THE RENTAL MARKET IS CHANGING SO LANDLORDS NEED TO CHANGE WITH IT
Quality tenants are becoming harder to find and are taking longer to find. One of our landlords with a quality 2 bedroom unit in Toorak Gardens, Adelaide, had to reduce their rent by $20 and it took 4 months before they got their ideal tenant! The market has not been so bad for years.
Admittedly they were probably more selective than most but there is no way, under any scenario, that waiting 4 months could be considered a reasonable time frame in which to get a good tenant. We are seeing rents drop around 5% each time a new lease is signed and whereas previously it might only be a few days vacancy between tenants now it is inching up to 4 or 6 weeks.
There is a definite shift in the playing field.
Winter is always slow and dark in Adelaide but there is more than this annual slow down involved here. Much of this change would be due to the very low interest rates which are making real estate affordable for many who would otherwise have only ever contemplated life as tenants. For the second month now the cash rate has been 1.5% which equates to around 3.6% when borrowed from a bank to buy a home. This makes the monthly rent about the same as a mortgage repayment.
Following recent toughening of borrowing criteria for investors they are now even paying slightly higher interest rates than owner/occupiers.
What this all means is that those who are still renting either haven’t been able to save a deposit to buy or otherwise have not yet been able to comply with some lending criteria such as full-time permanent work for 6 months or don’t have enough income.
That other group who have some credit impairment that forces them to be renters now form a larger proportion of the renter pool inciting one landlord to say recently, ‘The renters who are left are either, too poor, too disorganised or too dodgy to get a loan!” That’s a bit over stated but it reflects some of the frustration. In reality some of the most savvy investors will always rent the houses they live in and then seek tenants for the houses they own. This is what will earn them the biggest tax deductions, but that’s another story.
Investors Need to Reinvent their Property
The fact remains there will always be a demand for good AND BAD rental properties to cater for every budget but which of these do you want to own and what quality of tenant do you want to attract?
We are in a tenant’s market where they are the ones that can be choosy about the places they rent so if you are a landlord who wants to take back control and have the bigger numbers of applicants coming through your property, so that you can be the one to chose them, then here are a few simple things you can do.
Every property will rent regardless of its quality or lack thereof; it only depends on the price. If it’s not renting then you need to reduce your price but it you don’t want to chase the bottom of the market then you need to make your property more desirable.
So many rental properties lack the basics of cleanliness, tidiness, presentation or desirability.
It should not be too much to ask that your property be clean and tidy which includes lawns cut and getting rid of weeds and rubbish. Presentation can involve a lot more including good paint work, carpets and you need to have all facilities working.
Desirability is, however, more involved. So many rental properties have poor quality curtains, antiquated bathrooms, non functional kitchens and décor that might have gone out of fashion forty years ago.
Most people don’t renovate properly. There are a multitude of renovation programs on TV but still to most people renovation means paint, carpets and not much else. Where old timber windows barely work many would-be renovators see only paint as the solution and often end up painting them shut. In this situation if you couldn’t replace the windows or engage a qualified tradesman to make them functional then the simplest solution is to buy a new property where you have a reasonable chance that the builder had some thought of style and functionality.
Remember that you still need to be selective when you buy new; new does not automatically make you immune to poor design. Small rooms and minimal facilities have no cure except the bulldozer.
New homes will give the biggest claims for Negative Gearing and should always be your first option but you can’t justify demolishing a 20 year old house so you need to think seriously about what the house needs to make it desirable enough for even you to want to live there.
Remember the worst advice as a warning …
There are a number of property investment groups that will tell you to buy any property so long as the rental figures stack up and they will tell you not to worry if you wouldn’t like to live there yourself
This would have to be a recipe for disaster in the current market but in reality it’s bad advice anytime. Those who are quite happy for others to live at a level they would never descend to demonstrate a poor attitude and will find this market is especially bad news for them.
Keep in mind that in any market, good or bad, you need to do some extra work to the property between each tenancy if you hope to maintain its standard, even if it’s only basic presentation, and get the power connected; there is nothing worse than trying to show prospective tenants through cold, dark rooms.
Contact us on 8186 2777 if this article has inspired you to break out of the ordinary.