8 Tips to Help Increase Your Rental Property Yield
If you've decided to diversify your portfolio and reach out into the rental property market, you need to know how to set everything up and get as high a return as possible. This means that you need to understand the concept of rental yield and know what to aim for as you put in place measures to help you hit your target. So, what are eight great ways to help you increase your return on rental property?
What Is Rental Yield?
In simple terms, “yield” means the profit you make each year from your investment in rental property, expressed as a percentage of its value. In other words, you need to determine how much profit you make from each property and how smart an investment it is. Of course, property values may appreciate over time through market sentiment, but it's important to achieve a good rental yield to help with immediate cash flow.
What Is a Good Rental Yield Target?
If you’re new to property investment, you may be wondering what targets to aim for and what others can achieve in your market. This will vary from state to state and from city to city, but this site goes into detail and is a good reference for your particular location. Some locations can top out at around 15%, but as a general guideline, aim for a gross rental yield of about 5.5% to begin.
8 Ways to Increase Rental Yield
It would be easy, if not trite, to say that you should simply increase your rent if you want to increase your yield, but there are many other ways to boost those figures instead.
1. Be very critical about everything you spend on. Shop around for quotes whenever you need to buy products or services regularly to service your portfolio. Don't be afraid to seek a sharper quote on insurance. For example, if you haven't yet bought, ensure that you get the best mortgage deal that you can find, and always be on the lookout for new products that may come online.
2. Be aware of trends. For example, people may now want to work from home a lot more as countries emerge from the pandemic. Make your properties more attractive by sectioning off a space that could be used as an office. If you include furniture within your package, add a desk and comfortable chair. Always ensure that the property has access to the highest speed Internet possible, as this is nonnegotiable these days.
Furthermore, make sure that you highlight these features when you market your properties. Certainly, there may be a small expenditure upfront, but you'll attract more interest and be able to position the property towards the top of the rental range.
3. Make your properties more attractive by being a very flexible landlord. For example, considering pets will help your rental appeal to a bigger pool of great tenants (most Australian families have at least one pet and are willing to pay a little more for a rental that will accommodate them). Allow tenants to decorate within reason, if they return everything to its previous condition when they leave. Again, make sure that you market your flexibility, and you will elevate above landlords who may be seen as uncompromising.
4. Think sustainability. While the pandemic may have been front of mind for many recently, climate control has also been a scorching topic. How sustainable are your rental properties? Focusing on this area will undoubtedly strengthen your appeal with tenants who have made the subject a life priority. Furthermore, as you improve the energy efficiency rating of each property through insulation or other changes, you will also lower your energy bills.
5. Capitalise on street appeal. When potential tenants view the street appeal of your rental it sets the standard for what they will expect once they walk inside. If they arrive at your home and see unkempt and/or dead lawns, and overgrown gardens, they're going to assume the interior of the home is in a similar condition. What's more, they will then actively look for more flaws like this once they are inside (to justify paying less than the advertised rent). Before you advertise your home for rent, spend a Sunday afternoon weeding, mowing the lawns, and mulching your garden beds, and you’ll have a much better chance securing your ideal rent figure.
6. Opt for low maintenance gardens. Most tenants are time poor and will prefer not to spend every weekend maintaining the front and backyard – many will pay a little more for this simple convenience. If you can, avoid plants or trees that require lots of pruning or watering and choose some easy-care natives instead. This will improve the rentability of your investment and keep your maintenance costs down.
7. Invest in extra security. Depending on the area, features like an alarm, security screens and a visible camera can both protect your rental and boost your yield. Break-ins are an unfortunate reality regardless of where you live – particularly if a property is located close to the train station, an alleyway or in a cul-de-sac. Tenants that have experienced home invasions or car break-ins before will happily pay more to enhance their safety and well-being.
8. Keep your vacancy periods down. You can avoid this by communicating with current tenants and ensuring they are as happy as possible. If they do have to leave for other reasons, regular communication may give you more advance notice so that you can line up another tenant and, ideally, without any gap. It may be worthwhile considering incentives to either keep the current tenant in place or attract a new one without any delay. Even though this may be counterintuitive, it may help you avoid an extended period with no income at all – and work out better in the long run.
Using a Property Management Company
Of course, many investors in your position will have other commitments and responsibilities and find it hard to manage these properties effectively. If you do opt for an independent property management company, make sure that their fees are always reasonable.
Rental property can be exciting but challenging, and it can often be difficult to find answers. So it's always comforting to know that there are other real estate investors out there who could provide advice and share their experiences with you.
About Brendan Leahy
Brendan Leahy is CEO and Licensee of property management company, We Love Rentals, based in Perth, Western Australia.