New data showing that rent revenue growth is easing is no reason for investors to pause their ambitions to either re-enter the market or expand their portfolio.
Rising rents have helped many mum-and-dad investors, the core demographic of property investors, to cope with interest rate rises that began in May 2022.
We’ve now had 12 rate increases, taking them to the highest point in 11 years at 4.1%.
While pundits suggest there’s the possibility of maybe two increases before the end of the year, we believe it’s implausible for rents to continue rising unabated.
Industry researcher CoreLogic appears to agree. Its quarterly rental review found rents had risen 2.5% in the March quarter, down 0.3% on the previous quarter.
For the 2022-23 fiscal year, rents have risen 9.7%, down from 10.2% in the corresponding period a year earlier.
Sydney ($733-a-week) remains the most expensive city, while Melbourne ($551) shed its tag as the cheapest city. The title now belongs to Adelaide ($549), according to CoreLogic.
However, these findings don’t suggest Australia isn’t chronically short of rental properties.
Below, we’ve listed some fundamental approaches to shape a property investor’s strategy.
Be patient
Property investment requires a balanced approach, realistic expectations, and the willingness to adapt strategies to market conditions. For example, when prices peaked in 2021, many sold to owner-occupiers at big profits. Now, some are returning.
Have variety
Your portfolio should spread risk across different types of properties and geographic locations. So, don’t buy multiple units in the same block, or even the same suburb.
Keep crunching
Work with a great accountant or financial planner to establish a budget for each purchase and ensure it meets your financial goals. You should factor in the potential ROI and cash flow, income, expenses and appreciation.
Cost factor
Ongoing expenses such as property taxes, insurance, maintenance costs and property management fees are realities of life for a landlord.
Cash is king
Always explore financing options to ensure you’re getting the best possible deal. Lenders are always tweaking mortgage deals, so a proper investigation is worthwhile.
Perfect partner
Work with a property management team. They’ll help you set a rental price, find your best available tenant and handle any questions or issues that will undoubtedly arise once the tenant has moved in.
NOTE: The information in this article is general in nature and provided as a market overview only. Always consult your financial advisor or accountant for advice specific to your personal circumstances.