How do you ensure your investment property will be the most sought after by future tenants? Lisa Indge answers some crucial questions.
For many years, I have been answering an extremely popular question: ‘What makes the ‘ideal’ investment property?’ Real estate agents are not qualified to give investment advice, so we approach this question from the perspective of providing a rental valuation.
That means giving an answer to a slightly different question: ‘What attributes make this property a better rental property than any other, now and in the future?’
These are the key considerations:
Does the property match the local market?
First, consider whether the mix of houses versus apartments in the area matches tenant demand. For example, where there is a shortage of apartments in an inner city suburb, there is high demand and very low vacancy rates. Ensure the type of property you invest in is one that prospective tenants will seek out.
What are the area demographics and income levels of prospective tenants?
Match your investment to the middle of the market to capture the most tenant demand. In the inner suburbs of every capital city, there is a mix of families, professionals and lower income earners. Whom does your property suit? If you own a ‘tired’ house near a university it is probably going to end up as a share house – it won’t appeal to families. Identify your target tenant.
How does your property stack up against the others?
Get the basics right. Present the property as spotlessly clean, neat and in as good a condition as possible. Ask whether there are significant negative aspects that cannot be changed? Dark spaces, proximity to noisy night spots, busy main roads, and a difficult and/or ‘pokey’ floor plan. Again, families and single apartment sharers have different requirements.
What aspects of the location will attract tenants?
Proximity to workplaces, transport links and amenities such as schools, restaurants, parks and shops are all important. Also, is the property located in a highly desirable and prestigious suburb? This is an attribute in its own right, but the property should be presented accordingly and with the expectations of the demographic in mind.
What are the top attributes that appeal to renters?
General condition, kitchen and bathroom, paint and flooring are all important. The interior should present a clear message matched to the target tenant and area demographic. Modern functional and funky spaces in the inner city rent well, as do charming Federation houses in the suburbs – be clear about your property’s category. Other things that can affect the general appeal include gas cooking, built in wardrobes, uniqueness and outside amenities, including gardens, courtyards and balconies.
What attributes are considered negative?
This can, of course, be personal but typical examples are Vermiculite ceilings, 1980s-style low ceilings and brown aluminium windows! Parking? It goes without saying that in most big city inner suburbs, parking adds considerable value – in some inner city areas, it is hard to rent properties that do not have adequate parking. Lack of outside space can also be a negative with some properties.
Should I renovate my investment property?
A new kitchen, bathroom, paint job and new carpet increase a property’s rental value. But will the increase be sufficient to justify the spend and depreciation on your investment? We often give our clients an estimate of the current rental value and then one that takes into consideration any proposed renovation. That way, our clients can decide up front whether to buy or, if they currently own, whether to bite the bullet and renovate.
So, in short, don’t buy a pokey, dark studio apartment in a family suburb – or a beautifully renovated family home in a student area!
Lisa Indge is managing director of Let’s Rent – The Property Management Specialists