Investors looking to capitalise on their cash flow in a softer market should be considering these areas, according to a property management expert.
Having a solid yield means having a solid grasp on the cash flow of your portfolio and, for Penelope Valentine, director of Property Alchemy, south-western Sydney and Newcastle offer investors the best option for yields.
“The biggest trend I’m seeing at the moment is the outer southern-west, so places like Edmonson Park, Leppington and ,” Ms Valentine said to Smart Property Investment.
“There’s been some really great developments down there, and you can get a three-bedroom townhouse around there for about $650,000,
“The rents there are anywhere up from $550 plus, so you’re looking at more than 4 per cent yield there, and they’re big properties and huge demand, so that obviously decreases the vacancy, which is a big important part of maintaining yield.”
“These are areas that have been gentrified just recently, so they’re great places to invest, but also, they’re quite large blocks,” she said.
Ms Valentine added investors looking to increase their yields to “almost double” should be considering subdividing their existing properties, especially in the Newcastle area.
“If you were looking to increase your yield, something people are doing now is adding on a granny flat, because of the size of the blocks and the council in Newcastle is very open to this, and that can almost double your yield in some cases,” she said.
If investors want to take their subdivisions further, Ms Valentine recommended following the advice of Small Is the New Big’s Ian Ugarte by subdividing four-bedroom houses into micro apartments, which he claimed could see yields up to 16 per cent.
“It’s typically a boarding house, but the whole stigma around boarding houses is really changing now,” she said.
“Especially with the over 50s women; … sometimes they get divorced around that age, and they’re effectively homeless.
“They might have still have a child at home, so opportunities like this where they can live in these apartments, in these small communities for a reduced price but still have a really nice home, is becoming increasingly popular.”
Taking on board the micro apartment option also takes up little of a property investor’s cash flow, she added.
“If you buy the right kind of property or if you have the right property, they’re typically not very expensive. You could get the conversions done for $20,000,” she said.
“So, if you look at your ROI on that, it’s [a] very, very effective way to increase your yield.”