5 ways to boost your rental yield

Wednesday, 5th Feb 2014


Rental growth in 2014 seems unlikely in some markets in Australia, but there are still ways for investors to increase the rental income from their existing properties.

 After a period of impressive growth, the rental market in Perth came to a grinding halt in 2013 and in some areas rents even went backwards. Unfortunately for landlords, the prospect for rental growth in 2014 isn’t much better. There are, however, ways for investors to increase the rental income from their existing properties, even when the market is stagnant.

1. Minor makeover

It’s no surprise that making improvements to your property will generally result in a higher rental return. But many investors don’t realise that even minor improvements can be worthwhile. Tenants are often happy to pay a bit more for things like new carpets or a fresh paint job, and these jobs can be done in between tenancies. Exactly what you should do varies from property to property, so ask your property manager for a list of recommended improvements.

2. Substantial renovation

For those investors with an appetite for a larger project and the right property, it may be worthwhile undertaking a more substantial renovation of the property, such as a new kitchen or bathroom, or even extending the floor space. Clearly, this sort of work can only be carried out while the property is vacant, but if planned properly it can dramatically increase both the rent and the value of the property.

3. Build a granny flat

With changes to the residential design codes in WA, you can now rent a granny flat (ancillary dwelling) to a third party. Adding a granny flat to your property can therefore boost your rental yield without having to formally subdivide your property. For around $100,000 – $140,000 you can construct a high-quality dwelling that will provide a secondary source of rental income. You can often secure more than a 12% return on the construction costs and increase your overall rental yield substantially. With interest rates as low as they are, you can see why building a granny flat could make such financial sense.

4. Furnishing your property

Another strategy for boosting your rental yield is to furnish your property, but this is only worthwhile for specific properties and tenants. If your property tenancy targets are executives or university students, who require relatively short-term leases, it may be worthwhile fully furnishing your property and then asking for a higher rent. With the right circumstances, you can often obtain a strong yield on the cost of the furnishings.

5. Asking for more rent

Some investors are missing out on rent simply because their property is rented for less than fair market value. This situation often arises because the property manager is either reluctant to increase the rent (for fear of losing the tenant) or simply out of tune with the market conditions. By employing a different property manager who understands the needs of investors, you may receive an increase in rental income. However, it’s important to remain realistic with the rental asking price, especially when market conditions are soft.