Fortune favours the brave. Dare to offer a point of difference in your rental property and watch the tenants – and the money – roll in. Whether you target a niche market or simply throw in a few extras, there are many creative ways landlords can boost their rental yields.
Tenants will be willing to fork out more in rent if you offer them a few bonus trimmings, advises Rob Farmer, CEO of property management group RUN Property. “One of the reasons I love investing in property is that there are things you can do to increase both the value and yield of your investment – it’s amazing how even the little things can make a big difference!”
A proactive approach and a bit of initiative go a long way. Director of Active Property Network Troy Harris says there are many fantastic ideas out there; investors simply have to choose the right one for them and their tenants.
“Most are based around the same theory: give the tenant something they want and are willing to pay more rent to have,” he explains. “Some more left of field ideas are adding the internet, car parking and I've even heard of free eggs as the landlords left a chicken in the coop for the tenants to look after and get eggs!”
Furnish the space
It may not suit everyone, but a furnished home might just be your ticket to super financial rewards. Tenants with little in the way of furniture – perhaps short-term renters, divorcees, those new to the country or recently flown from the nest – will be willing to pay more for the ease of moving straight into a fully furnished home.
Michelle Galletti, real estate agent and managing director of Just Rent Sydney, says landlords can boost their cash flow by up to $200 a week simply by fitting out the property with simple, stylish pieces.
This was the case for a recent client of Galletti’s, who furnished a one-bedroom apartment in the Sydney CBD and subsequently raised the rent from $420 to a massive $620 per week.
The decision to furnish ultimately depends on where the property is located. Galletti advises that some areas, such as inner-city and metro fringe suburbs, are better suited to furnished properties than others. There needs to be a market for the product and a sufficient pool of interested tenants.
Galletti says another advantage of furnishing a property is the tax concession element. “The good thing is that when you furnish a place, you can depreciate it as well,” she says.
Essential items include a bed/s, fridge, TV, couch, washing machine, wardrobe and dining table. Furnish the property in a modern, contemporary fashion that will appeal to a broad cross-section of tenants – not your own personal tastes.
Patrick Bright, buyer’s agent and director of EPS Property Search, suggests installing solar panels to boost your property’s rental returns.
“For around $4,000 plus installation fees, you can have a 5kw solar panel system installed on your investment property that should generate enough power to look after the tenants’ needs with a little leftover to put back into the grid,” he says.
“Not only would that be a good, green move to make, it would also allow you to charge an extra $20 per week rent for the property as the tenants would be saving over $1,000 a year not having to pay power bills.
“Many of these solar panel systems come with a 20-year or more warranty, so given you would have your money back inside five years from the installation date, it’s a wise medium-term investment.” Solar is the perfect way to help both the environment and your back pocket.
Give them some air
Stankovic says temperature control systems can be a make-or-break factor for tenants. She says the addition of heating and cooling devices is considered far more important by renters than minor features like attractive tap fittings.
“The simplest solution is to install an air-conditioning unit which has heating functionality as well. Just by doing so, you may be able to increase the rent from $350 per week to $380 per week, as one of our clients found with their apartment in Elwood, a popular beachside suburb in Melbourne, where they added an $800 air-conditioning unit,” says Stankovic.
If your property is located in the high or low reaches of the continent, heating and cooling carries a lot more weight and may be some serious bait for tenants.
Throw in some extras
Everyone likes to receive a little extra – and your tenants are no exception. Minor additions such as a dishwasher can allow you to up the rent and keep your tenants happy.
The simple act of adding a dishwasher can earn you an extra $260 in rent a year – almost half the cost of a mid-range machine. It’s an even better return when you consider that the average life of a dishwasher is between nine and 12 years, according to www.dishwasherguru.com.
“You can install a dishwasher for a small investment of approximately $1,000, making your property more appealing to a wide range of tenants while also increasing the rent by around $5 per week,” advises Bright.
Create a second bathroom
Most can appreciate the trials and tribulations of sharing one bathroom. If your property has an internal laundry, why not ease your tenants’ woes and create a second bathroom or ensuite?
Muirhead did this exact thing, and while she says the conversion wasn’t hassle-free, it certainly brought substantial gains. “It was incredibly successful and was part of creating a very positively geared property,” she says.
“The best part about adding a bathroom is that you’ll not only receive a much better rental return, but the property value will increase substantially. The downside is that changing a laundry into a bathroom is one of the most difficult and costly property alterations. All of the plumbing must be changed, unless you already have a second toilet in the laundry which can be utilised to save costs.”
Muirhead says a laundry to bathroom conversion can increase rental yield by around 10– 20%. “My recent renovation increased the rental by $100 per week and the cost of the bathroom was a little over $5,000, so my returns on the renovation/investment are 100%! The capital growth received from this conversion was about four times the renovation cost.”
The next step, of course, is to consider where to house the laundry. You can either relocate the washing machine to the kitchen or main bathroom, or create an entirely new laundry.
Add an extra bedroom
That formal dining room or dead space could be earning you serious rental dollars. Transform it into an extra bedroom and increase both your yield and property value.
“One of the best renovations to attract good rental returns is adding a bedroom,” explains Muirhead. “This can cost as little as $1,000 for a simple stud wall, new door and ceiling fan, but attract more than $40 per week in rent – or 200% on your money.”
Stankovic says a client of hers recently converted a dining room to a bedroom in a Melbourne investment property and completely transformed its profile. “For the cost of $4,000 to make the change, the landlord was able to achieve $70 per week more in rent and also make the home attractive to a larger number of potential tenants,” she says.
Add an entertaining area
An outdoor entertaining area is strong bait for tenants of all ages and demographics. Tile a courtyard, extend the verandah or construct a gazebo out the back; not only will you add value to the property, but you’ll also increase your rental returns.
Why not add a Balinese-style gazebo to the backyard to improve both functionality and appearance? These huts have a life expectancy of around 15 years, depending on weather, and not only look attractive, but are also weather-proof, durable and have natural insulation qualities.
Alternatively, investors on a tight budget can purchase shadecloth and hang it outdoors to offer an escape from the sun in the summer months. A safe, shady play area will be particularly attractive to the family tenant market.
Give the car a home
A car space can be a huge bonus for tenants, particularly in inner-city areas where parking is limited. “The closer the property is to the centre of a city, the more that having a parking spot will increase the rent,” explains Stankovic. “For example, one of our clients built a sail-shade carport in their driveway in South Melbourne, an inner-city suburb in Melbourne, which increased the rent by $60 per week.”
Stankovic adds that investors can choose a tailored option to suit both their financial and space requirements. “Parking is an important factor, but it doesn’t have to be expensive,” she says. “Instead of building a garage or a full carport, consider creating a shade-sail carport in the driveway, which won’t cost anywhere near as much to implement but will provide potential tenants with undercover parking space.”
Additional storage space – whether inside the house or out – is another forgotten feature that can add significant value to your property. Built-in wardrobes and backyard sheds are highly regarded by tenants.
Stankovic suggests that storage space can be a major bonus for your renters. “For tenants, storage space is always important, so it’s worthwhile considering putting built-in robes into the property if it doesn't already have some, or other alternative storage such as a cupboard under the stairs or a shed in the backyard,” she advises.
Other bright ideas
- Put security screens on doors and windows
- Offer wireless internet connection
- Add a retractable clothes line to a unit
- Rent the property out by the room
- Offer holiday let and/or short-term leases