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Six key strategies to maximise your rental yields

Wednesday, 27th Mar 2019

With Perth’s rental vacancy rate reaching its lowest level in nearly six years and competition picking up amongst prospective tenants, we’re seeing increasingly optimistic signs for Perth’s rental market. Whilst these initial improvements are yet to translate into rental price movements across the board, these transitioning markets can be a crucial period for investors looking to better position themselves to leverage future market opportunities. With this in mind, here are some essential tips on how to maximise rental yields during a dynamic market.

Understand what’s driving tenant demand

Rental yields growth

It’s one of the fundamental principles of property investment that demand drives growth, and the rental market is no different. In order to achieve the best rental yields in any market conditions, it’s important to firstly understand the factors driving tenant demand. Target markets will often vary from area to area, so researching comparable properties in the local market is a good starting point when identifying potential features to boost your property’s own rental appeal. For instance, is there a premium on rental properties with built-in storage space or air conditioning units? Your property manager can be a great source of information when it comes to understanding tenant expectations, and a proactive property manager should be able to advise you on cost-effective strategies and value-add recommendations to enhance your property’s rental performance.

Keep up the appeal

In a transitioning market, not all property investors will be realising rental growth at the same time. However, in order to put yourself in the best position to leverage market opportunities, it’s important to look for ways to improve the immediate rentability of your property, while also enhancing its long-term appeal and performance. Making these changes proactively rather than holding off until your property is worse for wear could not only improve the appeal of your property to new tenants, but also maximise tenant retention by attracting renters that are more likely to view your property as a long-term solution rather than interim accommodation. Given the costs of replacing tenants and re-marketing properties on a regular basis, retaining good tenants can be just as important as achieving strong rental rates when it comes to maximising cash flow and achieving the best possible rental returns.

Set the right rental rate

It’s a common misconception in the real estate industry that maximising rental yields is synonymous with increasing rental rates. In reality, however, achieving the best results for your rental property often comes down to setting the right rental rate in the first place. Whilst increasing rents, when the market allows for it, is a great strategy for improving cash flow, doing so outside of market movements (or similarly not adjusting expectations in line with the market) can prove more costly for owners in the long run if it means facing lengthy vacancy periods as a result.

Consider including additional clauses in the rental contract

If you’re anticipating future improvements within the rental market but are yet to see a significant uplift in market rents in the area surrounding your investment property, your property manager might recommend including additional clauses in the leasing contract that will allow you to review or increase your rental rates further down the line. This is a great strategy to ensure your property continues to align with wider market movements, but it’s important to be cautious of excessive rent rises and the impact these might have on your relationship with tenants.

Proactively manage leases with seasonal influences in mind

Much like the wider sales market, rental demand will often fluctuate based on factors such as time of year and seasonality, with some seasons lending themselves to higher levels of tenant demand than others. As an owner, this may mean reducing your rental expectations in low-demand periods (such as during the winter months) to ensure your property is leased as quickly as possible and avoid costly vacancies. Whilst one or two-year leases are often considered the industry norm, timing lease renewals to fall in higher demand periods can help owners achieve higher rental yields and avoid untimely reductions that set their property below market rents.

Speak to a value-add property manager

As an investor, it’s important not to underestimate the crucial role property managers can play in maximising the performance of your property portfolio. A good property manager won’t just manage the day-to-day maintenance of your properties and handle tenant relationships, they will be able to make strategic recommendations to proactively enhance the performance of your properties. The right property manager can be an invaluable asset when it comes to identifying value-adding opportunities, understanding the local market, and recommending clauses to ensure your property remains aligned with market demand.

Momentum Wealth is a full-service property investment consultancy dedicated to assisting investors in all aspects of their property investment journey, from financing through to property acquisition and property management. Visit our website for more information on our property management services.