Budgeting and checking leases are among the advice for Illawarra investors to help ensure they won’t look back with regret come December.
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Herron Todd White is a property valuation and advisory firm.
Residential director for South East NSW, Chris McKenna, said rental returns for residential properties throughout the Illawarra shrunk significantly through the growth period (2013-2017) as values increased at a far greater rate than rents increased. “Value growth has now stopped and started to decline through 2018, and subsequently rental returns are starting to become more attractive,” he said.
“Capital growth is not expected to be as significant in the next one to two years and investors therefore need to be focusing on the rentability of a property to ensure cash flow continues.”
He said factors such as proximity to infrastructure are important to tenants, and that is why there has been strong demand for rentals around the Wollongong Hospital, University of Wollongong and Free Shuttle route.
Meanwhile, below is Herron Todd White’s list of Illawarra investor “resolutions” to help ensure a financially healthy 2019.
Do your budget
Investors set to gain the most in 2019 will have healthy balance sheets according to Angeline Mann, director at Herron Todd White.
“The tough finance environment that plagued borrowers in the second half of 2018 looks set to continue over the medium term – particularly with the banking Royal Commission findings due in February this year.
“Now is the time to get your financial affairs in order so you can put forward a strong case to the lenders when a prospect to buy arises.”
Ms Mann said it’s essential to do your home budgets and balance sheets while looking for opportunities to tighten up spending.
“Banks currently scrutinise household spending going back three-to-six months during the approval process, so be ready for a future loan application by implementing your new home budget straight away.”
Check your leases
Ms Mann said smart landlords study their existing lease details well before they’re due to be renewed.
“Don’t wait to the last minute – know when your leases are due for renewal and understand the process.
“Being ill-prepared creates pressure and will have you making bad decisions.”
Ms Mann said residential vacancy rates had been on the rise in some areas, so locking in good tenants on long-term leases is smart thinking.
“In some cases, avoiding a rent rise – or even lowering the rent come renewal time – means you can keep a good tenant longer and reduce your vacancy,” she said.
Ms Mann said raising rents to try and make up lost income due to vacancies would be a mistake.
“If your $500-per-week property is vacant for three weeks, that’s $1500 in lost income which equates to almost $30 per week (over the full year). A better solution would be to reduce the rent to $480 a week and keep the tenant in place.”
Start collecting sales and rentals information
Being well-informed about markets helps investors spot opportunities quickly, Ms Mann said.
“There’s no substitute for studying actual, completed sales or rentals in a suburb across a three-to-six-month period in order to paint a picture of a market’s direction.
“If you have selected a location, start putting together a file of properties that have sold and/or leased in your price point straight away.
“This will educate you on what the market is doing and provide accurate evidence as to what you should pay for an investment property so you can secure it quickly.”
Revisit your goals
January is a time to think about why you invest and how your strategy is working.
Ms Mann said clever investors will revisit their strategy in January. “You may need to delay or amend your plans if markets are softening – just be flexible so you can achieve your goals.”