Buying an investment property is a great way for you to make some extra income and obtain an asset that could help secure your future financial stability. However, like any investment, its performance must be carefully monitored to ensure that it remains profitable.
It is important to understand what the key indicators of a successful property are and the steps you can take to ensure your property achieves them.
Examining your annual rental yield is the first step in determining your property’s performance. In the investment property game, it is a vital statistic to have. There are two ways that yield can be calculated: gross rental yield and net rental yield.
Your gross rental yield can be calculated by the annual rental income (weekly rent multiplied by 52 being divided by the purchase price and multiplied again by 100). This will give you a percentage.
Net rental yield is calculated the same way except your annual expenses are subtracted from your annual rental income first.
While both are important to know, net yield tends to be a more reliable figure as it can give a better indicator as to whether your investment will be self-sustaining.
Once calculated, you can then compare your rental yield to the average yield in your property’s suburb and those that surround it. This is a good marker to measure performance by. If your yield is below that of other properties, then you may be able to increase rent while remaining competitive.
Another means of measuring your property’s performance is by examining its change in value. Your property will ideally increase in value. If you decide to sell years later after purchasing, it will hopefully sell for more than the original purchase price. This is known as a capital gain.
By using these key indicators, you can decide whether to be a long-term holder of the property or to sell and take the gains. If you find your investment property’s performance to be unsatisfactory, there are multiple steps you can take to improve them.
The nicer your property looks, the better you will be able to justify a higher rental price.
Renovation is a fantastic way to help your property perform at its best in the market. Giving your property a modern look can make it highly appealing to renters. If a full renovation is out of the question though, there are a few small-scale improvements that you can make that will spruce up your property.
A fresh coat of paint is the ideal way to freshen up your property without having to break the bank. Lighter coloured paints will help to accentuate your property’s natural lighting.
With electricity prices getting higher and higher, modern renters love the idea of energy-efficient technology. Energy saving bulbs could make your property very appealing.
Your property could also be underperforming if you are not examining your rental property expenses as closely as you should be. Much of what you spend on your investment property can be tax deductable. Such expenses that can be claimed include advertising for tenants, bank charges, body corporate fees and charges and many more.
It is important to note that you can claim expenses relating to your rental property but only for the period your property was rented or available for rent.
With the many complexities that come with an investment property, it is vital to get the right help. With the right property management agency, you can form a valuable partnership to ensure that your property performs at its best.
At Little Real Estate, Australia's largest independently owned real estate company, our expertise in property management services means we understand how to get the most out of your investment property.
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