Gone are the days when landlords could just raise rents without lifting a finger to maintain their properties. Now, with more investors entering the market, you have to work harder to increase your yield. Here’s how to do it. John Bockos explains
The principle behind all the best ideas is to make your property as attractive to tenants as possible. That way, it will rent more quickly, have fewer and shorter vacancy periods, and be more popular, meaning that you will be able to select better quality tenants. When this happens, the rent goes up.
The smartest property owners know that they can spend a little to earn a lot. Some landlords are reluctant to spend money on their properties, but they do not realise that approach is a false economy if the properties do not lease quickly or achieve the rental growth they could.
After assessing thousands of rental properties over the years, here are my top 10 tips for how to increase your rent.
1. Get the basics right
Between tenancies, carpets should be professionally steam cleaned, drapes dry-cleaned, scuffed or grubby paintwork touched up, and appliances checked to ensure they are operating efficiently. These items should be regarded as maintenance, not improvements.
For example, the carpet cleaning outlay for an average two-bedroom apartment is $110. Getting the carpets cleaned would present the property well to prospective tenants, thus resulting in a shorter vacancy period. Should the property remain vacant, this would cost an investor more in loss of rent. Compare the cost of a one-week vacancy at $500pw to $110 for presenting the property well.
2. Do maintenance on time
Delaying maintenance is often counter-productive to achieving rental growth. Something as minor as a leaking tap or a poorly fitting door can upset tenants and discourage prospective new tenants. If you can afford to have maintenance work done as soon as it needs doing, do it.
A happy tenant is like a happy customer, in that they are paying their rent and expect a good, efficient service when maintenance of the property is required. This will result in a longer-term tenancy without the added cost of having a vacancy that results from a tenant being disgruntled with their landlord.
Remember: the cost involved in maintaining the property is tax deductible and keeps the property in good order.
3. Renovate the kitchen
Illusion is an integral part of the renovation process if you don’t want to spend a fortune. By creating visual effects that attract the eye of a potential tenant, attention is diverted from less desirable aspects of a property. For example, painting kitchen cupboard doors, replacing doorknobs and installing a new flick mixer can leave your prospective tenant feeling like they have a new and expensive kitchen.
At Blink, we regularly oversee renovations that lead to benefits that far outweigh the costs. For example, a one-bedroom apartment in the inner-Melbourne suburb of Richmond had a $10,000 renovation that covered every room and included repainting, installing new carpets and blinds, and resulted in a rent increase from $205 to $280 per week – a jump of 37%.
4. Update the bathroom
Replacing taps, shower heads and other fittings with modern equipment can create an improved look. New door and cupboard knobs, new mirrors, and replacing a shower curtain with a shower screen can make a massive difference.
A tired bathroom can be brought to life by resurfacing the bath, basin and shower base and painting old-fashioned
or garish tiles.
5. Spruce up living areas and bedrooms
Cheap fluorescent lights drag down the quality of too many rental properties. Low-voltage fittings can plug into existing sockets without the need for an electrician. Modern pendants for bedrooms are a big plus. Changing light switches and installing dimmer switches can create the illusion of a newly refurbished property.
6. Install new equipment
Installing an air conditioner can result in an immediate rent rise of $20 per week. That will cover the cost of the new equipment within 18 months, after which time you will continue to receive the increased rent and more tenants will want to lease the property.
On a larger scale, building a carport can also achieve similar results. The costs will bring tax and depreciation advantages.
7. Add space
The layout of some properties lends itself to erecting a wall in a large lounge room to create an extra bedroom. Similarly, removing a non-structural wall in a small family room can open up the area to create a more useable space.
8. Make a laundry
In apartments, tenants love internal laundries. It is often feasible to build a front-loading washing machine, clothes dryer and trough into a large cupboard for a relatively modest budget. It requires a plumber, but the outlay can be well worth the cost because it increases tenant demand and rental return.
9 Adopt a business mindset.
Most people who buy a business for $500,000 would treat it seriously and have the systems and support to get the best results. Too many investors buy a property and then treat it like a hobby, and it doesn’t achieve its maximum potential.
The most successful property owners have a firm game plan and surround themselves with good people to do the jobs they can’t or don’t want to do. This allows the investor to look beyond the details and keep focused on the big picture of building their portfolio.
10. Use an experienced property manager
A good property manager is worth their weight in gold. They will care for your property as though it is their own, ensure it obtains the highest possible rent, minimise vacancies, advise you promptly of maintenance or other issues, collect the rent and pay the bills on time, and a multitude of other tasks, which might include overseeing a major renovation.
For a few tax deductible dollars a day, a professional property manager can save and earn you thousands – and take a load off your mind.
John Bockos is an experienced property manager at Blink Property. For more information, visit www.binvested.com.au.
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