powering smart financial decisions

Are you cut out to be a landlord?

Are you cut out to be a landlord?

With housing supply still trailing population growth, rents across Australia continue to rise steadily and rental yields – the percentage of rental income compared to the property’s price – are more favourable than ever. That’s good news for landlords and wannabe-landlords alike – now is a good time to consider property investment. But what does it take to be successful at it?

Be in it for the long haul

The key to being a successful property investor is to understand that buying a property is not a get-rich-quick scheme. Yes, property prices go up – thankfully, Australia has escaped the property crashes experienced in parts of the world such as the US, UK and Ireland – but it takes years for an investment to pay off.

While there are positive signs for investors, there are conflicting views on the outlook of the property market, said Michelle Hutchison, spokeswoman for RateCity.

“Investors thinking about jumping into the property market this year shouldn’t expect an improvement every year and a more traditional long-term approach should be taken.”

Do your homework

Buying an investment property is all about research. Begin by looking into property prices, rental yields and vacancy rates to determine what and where you can afford to buy. Talk to real estate agents or use real estate websites to get a clear picture of the property market.

Reserve the most energy to researching the area you will buy in. When it comes to investment, the safest bet is buying as close to the city as you can afford – there is always demand for well-maintained properties close to offices, restaurants and a city lifestyle.

You should also consider up-coming areas and suburbs with good infrastructure and public transport – and look for properties that won’t cost you too much in outgoings due to lifts, gyms and pools.

Hutchison also encourages borrowers to shop around for investment loans, because finding the best option for your circumstances could save a buyer tens of thousands of dollars long term, which makes the profit margin all the sweeter.

“Standard variable investment loans interest rates range by up to 180 basis points, which could mean an extra $350 each month or $126,000 after 30 years,” she said

Be a good landlord

Keep your property in good nick and ensure any repairs are done quickly and to high standards. By maintaining and improving your property, you will attract better tenants, be able to charge higher rent and your property will command a better price when you are ready to sell.

Before you embark on any renovations, however, consult local real estate agents about what tenants in your area are after – do they like showers or baths, carpet or floorboards, are they looking for built-in laundries?

Be aware of the downside

It doesn’t matter how much research you’ve done or how good you are at responding to your tenants’ needs, there will always be some unwelcome aspects to being a landlord. These can include overestimating the rental return, prolonged vacancy rates, tenants who fall behind in the rent or damage your property and even rising interest rates.

Ensuring you have a diligent rental agent, who knows the area and is passionate about managing your property, can help avoid some of these traps.

Did you find this helpful? Why not share this article?



More home loans articles

More articles? Read more here

Learn more about home loans