July 08, 2016
Many experts believe that the property market is reaching the bottom of its cycle in Perth, which means that the smart investors are only just warming up. The very best investors will seek out property bargains in order to make a short term or long term profit, or even both. But how do you maximise your returns in a flat market? Renovations could be your answer.
There are many factors which need to be considered for both experienced and new investors to the game. These factors can include the location, purchase price and rental yield prospects for the property and research is certainly the key to achieving profitable results. If we are to focus on apartments in the current Perth market, demand and supply is a factor which defines how profitable your investment will be.
Perth is currently experiencing an increase of vacancy rates in units during the property downturn, with currents rates at 6% according to Core Logic. This goes hand-in-hand with the fact that there are also more units available on the market, which causes the competition for tenants to increase. Perth has experienced a drop in median rent prices by 9.4% over the past 12 months (via Core Logic), so the question remains, is investing in an apartment in Perth a smart move?
Perth Rental Yields
According to Damien Collins, Managing Director of Momentum Wealth and Gavin Hegney, well known property analyst, investing in units in Perth is still a smart move. Even though rent has dropped over the past 12 months, rental yield remains at 4.3% in Perth, which is higher than Sydney and Melbourne who are both sitting at 4%. The question remains, how to maximise your yield when rents are down and vacancies are up?
Mr Hegney suggests if possible, to initially renovate the inside of the unit, to make it more attractive to potential tenants. If $20,000 was spent on renovating a small unit, it would only cost you on average around $1,000 extra per year onto your mortgage, equating to around $40 a week. These improvements can positively add to the overall value to your investment property, and also become more attractive to tenants.
In the current market with a high number of rental properties available to tenants, it could come down to the fact that one is simply more attractive inside compared to the others. When the property market starts to accelerate and units aren’t as freely available, these improvements have the potential to increase the rent per week for a newly renovated property.
If you would like to get into the investment market, or even get some extra money to renovate your property, give Nathan or Steve a call today on (08) 6144 3230 or email at email@example.com