While rents are rising and this is music to an investor’s ears, it is still important to focus on the yield your property is delivering.
I advise our clients to try and improve the cash flow on their properties. To do this you have to do one of three things;
1. Increase your rental income
2. Decrease your expenses
3. Decrease the length of your vacancies
So, how do you go about doing these? Here’s a checklist worth considering to bulletproof your yield, no matter what the rental market is doing;
1. Increase your Rent
In the current rental climate, as vacancies are reaching historical lows, we can sometimes increase rentals for our landlords. At Metropole we are able to do this with confidence – we understand the rental market intimately.
2. Decrease the Rent
Obviously this relates to number 3 above: decreasing your length of vacancies (admittedly not an issue right now). It sounds almost frivolous to say this after the previous point, but over the years I have seen many landlords having long vacancy periods because they are asking unrealistic rents. Any gains they would make by charging a higher rental are soon lost by the few extra weeks of vacancy.
3. Prepare a Depreciation Schedule
I find many landlords don’t take advantage of the huge tax deductions available through preparing depreciation schedules. Not only do newer buildings offer tax benefits but depreciation may be available on older investment buildings. If you would like to find out how you can obtain a depreciation schedule, here at Metropole we can steer you in the right direction.
4. Consider Pets
With more than half the population interested in having a pet, you will broaden your market by allowing your tenants to have them. We protect all our landlords who rent their properties to tenants with pets by inserting a special pet clause in the lease to protect their interests.
5. Make your property more attractive
During periods of vacancy take the opportunity to spruce up your property. A quick coat of paint inside is probably the most cost-effective improvement you can make to attract tenants and increase your rent. Stick to neutral colours – off-whites or creams – which will appeal to the majority of tenants. If your carpets are getting tired, update it or pull it up and polish the floorboards.
6. Include air conditioning
Properties with air conditioning will rent out for $10-15 per week more than those that don’t have it, and they attract a wider range of tenants. I would suggest installing a split-system air conditioning system which would cost you between $1500-$2000. You will also be able to claim depreciation on this.
7. Install a dishwasher
While a dishwasher may only cost you $700-$1000, it will probably increase your rent by about $5 per week … or $260 each year. At times of high vacancy, having a dishwasher or air-conditioner will always attract a tenant to your property before another property that does not have these amenities.
8. Keep your property looking smart
Every five years we give our own investment properties a good overhaul; every 10 years we give them a full refurbishment. This keeps them attractive to tenants and means we minimise our vacancies. I would recommend that all our landlords do the same.
As you can see most of these suggestions will cost you little but will ensure that your property remains tenanted at the optimal rent, therefore increasing your investment return. If you would like to discuss any of these matters with regard to your particular investment property, I would be happy to make suggestions.
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