Growing wealth is the ultimate long-term goal of most property investors. But in the short-term, it’s often the property’s ability to deliver a consistent, reliable income – in the form of rent – that matters far more to your day-to-day finances.
So how do you make sure your investment property remains tenanted and keeps producing income, especially at times when vacancy rates are high, properties are plentiful and renters are spoiled for choice? Let’s explore.
Why a reliable income matters so much for investment properties
Before we share specific strategies for making sure your property continues to produce income, it’s probably worth reflecting on why it is such a vital part of property investing.
The simple fact is that most early-stage property investors rely on leverage. In other words, they need to borrow money to fund their purchase – usually in the form of a mortgage or home loan. And so every week, fortnight or month, that home loan needs to be paid.
One of the great advantages of property investing is that a lot – and sometimes all – of the cost of this mortgage can be funded by the rent you receive. But if rent isn’t coming in, there can be a financial hole you need to fill.
So if you want to avoid that from happening to you, here are our 6 tips:
1. Buy a new property
In a market where renters have a lot of real estate stock to choose from, it’s often newer properties that hold the competitive advantage. That’s because they usually come with many of the features tenants’ prizes, such as open plan living, modern appliances, and tasteful fixtures and fittings. They’re also often positioned close to transport and large-scale amenities and tend to be more suited to a contemporary lifestyle, with landscaped courtyards or roof gardens, security, parking, lifts, and valued on-site amenity that may extend to gyms, swimming pools, childcare, and concierge services, plus many other features you won’t usually find in older style properties.
For this reason, new properties are also often easier to rent out, helping minimise the length of any vacancies, so that your income continues to flow.
2. Keep your property well-presented and up-to-date
Many buyers can overlook cosmetic problems in a property, confident in the knowledge they can change things they don’t like. A kitchen or bathroom can be renovated, the walls can be painted in a different colour and new carpet can be laid. Renters don’t have this luxury – they’re usually stuck with the property in its current form.
This means renters tend to approach a property search in a different way to buyers: they’re paying their money for the here and now, not the long-term. So if your property needs work or is simply out-of-date, you’ll find it harder to rent out.
Plus the old adage is true – ‘prevention is better than a cure’ – investing in preventive, regular maintenance of your property will help prevent serious problems before they occur. Maintenance is less costly than repairs.
3. Sign a longer lease
A longer lease – ie one for more than 12 months – can help reduce the amount of time a property is vacant and help guarantee income because the tenant can’t usually break it without having to pay a penalty.
Long leases can be a good strategy during a flat market when market vacancy periods for an area are high, or if you value the security of a longer-term, quality tenant. But in a strong market, long leases may leave you with less room to move, particularly in relation to rental growth.
You should always weigh up the pros and cons and assess the current market before taking this approach. Talk to your Property Manager about the best strategy for your property.
4. Use a proactive property manager
Good property managers do far more than simply collect the rent on your behalf. They act as a Property Management adviser, letting you know how much rent you should charge and when (and when not) to increase it. They’ll also help make sure your property is marketed correctly so that you attract the right tenants and host regular inspection to fill any vacancy as quickly as they can.
Then after securing tenants, a property manager can also manage the relationship once they’re in, answering their questions and requests and doing their best to ensure they’re happy and that you retain them for the long term.
5. Consider furnishing your apartment
The reality of today’s property market is that many good tenants come from interstate or overseas and one way to make sure your property stands out to these renters could be to furnish it. After all, furnished properties offer tenants the chance to move straight in, without having to worry about the expense of buying so many household goods. On top of this, they can also offer command a higher rental rate from tenants.
Just one word of warning though – because furnished apartments tend to appeal to renters from elsewhere, they can also experience higher turnover when a tenant returns home or moves on. On the other hand, they’re frequently easier to rent out when vacant.
6. Get a rental guarantee
One way to make completely sure your investment property continues to produce income is to purchase one with guaranteed rent. For instance, the PIA Fixed Weekly Rental Guarantee ensures you receive a set income for three years, regardless of whether your property is rented or not. This, in turn, means you have predictable cash flow for a set period and can plan your finances accordingly.
PIA’s Fixed Weekly Rental Guarantee comes standard with any off-the-plan purchase you make through PIA. In exchange, you’ll get peace of mind that the money will continue to come in and the bills can get paid.
Information from this article has been sourced from the Property Investors Alliance