If you want your next investment property to be a top-performing asset, you need to know what tenants want. Here are 9 secrets for success.
Blogger: Lisa Indge, managing director, Let's Rent
You know, I’ve been exposed to more than 1,000 rental properties in my 10 years as a specialist property manager and active investor.
I’ve seen the ones renters are attracted to, even make higher offers on, and conversely those that take longer to rent and elicit lacklustre interest from renters. With all this experience, I’ve put together my top tips for features to look for when buying your top-performing investment property.
1. You’ve heard it before … location, location, location
2. Who is your tenant?
3. Good floor plan
4. Privacy and light
5. Unique – something to differentiate from the bog-standard rental stock
6. Outside space
7. Neutral interiors
8. Avoid excessive traffic noise
9. Be aware of maintenance costs
Let’s talk location
Areas that offer amenity, proximity to jobs and easy transport links to get there. I love areas where you have a hospital, university and city centre because this means you’ll have different types of renters – professionals, families and students. This can really increase the demand for rental properties.
Tenants appreciate good lifestyle amenity and that might include parks, beaches, cafes, restaurants and good schools.
Good transport links are essential. Know where your renter might work and how they will get there – bus, train, ferry or even road links to major employment centres.
Who is your tenant?
Going for a property that only appeals to a small group of renters is not the best strategy. Low supply and high demand allows us to minimise vacancy and maximise the rental price. This is so important when we have periods of seasonally lower demand. Yes, it does happen!
The vacancy rate for inner Sydney jumped from 1.5 per cent in December to 2.4 per cent in February 2015. That’s a massive increase when you consider that January/ February is seasonally the strongest month of the year for rental demand.
For example, understand whether your renters want renovated interiors, which is typical of inner-city areas. Conversely, where there is high demand from uni students renovated properties might not be as appealing as the size of the property, in terms of the number of bedrooms and bathrooms on offer.
Be guided by a good understanding of likely renters for your investment.
Love, love, love a good floor plan
Don’t underestimate the importance of the floor plan.
It’s a good two-bedroom house or apartment, but the living room is a bit pokey, or it might be a challenge to fit a double bed in the second bedroom … it’s a “bargain”, right? It might be cheap, but it’s not a bargain! Such limitations really lower the appeal to renters, narrow your potential renter numbers and cap your return.
Having a floor plan that flows and where dimensions are consistent throughout makes a property feel right, and guess what? Tenants like that very much. Potentially, it could create a scenario where there is competition for the property and tenants make a higher offer on the rent.
Open-plan living areas, built-in wardrobes and parking are boxes that most renter types want to tick.
Privacy and light
Dark, dingy properties are a turn off to a very high percentage of the population, perhaps the only exceptions being gamers and teenagers. Light is so important for our wellbeing, so a good balance is key. Bedrooms don’t need to be super sun-filled, but kitchen and living areas should definitely be bright.
Sub-floor rooms should be viewed with great caution. Fine for a wine cellar, but think twice if it’s a living space.
Add to that the privacy factor. Nobody wants passers-by to see into their home or for the apartment across the way to be looking into their bedroom.
You want your property to appeal to the broadest market possible in order to achieve the best return. It’s very apparent when we show properties that are painted in a multitude of colours that this is a turn-off for a significant number of people. Of course it is! Nobody wants to live with someone else's favourite colour scheme. If you do buy a property where there are bright colours on feature walls or where each room is a different colour, I recommend that you repaint in one neutral colour.
Something a bit special
With the right qualities (not quirky!) a property can appeal to a much broader market. This can lead to above-market returns in comparison with other properties offering the same number of bedrooms and bathrooms. They have that ”something special”.
Think warehouse conversions, properties with beach or harbour views, character features and those that are generous in size.
Of course, there are exceptions to the rule. Those beautiful old buildings such as schools, warehouses – even silos converted to apartments – sometimes have negatives that are outweighed by positives. An example would be limited or no outside space countered by gorgeous, big old windows looking out over the city. Now that would appeal to many renters even with no outside space.
Although you may love 1980s architecture, it’s not an era that appeals to all. What we are seeking are those factors that increase the appeal, not decrease.
Let me outside
You know the feeling. You just want to sit or entertain in the garden or courtyard; smell the fresh air and enjoy the sunshine on the balcony. If there are no appealing outside spaces, this can really limit the number of renters keen to pay good rent.
There’s no doubt that tenants put access to a private outdoor space very high on their list of must-haves.
Excessive noise from schools, construction, trains, traffic or planes is a major turn-off. Clearly properties exposed to these types of noise pollution sell for less, rent for less and are attractive to a much smaller group of people, whether buyers or renters.
As a result, they are likely to endure higher vacancy and greater churn of tenancies, which reduces your overall return and no doubt increases the stress on you as the landlord. Don’t go there.
The care factor
How much will it cost to maintain your investment? On balance, older homes have significantly more maintenance costs compared with new or fully renovated properties.
Make sure you have a building report completed in case there are damp, asbestos or other expensive maintenance issues that may require rectification before starting any tenancy.
If not rectified, these issues can negatively affect the return due to vacancy and quality of tenant. You may even find yourself in dispute with your tenant and defending a claim for compensation.
The rule here is to have your checklist and be critical. After all, investing is a long term plan and getting it wrong can cost you in vacancy, tenancy turnover and maintenance costs or simply cause unnecessary stress.