No matter your situation, property investing is about generating wealth. If your rental property isn’t performing to its full potential, the question is ‘why not?’
Anything you can do as an investor to improve the performance of your asset will reward you well – be it capital growth, manufactured equity, or additional income. Here are some simple steps we’ve learnt over the years that can help ensure you are getting the maximum return from your property investment.
1. Add value
Adding value to a property is a great way to turbo-charge its performance. There are many ways to add value, including increasing the use of the property by sub-dividing the land, obtaining development approval for multiple dwellings, or making improvements to the existing dwelling. These options can quickly increase the value of your property, increase its appeal, and generate equity that can be potentially leveraged for future investments.
2. Claim all tax breaks
If you’re not examining your rental property expenses as closely as you should be, chances are your property is underperforming. Remember, any opportunity to reduce your tax liability means cash back in your pocket. Deductions you can claim immediately include advertising for tenants, bank charges, council rates, insurance, and repairs. Deductions that can be claimed over a longer period include borrowing expenses and capital works. To claim the declining value of depreciating assets, you’ll need a depreciation schedule through a quantity surveyor. Having a depreciation schedule is often overlooked, meaning many investors miss out on claiming all the tax deductions available to them.
3. Decrease the vacancy rate
Knowing the vacancy rate in your local market is key; that way you’ll know whether the period your property sits untenanted for is normal for your area, or whether there is a potential solution within your control. For example, if your property is sitting vacant in a strong rental market with low vacancy rates, you might need to reassess your rental expectations. Sometimes lowering your rent to a more competitive rate is offset by reducing your vacancy rate where you are receiving no rent at all.
4. Increase the rent
It’s sounds like a pretty obvious way to increase cashflow, but many investors are reluctant to jack-up rents in fear of losing quality tenants. When you’re relying on rental income to meet mortgage repayments, you don’t want to make a move that prompts your tenants to look elsewhere. That’s where it pays to know your property’s value relative to your competition. If the value of your rental offering is significantly better than the value of other rentals, you’re in a strong position to justify the increase.
5. Partner with a property manager
When it comes to decisions of rent expectations and vacancy rates, the best advice you’ll get is from a property manager. A property manager is an essential resource for successful investors so choosing the right person to trust with your investment is not a decision you should take lightly. Do your research and find someone who understands that their role is more than just managing the property and collecting rent – it’s about managing your asset.
6. Review the performance of your loan
The loan market isn’t static and your needs may vary over time, so staying in regular contact with your broker can help to ensure you have the right loan for your needs. Mortgage brokers can negotiate better deals, ensure your loan has all the features you need, and check that your loan is moving you closer towards your financial goals.
Are you looking for extra value from your investment property?
Contact a Vision Property & Finance mortgage broker for the best advice and the right property loan for your needs. Give us a call on 02 8354 3000 to reach the Sydney office or 02 4014 1999 to talk to someone in the Newcastle office. You can also contact us here.