While rental yields in Australia are predicted to compress even further past their current record lows
, landlords shouldn’t give up their efforts to increase the cash flow their investment properties generate.
For many investors, the chief aim of property is to reap the rewards of long-term capital growth and while many have been the beneficiary of a strong growth cycle in recent years, there’s no reason they can’t also see some more immediate benefits through increasing the cash flow of their properties.
For those hoping for an investment that is cash flow neutral or even positive, Rich Harvey, chief executive officer of Propertybuyer.com.au, said the biggest factor is buying in the right location
“You’ve got to look at buying properties that have a very high quality aspect to them. Ones that are close to the city, close to good public transport, all the things tenants will want to pay more for,” Harvey told Your Investment Property.
“The highest yields are going to be in the areas where there is the highest amenity, lifestyle and access are the things that will drive yields,” Harvey said.
Though purchase location will play a significant role in determining the cash flow a property generates, Harvey said landlords in less desirable locations can increase the money a property brings in if they’re proactive.
“There are things you can do. Say for instance you’ve bought a unit further out from the city, that might be a location where you put in an air conditioner or white goods package,” he told Your Investment Property.
“You’ve got to try and make your property a little different from the others. You can’t make you balcony or cars space different, but you might be able to put a storage container in the garage… if it’s an older property you could try new carpets or floorboards. Anything that’s going to make it better for a tenant.”
While it may seem obvious that maintenance or improvements are the way to go for those looking to beef up their cash flow, Leah Calnan, director of Melbourne based Metro Property Management, said many landlords fail to realise their own preferences aren’t applicable to tenants.
“Tenant expectations have changed. Quite often an owner will say they don’t have air conditioning in their house, so why does a tenant need it?” Calnan told Your Investment Property.
“That’s a choice for the owner, but they need to accept that sometimes to attract a tenant or achieve the rent they want then they have to provide something else,” Calnan said.
In particular, Calnan said owners who buy new or off the plan properties need to reassess the condition of their purchases as time goes on.
“When an owner purchases a property brand new they go through the first few years with very little outlay and then five years down the track it’s all very new to them that they may have to think about recarpeting or repainting,” she told Your Investment Property.
“Some owners just need a reminder that their property may have been settled in 2010 and it’s six years old now, that’s no longer new and if you want to keep getting the same rent or even increase it you’re going to have to do something.”
For some investors, increasing the rent may seem the easiest way to increase their cash flow and while Harvey said landlords shouldn’t immediately rule that out, they should seek advice before doing so.
Calnan agreed with point and said many landlords fail to take into account the best source of information at their disposal.
“Owners need to hear what the market thinks and you hear that by taking on the feedback your property manager gets.
“We get feedback from when a tenant leaves, from after an inspection and after open houses. A landlord might want to increase the rent or that sort of thing, but at some point they have to listen and accept what the market is saying.”
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