To predict whether an investment property will generate a healthy yield, property investors often rely on the current average vacancy rates/rental yields and their historical trends.
A healthy yield is especially important for first time investors that are more affected by cash flow.
If we look at Melbourne, the overall vacancy rate is around 2.2% with plenty of suburbs much higher than this right now (Docklands, Southbank etc), but a popular suburb such as Malvern has a vacancy rate around 1.79% where an average a house will fetch $750 and a unit $410 per week in rent. (July 2017 - realestateinvestar).
Understanding these statistics allow a quick comparison between suburbs which investor can use to assess which areas present the best buying opportunities.
On further analysis we can find other important factors at play including affordability issues and what are the in-demand amenities tenants require. For example, an investor could purchase a strata property next to an employment hub such as a hospital. Here you will have a tenant pool hard to match with hundreds of staff working long shifts and on-call once home ensuring ongoing demand for quality accommodation within walking distance.
These tenants are also time poor and do not want to mow lawns so a strata property would fill this demand perfectly and ideally a new property due to requiring less maintenance, which will also reduce costs.
Conducting thorough research on the location and how the property will suit the local tenant’s requirements will ensure your investment property not only meets the suburb’s benchmark but possibly out-perform it.