Cashflow and capital growth make the property investment world go ‘round. Really, when all the strategies are said and done, it’s that simple. You need both to make a successful real estate portfolio.
As such, attracting and retaining reliable, paying tenants for your rental is essential to the survival of your asset base and should be very high on the priority list, right there behind considered asset selection.
Getting the location and property itself right, in context of your market, will of course go a long way to determining how readily you can find decent residents.
But there are a number of other factors to consider when it comes to the blockages that can potentially inhibit that necessary, consistent income stream. Here are five big ones…
- The price
With masses of market data available via online property portals, today’s tenant is more educated (and discerning) than ever. Price your property above expectations and you’ll fail to attract the market.
Your rental value must be based on what local tenants are willing to pay, not just your financial needs as a property owner. In this instance, it can literally pay to lower your sights a little and enjoy consistent cashflow, rather than unpredictable spurts of interrupted income.
- Vacancy rates
When we see a surge of investment activity in a particular location or, as has recently occurred, a glut of new apartment stock come online all at once, vacancy rates can start to creep up in certain pockets.
This is commonly witnessed when investors buy into speculative areas or developments ‘en masse’. Think the resources boom and mining towns built on the back of this single industry.
When tenants are spoilt for choice due to a saturation of rental accommodation, for whatever reason, you can end up with an asset that’s doomed to fail in the long run.
- Asset selection
On the odd occasion, there’s no escaping the fact that you’ve simply bought a ‘dud’, in a location lacking the necessary amenity to attract and retain good long-term residents.
Tenants, just like everyone else, require a diverse local industry base within easy commuting distance of various employment opportunities. How else will they pay the rent?
Many prioritise lifestyle amenity and well-established social infrastructure, such as education and healthcare facilities. It all comes back to knowing your tenants and targeting their requirements accordingly.
As just mentioned, the first critical step in minimising rental vacancies is to know your tenant. Even a basic understanding as to your target audience, what they want and what they’re prepared to pay will dramatically increase your chance of successfully finding good, reliable tenants.
Your property should be sold to a prospective tenant with much the same gusto employed to reel in a prospective buyer…because one is just as important to the long-term viability of your portfolio, as the other.
Today’s digital marketing is a highly visual medium, where tenants generally make decisions on the basis of their immediate emotional response to your property. Or more importantly, the first impressions it makes online.
Staging your rental asset to translate its liveability in pictures is important to make it stand out from ‘the crowd’. Your investment must look inviting and homely if you want it to ‘reach out and touch’ the long term tenant audience.