Favourable conditions for property investors are again emerging as rents rise and higher interest rates start to take the heat out of the market.
Weekly rents increased 4.7% in the 12 months to March. That’s the strongest growth in almost eight years, according to the latest REA Group’s PropTrack rental report. The low number of rental properties is driving the rise.
There’s been a 24% year-on-year fall in availability of rental properties and new listing are tracking 12.5% below the 10-year average. Demand has increased 37% in the past 12 months and has never been higher in our capital cities, says REA Group.
As an experienced agency in our area, we’ve seen some investors sell to owner-occupiers in the past year, making a tidy capital gain thanks to record property prices.
Now, there’s an opportunity to re-enter the market, or expand your portfolio.
Rents are likely to continue to rise while the interest rates edge higher, especially for newly-issued fixed loans. We believe this will dampen the exuberance that pushed annual value growth beyond 20% last year.
Both first-time and experienced investors should consult a financial professional before beginning or expanding a rental portfolio. It’s important that you can afford and benefit from a potential investment.
Below, we’ve listed four quick tips to help ensure you have a positive experience now the rental market looks like a strong option again. Our agency has houses and units on our books that could make great rental properties.
Be budget-wise
Buy with your head, not your heart. Over-stretching yourself financially to buy a rental property is likely to prove a poor investment. Figure out how much you have to spend, and don’t consider any properties beyond your limit.
Do your research
Finding the right location is imperative. Choose an area where people will want to rent because there are good employment opportunities, shops, amenities or schools nearby. Your property should also offer the potential for long-term capital gain: that is, its value will keep rising so you’ll make a profit when you choose to sell.
Function first
When considering properties, remember this isn’t where you’ll live. You want to appeal to potential renters rather than suit your own circumstances. Consider the practicalities of the property and its location rather than the luxuries.
Stuff happens
Things break and wear out. Make sure you have a small cash reserve to fix problems as they arise. This will keep your investment in good shape and help keep your renters happy.