So it’s no wonder that many ordinary Australians choose to invest in a house or an apartment to build their retirement nest egg. According to the Australian Bureau of Statistics, when you exclude the 100 richest Australian property investors, the average net income of Aussie property investors is $79,404.
This doesn’t leave a lot of room to support a dud property investment in Australia, so it is vital to squeeze every bit of value that you can out of an investment property.
We've put together a list of the key ways to maximise your property investment returns so you are more likely to look back on the investment in future years with success.
Before you do anything else, it is vital to see an accountant and make sure you have worked out the right investment structure for your property investment and investment property loans.
This doesn’t mean complicated financial engineering, it means understanding the basics like how to split debt between your home and your investment property, and how to divide ownership between yourself and any investment partners you may have, including your spouse.
It may seem boring or even a needless expense, but nothing will cripple an investment from day one like starting out with a structure that is badly arranged so you end up missing out on tax advantages you would have been entitled to.
This goes without saying, but the location of the property and the price you pay will make a big difference to your investment property returns.
Choose a place that is popular with renters and primed for capital growth, and set a firm limit on what you’ll pay and stick to it.
When you find a property you are interested in, you can use one of our free property reports to find out more about it and get an idea of fair property value.
Once you have acquired a rental property you can start working to increase the rental yield you receive from the property. It is important to:
There are lots of small improvements that a smart investor can make to improve rental return. Perhaps the easiest is to install extra value-adding appliances. These could include a dishwasher, reverse-cycle air conditioning and a security system.
These will make your tenants more satisfied and less likely to leave, saving you money in the long run.
Nothing will kill rental value like letting the property get run down and shabby. Broken fixtures and appliances are a particular turn off. To maintain rental value, be sure to have relationships with trustworthy tradies who you can rely on to fix any problem quickly.
Using a professional property manager can also be a good idea. If the property looks good and everything works you will be able to command a higher rent.
Occasional cosmetic changes are essential to keeping your property attractive in a changing market. Tastes change and your property needs to change with them.
Small changes can have a big impact, like a fresh coat of paint, or updated flooring and window coverings. Improving the kitchen and bathroom can also be a worthwhile investment.
Being regularly forced to move is one of the big hassles of being a renter and it costs money too. For this reason, many tenants are willing to pay more for the security of a longer-term lease.
Many landlords refuse to allow pets which means that pet owners are often willing to pay a higher price for the limited number of properties that do allow their furry friends. Pet owners can be great tenants and allowing pets can give your property a real point of difference, making it lease faster and achieve higher rents.
The art of setting rents is to raise them periodically without driving out your tenants and suffering vacancy. This involves understanding exactly what is available nearby and the cost and hassle of moving for the tenant.
If you study the market closely, you can ensure you are extracting the maximum price for your property without increasing vacancy.
Lenders often change their investment property interest rates so you should keep an eye out and benchmark your loan to market from time to time to see if there’s a better deal available. A seemingly small difference in interest rate can add up to a lot over time.
For instance, on a 30-year property investment loan of $450,000, if you find an interest rate just 20 basis points cheaper, it will save you $18,441 in interest over the life of the loan. To see how much you can save on your loan with a cheaper interest rate, use our free mortgage calculator.
As you can see, small changes can make a big difference in how much your property earns. Take the simple steps above, and you will be well on your way to maximising returns from your investment property.