One of the biggest fear factors about buying a property as an investor is making sure that your investment property will get rented. If you cannot find a tenant then that means your property will be untenanted, yet you will still need to pay the mortgage repayments every month.
This is the last thing you want to do as it can put a strain on your cash flow, particularly if money is already tight as you are likely to be paying rent on your primary place of residence as well. So what can you do to avoid this happening to you and how can you make sure your property will get rented? 1. Do your research
The very first thing you need to do before even purchasing a property is to do your research. You want the low down on everything about the suburb that you are buying in, before you actually buy there to ensure that this is the best investment for you. Some of the main factors that you need to consider are:
2. Get a reputable property manager
- Rental Demand – How many people are currently renting in your area? Is there a high rental demand and if so is there a high demand for the type of property that you are looking at buying, for example two bedroom apartments? You want to appeal to as wide an audience as possible so if you buy a one bedroom apartment in an area that is mainly home to families with children, then you might struggle to rent your property.
- Property Supply – The next thing you need to research is what the property supply is like as this will determine your competition. The lower the supply, the easier it will be to find tenants as there is less competition to compete against. You should also consider future supply as if there are lots of new apartment blocks going up in the upcoming years then it will become harder to find a tenant in the future due to increased supply.
- Vacancy Rates – What are the vacancy rates like? You want to buy in an area with low vacancy rates as you want to hold on to your tenants for as long as possible as this will reduce the time your apartment is untenanted and will create more stability and regular incomings for you.
- Median rental prices – Take a look at the suburb’s median rental prices for similar priced apartments to the one you are buying and do the sums to ensure you can compete with similar pricing.
- Immediate location – Rental tenants prefer to live close to important amenities such as a train station, shops, eateries and schools. You should therefore choose a property that is situated in a good location in walking distance to local amenities.
- On-site facilities – Buying an apartment within a development that has on-site facilities such as a gym or swimming pool can make your property much more appealing than one without these added extras due to the tenant not having to pay for a gym membership elsewhere. However, you need to bear in mind that this can increase your strata costs depending on the on-site facilities and the size of the development.
If the research looks good and you have decided to buy the property, the next thing you need to consider if not self-managing the property is to hire a reputable property manager. At the end of the day, the property manager’s job is to make sure a property will get rented and they will maintain the property for you. Their duties include finding and interviewing tenants as well as conducting inspections and collecting rent amongst other things. You therefore want to choose a reputable property manager who is able to access a wide pool of quality rental tenants and is on the ball.
The last thing you want is to use a property manager who is managing too many properties and does not have time to focus on tenanting your property properly, or choose poor quality tenants that causes damage to your property.
Ideally you want to use a property manager who knows the local market and area well, whilst have the ability to use tactics to help find a tenant and adjust rents accordingly. 3. Get Landlord’s Insurance
As a landlord you should definitely protect yourself by taking out Landlord’s Insurance. This does not necessarily mean it will help your property get rented, but it can protect you from missing rent or unpaid rent due to tenants leaving without paying. However, it is unlikely to cover periods when your property is untenanted, unless there is a break in the lease. 4. Rental Guarantees
Sometimes a property might be sold with a rental guarantee. A rental guarantee basically provides owners with the assurance that their property will receive rent even if there are times when it is untenanted. This can provide the owner with added peace of mind as they won’t need to dig into their pockets to find this extra rent.
However, investors should be wary as some properties with a rental guarantee might not be as good as you thought. Vendors might have added a 12 month rental guarantee to make the property more sellable to the buyer, but in actual fact once the rental guarantee expires, the owner will find it difficult to rent out the property due to high vacancy rates, high supply and low demand. Ensure you do your research first to make sure you are buying in a good suburb.
Overall, the key to making sure a property will get rented is to do thorough research into the suburb you are buying in and ensure that your property targets the core market that lives there, whilst seek out a professional and reputable property manager if you prefer not to self-manage the property.
Published on 25th of August 2015 by Marty Stanowich