Thirty ways to lift the rent

Even a modest improvement to a property's return can make the difference between burden and boon.

PORTFOLIO POINT: When capital gains are harder to come by it might be worth looking at ways to boost your investment’s cash flow.

Outside of routine rental increases, investors could be forgiven for thinking it’s too difficult to get more money from a tenant. You might be surprised how simple it can be. From a lick of paint to a shelf in the garage, experts say even the smallest effort can have an impact. Here are 30 tips to help boost your yield.

1. Renovate and profit

Breathing new life into your investment property doesn’t have to cost a fortune. A strategic renovation focusing on the important areas could increase your return.

RUN Property chief executive Rob Farmer says a client in Melbourne recently refreshed her investment by replacing the kitchen, painting and installing new carpet and blinds. The work cost $10,000 and her rent jumped by $75 per week.

Ana Stankovic of Renovate and Profit recommends researching your target market and providing functional areas and useful features that tenants demand.

2. Replace the appliances

If you can’t afford a full makeover of the kitchen, consider updating the appliances. A new oven, stove or dishwasher can have an impact.

Peter Koulizos, coordinator of TAFE South Australia’s property and shares investment course, says most tenants consider a dishwasher to be a standard feature. Not having one could make your property harder to lease.

3. Focus on the basics

You can’t charge tenants for the repair of reasonable wear and tear and if you’re not diligent your property could wind up looking shabby.

Farmer says periodically having the carpet cleaned and curtains dry-cleaned is worthwhile. Make sure the walls and floors are scuff-free and touch up any grubby paintwork.

4. Heating and cooling

Tenants will often pay a premium for the ability to warm their home in winter and cool it in summer. Simon Pressley, buyers agent with Propertyology, says installing an air conditioner could immediately result in an extra $10 to $20 a week in a market like Queensland.

Waiting until winter to rent a property that’s not air conditioned is unlikely to fool anyone, according to PRDnationwide Ipswich assistant manager Jeff Mendoza.

The same applies with heating in markets like Melbourne and Adelaide. Landlords could recoup the cost of equipment in about 18 months, Farmer says.

5. Storage space

Mendoza says he’s seen potential tenants flock to a property, only to walk away when they realise there’s no wardrobe.

“You can purchase cupboards that are easily fitted to the walls but aren’t enclosed. It’s a cost-effective solution.”

Stankovic says enclosing the space under a staircase or installing a shed in the backyard are other options.

6. Build a cheap laundry

Tenants increasingly demand an internal laundry and the local laundromat isn’t an attractive alternative. It’s feasible to build a front-loading washing machine, dryer and trough into a large cupboard

7. Safe and sound

Security is an important factor, particularly in areas with a high proportion of elderly or single households. Mendoza finds properties with security screens and doors rent much faster.

“Tenants also get a discount on their contents insurance for properties that are security screened, which makes the feature (for them) all the more attractive,” he says.

8. Build a new bedroom

The layout of some properties makes it possible to erect walls and create a new bedroom. While it sounds daunting, it mightn’t have to cost the world.

Philip Thomas, author of Profit from Property, says it’s sometimes possible to do the work within the existing structure of the building gyprock.

9. Add a dwelling out the back

Building a granny flat in the backyard could boost your cash flow, and the process might be easier than you think. New South Wales has the most streamlined approach to granny flats in the country and a number of councils in Western Australia are relaxing their regulations. It’s more difficult in other states, but the trend is growing.

Aaron Sainsbury from Smartline Personal Mortgage Advisers says a prefabricated two-bedroom dwelling could set you back between $70,000 and $100,000 and in the right area could get you an extra $300 a week in rent.

10. A clever form of parking

Somewhere to park a vehicle is an attractive feature, but it’s not always possible – especially in the inner city. Forget building a carport – Stankovic says a piece of material can do the trick.

11. Automatic roller door

If your property already has a carport but its door is an old manual one, consider replacing it. Mendoza says it’s something many tenants expect.

“Remote control garages are a cost effective luxury that can secure a tenant over a comparable property that doesn’t have this feature.”

12. Street appeal

Painting the outside of your property, installing a new fence or putting in a neat and tidy garden could add some extra cash to your pocket. Thomas says a bit of exterior attention can lift appeal without breaking the bank.

13. Meet the market

Many landlords aren’t charging the rent they should be. Checking out the local market should be a regular routine for investors, Koulizos says.

14. DIY management

If you’ve got the time and patience to manage your own investment properties, it could be worth your while. Management fees could equate to as much as 15% of the rent, Koulizos says. On a $400 per week property, that’s almost $3000 a year.

15. Drive a hard bargain

If you’re not too keen on taking care of things, talk to your managing agent about getting a better deal. You’ll be in a position to haggle if you’ve got more than one property with the same agency. Even if you don’t, Thomas says it’s worth bargaining for a more competitive rate.

16. No end of year renewals

The time of year your tenant’s lease expires can make a difference to cash flow, according to Investigate Property buyers agent Justin Eslick. December is statistically the slowest rental period, so if your property is vacant in the lead up to Christmas it could stay that way for a while.

If a tenant is signing a lease that’s due to expire in December, change it to January or February, he says.

17. Long-term with fixed increases

In areas where demand for accommodation is high and vacancy rates are low, consider offering a long-term lease, Johnston says. You’ll be more likely to secure a tenant, and with built in periodic price increases you can be sure of improving returns.

18. Rent rooms individually

Leasing a property as one dwelling is the obvious choice, but in the right area it could be worth renting rooms individually.

Locations with low vacancy rates, especially those close to major universities might be perfect, Thomas says. In some cases, your weekly income could be $50 to $100 a week higher on average.

19. Furnished rental

In suburbs favoured by executives or students you should consider renting your property fully furnished. It’ll require an initial outlay and some ongoing costs if items are lost or damaged, but it could be worth it.

20. Holiday or executive rental

Catering to travelling businesspeople or tourists could almost double what you’d make from a long-term tenant, but your property needs to be in an area where demand for short-term accommodation is high.

Thomas says even the hottest business or holiday destinations have off-peak periods, so be ready to weather the slow seasons.

21. Charge for water use

Each state and territory has its own rules, but Koulizos says landlords can charge for some or all of the water use in some areas. The managing agent or relevant tenancy authority can advise what you can and can’t charge the tenant.

22. Pets welcome

If you’re willing to allow pets you could be in for a windfall, Johnston says.

“A desperate tenant with a much-loved dog or cat will pay more for such a property.”

While some rental properties aren’t suited to pets, like small apartments without an outdoor space, a house with a fenced yard could be a gold mine, Koulizos says.

23. Smile and be nice

A happy tenant is more likely to be a responsible and long-term one. That’s why Stankovic suggests making an effort to let them know they’re not just another rent cheque. The small token might also encourage them to take better care of your property, she says.

24. Depreciation schedule

Getting a depreciation schedule could be a boon at tax time, Pressley says.

“We’ve bought 60-year-old properties for clients and there was still $5000 or more depreciation to claim in the next year alone. That reduces the impact on cash flow substantially.”

25. Find a star accountant

A depreciation schedule is one of many potential deductions. If you don’t have a good accountant, Koulizos says you’re probably missing out.

“If they know anything about property, they should be able to tell you how to have your tax withheld so in effect you’re receiving your tax refund over 52 weeks.”

26. Maintenance check

Taking a thorough look at your property to ensure everything is ship-shape could save you in the long run.

For many investors, it’s often months – or years – between visits. It’s easy to let issues get pushed to the back of your mind, but Farmer says delaying works is counterproductive to rental growth.

27. Split costs with neighbours

If you’ve got an apartment that’s next door to another block, strike a deal on maintenance with the neighbouring body corporate committee.

Giving the same gardener extra work might incur a discount and splitting that cost by two (or more) will reduce overheads, Johnston says. The same applies to houses.

28. Ditch the grass

If you’ve got a house with a small yard or an apartment with a courtyard, it might be worth finding a lower maintenance garden option.

Julie Schnoegl from PRDnationwide Wagga Wagga says paving over grass will slash maintenance costs. Heartier plants and shrubbery will also require less upkeep.

29. Refinance your mortgage

Belinda Williamson from Mortgage Choice says a number of investors don’t bother checking the health of their loan on a regular basis.

An analysis of data shows refinancing customers saved an average of $10,000 each over five years, she says.

30. Pay down debt

Paying a chunk off your mortgage with a tax refund, work bonus or savings can improve your yield. Johnston says a reduction in debt can slash interest repayments.

Similarly, investors with no non-deductible debt (mortgage interest on a principal place of residence) could put cash in an offset account.


Copyright Australian Property Investor magazine - www.apimagazine.com.au. Reproduced with permission.

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