What Property Investors Need to Understand about Rents and Vacancy Rates

We keep on reading about how low residential vacancies rates are across much of the country. Also on how much rents have risen; and the expectation that they will continue rising, and at the same pace, well into the future.

But several sub-measures of the rental market suggest that rental growth is already slowing down.

Also, more renters are sharing accommodation in order to afford to live in preferred locations.

Renters are also leaving sub-par, even average properties, and relocating to better properties. Renters are staying longer in quality & well maintained homes & occupying lesser quality properties for increasingly shorter leases.

Target your lease periods around maximum take-up periods.

You should never have to be trying to find new tenants around Christmas or other times where people are more interested in going on holidays – i.e. school holidays.
Other times to watch out for can vary according to local drivers – i.e. universities, hospitals, new construction projects etc.

Never have a lease end in December or January as a rule

Regardless of the stage in the property cycle – is that competition is fierce in rental markets. Prospective tenants always compare your property to whatever else is on offer. They just don’t blindly accept the asking rent without doing their homework.

A poor property doesn’t rent well, regardless of the lack (or otherwise) of supply.

Don’t expect rents to rise automatically every year.

There are many things an investor can do to maximise rents, but again, my experience suggests that rents don’t rise every time a lease is up & keeping a good tenant, even for a bit less rent, is far better than getting more money & having tenant problems.

A property investor’s aim always should be to sign the best tenant for the highest possible rent in the lowest possible vacancy time.

Never let your property sit – advertised for rent – vacant for too long. Properties should be rented out in weeks, not months.

Waiting too long stuffs up your cash flow & often gets you less rent in the end. If you want to take longer, do not list it for the full time. It will look stale.

Buy an investment property that can be shared.

One-bedroom stock in an inner city location is fine, just make sure the apartment design/proportions can accommodate a couple if needed. Also when it comes to two-bedroom product – having separate bedrooms, with their own ensuite, allows two unrelated couples or singles to share.

In fact, the one ensuite per bedroom ratio is proving to be a good one, especially in regional markets, where resource workers often share accommodation once friendships are established. Four middle-aged men in a four-bedroom/four-bathroom house might not smell too crash hot, but I bet it would show a great rental return.

Some statistics For You

There are some 1,600 postcodes across Australia.

Last year, 40% of these experienced a decline in their rental vacancy rate, whilst just over half (52%) saw an increase in the number of dwellings available to rent. Eight per cent saw no change in rental supply.

When it comes to rental demographics, more people are sharing. A consistent theme across Queensland rental agencies is the increase in the number of people per dwelling. Many have told us that there are around 30% more people living in each rental property when compared to a few years ago.

The Census doesn’t supply us with the number of people renting, but some quick maths suggests that 2.5 people live, on average, in the nation’s 2.3 million rental dwellings. Ten years ago, the average size of the rental occupancy across Australia, was closer to 2.

Jason Gwerder
Friday, 11 December 2015

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