- Posted 28 Oct
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Property investing is always risky. Your property might be empty for months while you search for another tenant, or you might have to do major repairs. As a security against these inevitable issues, the rent you charge needs to be able to cover your mortgage costs plus an extra reserve that can go into a maintenance fund.
With rates on many home loans rising, investors may soon see a hike in their monthly mortgage repayment costs. If you are facing this situation, you may need to increase the amount of rent you charge your tenants. Let’s look at a few tips for boosting your rental income from your investment properties.
Re-evaluate the market
If you haven’t made any changes to your rates recently, your property may be undervalued. Do some research Into market averages in the immediate neighbourhood and surrounding areas to get a feel for current rates.
If you work with a property manager, they’ll have an accurate idea of market rates and what you can charge. Often landlords will raise their rents a small amount each year to keep up with surrounding neighbourhood increases. This approach is less painful to tenants than a large increase after no change for several years.
Fire your property manager
Most property agents charge a fee of between 4 and 7 per cent, so you can save money each month by self-managing. Of course you’ll have to put in the time and effort needed to deal with rent collection and tenant issues. You should also study local landlord regulations to make sure you stay in compliance.
Renovate for increased rents
If the price you are charging is fair for the area and the type of property, you may still be able to boost rates by making your property more modern an attractive than the competition. The key is to improve areas that tenants will really value, such as flooring and the bathroom.
Adding a laundry is a relatively simple project that can return great value. Renters appreciate the convenience of doing their washing at home and are willing to pay more for it. Another simple project to boost value is adding storage. Installing some simple wardrobe shelves from IKEA won’t cost much, but will impress your tenants.
Don’t forget depreciation
While not technically an income increase, making the most of depreciation can have the same effect by saving you a substantial amount on your taxes. If your property is less than 40 years old or has been renovated within that time, you can claim building depreciation. The other form of depreciation, plant and equipment, can be claimed by any property investor. This covers deterioration on appliances, flooring, and other non-structural items that wear out over time.
If you are thinking about a mortgage refinance or about purchasing another investment property, Australian Credit and Finance can help. Contact our loan experts to find out about our low rates and great services.