4 Steps To Maximise Your Rental Income

In today’s climate of rising interest rates and falling house prices, maximising the rental returns on an investment property is particularly important. Luckily there are a number of simple steps to help landlords squeeze those extra dollars without squeezing the tenants. Here is a quick guide.

Step 1: Be clear about your ideal tenant

When purchasing an investment property, most investors have a reasonable idea of likely return and the type of tenant the property will attract. However, renters needs and desires are constantly changing. Before putting your property on the market (or trying to reinvent the property via a renovation or cosmetic make-over) speak to local estate agents to determine the exact tenant profile and level of rent.

Put yourself in the tenants’ shoes. Who are they? What are their priorities and needs? Most tenants value similar things: nearby shops and services, access to public transport, low crime rate, quality public amenities and parks.

Make the most of your property’s natural advantages and features. For example, a property close to a university will obviously appeal to students. But these tenants won’t be driving to school, so if the property has on-site parking you may fail to take advantage of the potential value of this feature if aiming only at students.

Keep your tenant in mind when considering improvements to avoid overcapitalising. Students are unlikely to pay higher rent in return for a recently refurbished kitchen, but will probably do so for a broadband internet connection.

Step 2: Review the rent

Is your asking rent still accurate? Remember that receiving lower rent is better than receiving no rent while a property is vacant. With vacancy rates declining, now is good time to review the rent and put in place an annual rental⁄CPI review process.

Be aware of certain legal conditions that exist in relation to rent increases. In the meantime, research the current and prospective rental market, particularly rents and vacancy rates in your area. Is rental demand for the suburb increasing? Has proximity or accessibility to services such as schools, transport and shops improved or will they in the future due to future developments in the pipeline?

Step 3: Cut management fees

Managing the property yourself can save you up to 10% of gross rental. If you are time poor, it may be more efficient to employ a professional property manager.

Look for agents with strong local knowledge, a good profile in their community and a large rental list. Be clear about what their management fees cover in terms of maintenance and repairs services, and don’t be afraid to question and negotiate. Also remember to keep records of property management expenses for your tax, as they may be claimable.

Agents have wider access to potential tenants and can screen their rental history to prevent problem tenants. But in a hot rental market, sourcing tenants is less difficult so you’ll spend less on advertising. Tap into formal and informal tenant networks through noticeboards, student accommodation services and relocation agencies servicing expatriates and global corporations.

Finding quality tenants and keeping them – whether through a real estate agency or doing it yourself- is the key to cutting “tenant turnover” and the costs that this incurs.

Step 4: Maximise your tax refund

The tax laws surrounding property investing can be complex. However, the available tax benefits more than offset the time spent preparing a tax return. The key to maximising the tax benefits is careful record keeping and strict cost control.

By following the above four steps you may not beat higher interest rates or overcome the current market slowdown, but you will be on the path to a more profitable relationship with your investment property.

(Source: www.anz.com.au  Home Essentials online magazine Issue 19 June ⁄ July 2005)