Every investor is looking for cash flow positive properties. But the reality is, these types of properties are increasingly few and far between. Generally, if you can find them, they’re out in the middle of nowhere, with little to no capital growth.
In the most general terms, an investment property should become neutrally geared within the first few years. To do this you need to increase the rent on your property regularly. Of course, a lot of landlords don’t do this for fear of alienating great tenants and having to re let the property year after year.
But failing to increase rent regularly, does have consequences, particularly when it comes time to sell the property. Often, we see properties that have increased considerably in value, however the rental return is dismal. This negatively impacts investor interest and reduces that all important sale price.
Is your investment property 10 years or older?
It’s time to give your investment a makeover. Tenants love modern, fresh accommodation, so to achieve the best rental return on your property, you must meet the market’s demand. With unscrupulous property managers encouraging tenants to move into newer properties nearby, it becomes increasingly difficult to retain great tenants who deserve updated accommodation. So don’t think about it. Do it!
The Numbers Do Add Up
Just recently we gave a two bedroom flat a mini makeover after the tenant vacated. We were able to increase the rent from $285 to $330 per week. This was a 15.8% increase in rent and gave the investor a 20.8% return on the funds invested in the updates.
Our Top 10 Tips for Neutrally/Positively Gearing Your Investment
- Ensure you have the BEST Property Managers – That’s us!
- Act immediately on any repairs and maintenance
- Paint your property at least every 5 -10 years depending how kind your tenants have been to the property. Particularly inside wardrobes
- Provide air conditioning throughout
- Update the kitchen and add a dishwasher if there isn’t one
- Replace carpet in the bedrooms
- Update entry, living, dining and kitchen with floor boards or polish them if they need it
- Update the window furnishings
- Update the bathroom. Dig out dirty grout and replace it. Add new taps and showerhead and replace the shower screen if the soap scum is ingrained.
- Update light fittings