Investing is fraught with risk.
These risks can include economic flux, changes in taxation, altering rules and regulations, cost and availability of finance, government charges and level of competition.
All of these can affect your investment and most of these elements are out of your control.
And there can be little doubt that we are facing more uncertainty; more change – and during such times, it is in our nature to look for more control.
One thing that a property investor can control is who rents their property and, to some degree, how much they will pay.
It all comes down to the correct market match – that is, getting the right tenant for your property.
Getting the right tenant
Who is going to pay you the most rent for your property?
Which tenant profile is going to stay the longest and pay you on time, every week?
I don’t have those answers without knowing more about your property.
But you should.
To get the greatest level of control, it may best to decide what type of tenant profile best suits you before you buy a property or develop a new project.
Some things worth thinking about
Sharing: Whilst it is very attractive to have several tenants sharing your property, the property itself may not suit this arrangement.
Even if your income is less if, say, a couple rents out the property, it might cost you less in the long-run (when you factor in maintenance and potential tenant turnover) than, say, renting your investment out to three or four independent parties.
An important side bar here – looking forward, buying an investment property that really facilitates sharing is, for mine, the way to go.
We are facing a housing reset.
Many, including tenants, will be forced to compromise on their housing.
Many more of us will live in a group situation. In my mind, for most new investors, rental returns will surpass capital gains.
Tenure: A good market match will have your tenant stay for years, not just six or twelve months.
The best performing investment property is one that is actually leased. 100% occupancy is better than rolling tenants and vacancy periods. More tenants are looking for commercial-style lease arrangements.
Payment: You want your tenants to pay on time; you don’t want to be sweating on rents from a tenant in arrears.
Bonds are really for when something goes wrong, not insurance against your tenant not paying the rent.
Pets: They can increase your rent, widen your rental pool – 63% of Australian households own a pet – and help keep tenants longer.
Set out the details of pet occupancy in advance and treat the pet/s like a tenant.
Regardless of what assurances a tenant with pets may give you, two big mutts in a small space are going to be a problem.
So, other than pets, what will a tenant pay a premium for?
A recent Matusik poll found tenants will pay a premium for:
A dedicated study area: preferably in a separate room or alcove.
They want high-speed internet access.
Free Wi-Fi (up to a monthly limit) is also very attractive.
Largely reduced or better still, no energy bills.
Also, many apartment/townhouse renters actually don’t use the facilities supplied.
Nor do many of the owner occupiers, for that matter.
Tenants will even move to more expensive premises without such facilities, if the design of the property itself helps them reduce their energy bills.
Think cross ventilation and/or a practical balcony that allows clothes to dry and not be blown away.
Those projects that “give back to the grid” are increasingly attractive to tenants.
Most tenants want a well-positioned – facing north and/or with some view – functional kitchen space. T
hey want practical kitchen storage space. In fact, the more storage available the better, regardless of where it is.
Proper ensuites: that is, a bathroom directly adjacent to the bedroom.
More and better designed robe space will attract higher rent, too. A lot, too, will pay a premium for a separate WC or PWC.
Bedrooms large: enough to comfortably fit a queen size bed, bedside table and if possible, a small desk.
Secure, off street car parking is also wanted.
Our rental survey work also shows that around 80% of renters intend to stay after their leases expire. This has increased from about 70% from about three years ago.
And based on the list above – including pets – five out of ten renters say they would pay up to 10% more in rent to get these things; with another quarter saying they would pay 20% more.
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