can improve its desirability. Improved desirability can put you in a situation where you can demand higher rents and achieve higher rental returns. Property upgrades also set your rental property apart from the other properties on the market.
In addition to renovations, you should also think about preventive maintenance. Preventive maintenance usually includes regular inspections of the rental property itself and associated equipment or systems. For example, your plumbing system and your HVAC system are two important features of your home that would benefit from regular inspections. Duct blockages and inefficient air conditioning units are indeed common problems to watch out for. Preventive maintenance allows you to fix a problem before it becomes a more expensive problem. This will save you money in the long run and help you maintain the appeal of your property.
While refinancing can be a stressful and involved process, it can save you a significant amount of money. If you find a better mortgage rate, even if it’s only half a percent, then you should strongly consider refinancing.
Simply put, refinancing changes the terms of your debt obligation. A debt obligation has a fixed amount of installment payments, a fixed interest rate, and a specific time frame within which the loan will be repaid. If the lender agrees, you can refinance your debt to change these terms. For example, you can refinance so that the time you have to repay the debt is longer. Another example is refinancing, which reduces the agreed interest rate.
Refinancing your investment property can offer a number of benefits:
- Reduced interest rates
- Lower monthly payments
- Higher ROI
- Allows you to use equity for further investments
- Gives you the means to renovate and upgrade the property
It is important to note that refinancing your investment property and refinancing your primary residence may have different processes. For example, when it comes to tax deductions, there may be differences in what you can claim depending on whether the property is an investment or a home for sale.
As you can see, there is a lot of work involved in managing an investment property. Just because the money you make from it is often described as “passive” income, it doesn’t mean you can just sit back and relax. You should study the market, maintain good relations with your tenants and take care of the property.
That said, you don’t have to do it alone. Hiring a property manager is highly recommended. They help you keep your tenants happy, advise you on the market situation and help you manage multiple rental properties.
All this is of course not possible without first a real estate with high cash flow that fits your portfolio and your investment goals. And once you have that trait, use the tips above to make sure you get the most out of your . fetches real estate investments.
Julian is an editor and content creator with a background in industry journalism and technical writing. He is an avid handyman and gardener and collector of vintage books.