How To Increase Your Rental Returns
By Scott Bentley
There are two ways to increase your rental returns – raise the rent and reduce your costs. Here are our best tips for doing both.
Raising the rent
You can only raise the rent when market conditions allow and/or when you improve your property.
Ask your property manager to review weekly market rental values in your suburb at least annually to ensure your property is rented at the maximum possible rent.
Property Management Division Manager, Mariette Knudsen says: “We do this as a matter of routine close to a lease’s end date. We show our clients a list of comparable rented properties and provide a recommendation reminding them that their costs (rates, insurance etc”
You can also raise the rent if you improve your property. While the government’s Healthy Homes standards for insulation and heating, the time-frame allows a gradual implementation, with July 2021 the cutoff for all homes to comply.
“If your property already has good insulation, heating and ventilation, there are other ways you can add value, Mariette says. “While tenants are the direct beneficiaries, your property will also gain in overall value to your advantage.”
Full scale renovations will obviously take your investment to a new level of rental value; and you will also be able to take advantage of depreciation benefits on new fittings and fixtures.
If you’re not interested in a big project, there are many lower-cost ways to increase your rental returns.
Here are our ideas:
Install a dishwasher
Install built-in wardrobes in all bedrooms
Refresh the bathroom – install a new vanity, add a modern wall mirror or cabinet, replace shower curtains with frameless glass, replace old taps, re-spray bathtubs and tiles.
Refresh the kitchen – repaint cupboard doors, replace old door handles with sleek modern styles, update appliances, replace a scratched and worn sink.
Outdoor living is popular, so upgrade your outdoor areas to create relaxing, pleasant spaces for your tenants to enjoy. Pressure clean tiles and pavers. Tidy up the garden and create an alfresco dining area – ideally with shade.
Replace carpet with hardwood timber or timber laminate floors.
Re-paint every few years for an as-new look. This maintenance also keeps up the value of your asset.
Update fixtures such as taps, light switches and doorknobs.
Allow pets (apartment owners need to check their building’s policy first).
Add extra storage such as built-in cupboards and bookshelves.
Offer gardening services.
If your property doesn’t have an internal laundry, install a washer/dryer in the kitchen.
Respond to repair requests and other issues immediately. It pays to look after good tenants to encourage them to stay, because new tenancies are an additional cost.
“We always explain to tenants why there is an increase - that it is because of market conditions, or the property has been upgraded,” Mariette says. We will also show the tenants comparable properties currently advertised or recently rented at the same price.”
Good tenants can feel offended when you put the rent up, so you need to provide your reasons.
Reducing your costs
- Insist on a 12 month lease as a minimum timeframe. Six month rotations will likely reduce your rental returns, even if you raise the rent each time. This is because new tenancies tend to cost at least one week’s rent in vacancy and another week’s rent in management fees.
- Shop around for the best building, contents and landlord’s insurance. Take advantage of multi-policy discounts offered by companies you are already with for other insurances, such as car and home contents.
- Use depreciation to reduce tax. Before you rent the property out, have a depreciation schedule done by a quantity surveyor. The schedule will tell you how much you can claim as a tax deduction each year.
- Monitor interest rates and periodically ring your bank to ask for a better deal. Consider refinancing if the benefits outweigh the costs and time involved.