Perth’s property market has moved from strength to strength in recent months with both median house prices and median rents showing strong signs of growth. With experts forecasting this growth to continue into the near future, this period could prove crucial for investors looking to better position themselves to leverage future market opportunities.
Here are four key strategies to help you maximise your rental yields during a period of market growth.
Understand what’s driving tenant demand
Much like the sales market, the rental market is made up of smaller markets that each have their own unique demand drivers, and it is important to understand your local market to better capture the attention of tenants. Researching comparable properties in the local market is a good starting point to help you identify potential features that will boost your property’s rental appeal. For instance, is there a premium on rental properties with built-in storage space or air conditioning units?
It is important to understand that what appeals to you, may not appeal to potential tenants. Your property manager can be a great source of information when it comes to understanding tenant expectations as well as demand drivers specific to the local market. Once you have a strong understanding of what tenants in your area value, you can undertake cost-effective strategies to add value to your property to enhance its rental performance.
Keep up the appeal
In order to put yourself in the best position to leverage market opportunities, it’s important to look for ways to improve the immediate rentability of your property, while also enhancing its long-term appeal and performance. Minor cosmetic improvements can have a huge impact on the rentability of your property and making these changes proactively not only improves the appeal of your property to new tenants, but also maximises tenant retention. The costs of replacing tenants and re-marketing properties on a regular basis can quickly add up, so retaining good tenants can be just as important as achieving strong rental rates when it comes to maximising cash flow and achieving the best possible rental returns. Keeping up the appeal of your property is still important in a hot rental market, like the one Perth is currently experiencing. Properties that are not offered in good repair can undermine your efforts to target the best quality of tenant – something that can be just as important as securing a great rent.
Case study – Minor renovations lead to increase in rental income
An owner of a 3 x 1 established house in Perth’s southern suburbs approached Momentum Wealth to lease their investment property, which had formerly been rented out to the investor’s family member. Momentum Wealth appraised the property at $300 per week but noted that several minor improvements and maintenance tasks would help strengthen rentability.
Following recommendations from our property management and leasing team, the owner agreed to several improvements, including repainting the walls of the property, updating curtains and light fixtures, and replacing the flooring in the rear games room.
Consider including additional clauses in the rental contract
If you’re anticipating future improvements within the rental market but are yet to see a significant uplift in market rents in the area surrounding your investment property, your property manager might recommend including additional clauses in the leasing contract that will allow you to review or increase your rental rates further down the line. This is a great strategy to ensure your property continues to align with wider market movements, but it’s important to be cautious of excessive rent rises and the impact these might have on your relationship with tenants. Western Australia’s emergency rental moratorium that was brought in during the COVID-19 pandemic has changed the landscape for rental increases, so it is important to seek professional advice to ensure you are operating within the relevant legislation when looking to increase rents.
Speak to a value-add property manager
As an investor, it’s important not to underestimate the crucial role property managers can play in maximising the performance of your property portfolio, especially in a moving market. A good property manager won’t just manage the day-to-day maintenance of your properties and handle tenant relationships, they will be able to make strategic recommendations to proactively enhance the performance of your properties. The right property manager can be an invaluable asset when it comes to identifying value-adding opportunities, understanding the local market, and recommending clauses to ensure your property remains aligned with market demand.
Momentum Wealth is a full-service property investment consultancy dedicated to assisting investors in all aspects of their property investment journey, from financing through to property acquisition and property management. Visit our website for more information on our property management services.