How To Increase Your Rental Yield
With the sharp rise in houses prices across Australia over the past 18 months, rental yields have been driven lower and lower. For investors, a strong rental yield should be an important part of their overall investment strategy, as it allows them to hold onto the property with less out of pocket costs. Here are a few ways to boost your rental yield:
Adding appliances
Depending on where your investment property is
located, the addition of a few different appliances can make a property
incredibly appealing. Something as simple and relatively inexpensive as a
dishwasher makes a property far more in demand than one without.
The same is also true for air conditioning. If you live somewhere in Australia with relatively hot summers, air conditioning is almost a must. You don’t need to go all the way with a large ducted system – a modest reverse cycle unit will suffice in most instances and is a good way to get a slightly higher weekly rent.
Another idea for smaller apartments is to have a built-in washer/dryer unit. Many older apartments don’t have space for a washing machine, let alone a laundry. People appreciate the added convenience of having a laundry ready to go.
Just like when you’re selling a property, when you put a property on the market to
rent is equally as important. Typically, the summer months are when there is
the most demand for rental properties. If your goal is to maximise your rental
income, then you should look to find new tenants when there are the most people
looking.
While you can’t control something like a tenant leaving, you don’t always have to go with a standard 6 or 12-month lease. You can stagger the lease so that it comes out of its tenancy during summer to give yourself the best opportunity to attract a solid tenant and obtain a good price.
While most people understand that a renovation can add
overall property value, it can also improve rental yield. The most obvious
place to start with any renovation is the kitchen and bathroom, but depending
on your budget, that might not be viable.
In terms of value for money, floor coverings, window coverings and a coat of paint can be a cost-effective way to really improve the presentation of your property and potentially make it more attractive to would-be tenants. With house prices drifting higher to start the new year, trying to afford your dream home is getting harder. Fortunately, there are a number of things you can do to maximise your borrowing capacity without needing to increase your income.
Start budgeting
When
lenders assess your borrowing capacity, they look closely at your fixed
expenses as well as monthly living expenses. While it might not be easy to
reduce all your costs, it’s worth examining some of your ongoing expenses that
you can potentially trim. Subscriptions and memberships can easily stack up, as
well as other non-essential costs. If you’re looking at buying a property, it
might be worth sacrificing a few luxury items in the short term to make that
happen.
Consolidate debt
These
days, people often buy things on credit. The main issue with this is that
purchases with something like a credit card often attract high interest rates.
Things like car loans, personal loans and credit cards can really dent your
borrowing capacity. It’s worth looking at consolidating your debts and rolling
them over to a lower interest rate loan product. This will free up some
serviceability. It could also be worth getting rid of your credit cards if you
don’t really need them, as lenders assess these as if they are maxed out –
regardless of how you use them.
Watch your credit score
Your
credit score is like a track record of how you have managed credit in the past.
If you’ve got a history of not paying your bills on time, then a lender will
likely want to apply a higher interest rate to any loan you take out. This in
turn, means you will be able to borrow less money. The good news is that you
can start to repair your credit and lift your credit score. Simply paying your
bills as soon as you receive them and staying on top of your credit card will
help accomplish this. By always paying bills on time, you’re showing that you
can manage money, which will mean lenders are more likely to want to work with
you.
Choose
the right home loan product
Depending
on the loan features you need and the type of home loan product you want, your
interest rate will vary. If borrowing capacity is an issue, it’s worth talking
to your broker so they can compare home loan products and you can work towards
your goals.
A mortgage broker should always be the first person you speak to, as they can assess all of your personal requirements and compare loan products that will suit your needs.
Do you need to review your home loan? Contact Us. Important note: While every care has been taken in the preparation of this article, ADNA Financial Services makes no representations or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts.
Material contained in this news item is for general information only. It comes from a number of sources. Some of the content is provided by external writers.
Any advice provided within the various articles is of a general nature only and should not be construed as providing advice on any of the topics discussed.
Your needs and financial circumstances have not been taken into account. © First published 06 April 2022