Now, more than ever, it is important to have an edge if you are a landlord in the rental market. Expertise and guidance are crucial in landing reliable tenants. Thom Richards, Co-Founder of property management tool ‘Managed App’, gives a comprehensive explanation of how to take advantage of investing in the current Sydney market.
In 2020 we saw vacancy rates rise substantially. What’s happening now?
Sydney’s vacancy rates were the highest they had ever been in 2020. The city’s vacancy rate ended on 3.9% last year but is now seeing a bounce back.
Sydney vacancy rates for January 2021 were 2.9%, which is exactly the same as the vacancy rate in January 2020. This demonstrates increased confidence in the economy from renters and this positivity is likely to continue as the market strengthens throughout the year.
It could also indicate a tightening of rental listings on the market. Many short-term rentals, such as Airbnb listings, marketed themselves as long term rentals during the pandemic, increasing the supply of rental properties and therefore, the vacancy rate. With interstate travel opening up, these properties are now returning to short-term rentals, and in part have helped the recovery of Sydney’s vacancy rates.
How are rental returns performing?
Rental returns in inner-city properties have dropped by 20% on average, which is a considerable drop. Rental yield in Sydney was 2.9% in January 2021, which is below the national average of 3.6%.
However, this can be expected to increase as rental supply and vacancy rates tighten, and competition for rental properties becomes stronger.
What properties are we seeing on the market?
Market quality is seemingly low. Just the other day, I was browsing for rental properties and none of them seemed to be well maintained. Low market quality is a big issue in Sydney inner-city rentals at the moment.
Landlords became complacent as the convenience of inner-city properties used to outpace the need for comfort. As people look further afield due to work-from-home conditions, poor quality properties simply will not be leased.
However, quality is something that landlords and property managers can easily control, unlike market conditions. Standout properties are likely to be snapped up, so take advantage of this opportunity.
How can an investor make their property stand out?
A standout property is far more likely to rent, and the first step is to update your investment. Landlords need to make their properties more modern. This doesn’t necessarily have to be an expensive fix; it could simply be updating cabinetry. But this small update will go a long way in the market.
To give your property an edge, it is also vital to aim for the perfect quality of the home. With extra competition on the market, weathered floors or unmanicured gardens can set your property behind another. Ensure you are maintaining it and keeping it sparkling for inspections.
Unique properties are seemingly the ones that are being snapped up. Heritage-style buildings and loft-style apartments are being secured by renters at a premium. Embrace the different aspects of your property, as this could be what makes renters fall in love with the home and compete for the lease.
Once you have followed these steps and have tenants move in, it is important to keep them for as long as possible to maximise your rental returns, provided they are reliable leaseholders. Employing a property manager who is enabled by cutting edge tools such as Managed App will ensure excellent communication and maintenance of your property. This is likely to encourage tenants to stay and will increase your return.
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