Things you should know about the Sydney rental market if you own or are considering owning an Investment Property Sydney.
We ask rental expert Michelle Galletti, award winning principal of Just Rent Sydney. Just Rent Sydney manage residential property in and around Inner West Sydney.
1. Michelle, how long have you been working as a property manager and where are your main areas of expertise?
A: I have worked in Residential Property Management for over twelve years throughout Sydney including Lane Cove, Balmain and the Inner West, and currently own a specialist property management agency – Just Rent Sydney. My main area of expertise is residential investment property management looking after investment properties for local and overseas property owners.
2. In the areas that you cover, briefly describe the main different types of tenants that you deal with.
A: At Just Rent Sydney, many of our properties are in close proximity to the city. Therefore we generally attract a mix of professional executives, couples and young families.
3. If an investor wanted to be sure of finding good tenants who pay the rent on time, what general advice do you have in terms of the location of any rental property?
A: From experience the best advice I can give to finding good, reliable tenants would be to stick as close as possible to cosmopolitan, affluent and lifestyle suburbs where investment properties tend to have lower rental vacancies and higher rental returns/yields.
4: When an investor buys a property, there are so many important considerations that it is sometimes difficult to empathise with the individual needs and requirements of a tenant. Are there any features or inclusions that you consider are essential to attracting good tenants?
A: As a specialist property manager our job is to maximise our clients’ investment opportunities. Good tenants like well presented properties. The best way to see if the property is up to scratch in the current rental market is to jump online and see what you are competing with! Sometimes by spending a little money on items such as ripping up the old carpet, polishing the floorboards, putting in some built ins and giving the property a fresh coat of paint, the property will not only attract good, quality tenants but in most cases a higher rent. When looking to buy an investment property, well presented properties with parking, outdoor space and good sized rooms are a real bonus.
5. Is it better to rent out a property furnished or unfurnished and what is the difference? If you are going to rent out a “furnished” property, what are the essential items of furniture that must be included?
A: Furnished or unfurnished? This is purely dependent upon where the investment property is located. There needs to be a market available for furnished properties in the area in question. Some areas are just not suitable for furnished accommodation. For instance, in the CBD or in close proximity to the CBD, executives and ex-pats look for a place that they can just move straight into without any hassles. Such people would generally be looking for furnished accommodation and are happy to pay a higher rental rate than if the property was unfurnished.
Investing in furniture obviously involves significant upfront costs. The essential furniture items would include a bed, fridge, TV, couch, washing machine, dryer etc... There may be tax depreciation benefits available to investors in respect of any purchased furniture items and you should check these with your accountant. Furnished properties generally attract higher rental rates because of the cost of providing the furniture and the convenience provided to the tenant. However, depending upon the market in question, there is sometimes a higher vacancy rate for furnished accommodation when compared to unfurnished accommodation. This is because furnished accommodation is aimed at attracting a particular type of tenant.
6. Many investors are concerned about tenants causing damage to their rental property. What advice do you have to anyone with these concerns?
A: Prevention is better than cure. If you don't already have a property manager, get one! You pay your property manager to keep a close eye on this. Conducting regular inspections reduces the risk of damage to your property. Always act on issues quickly. In the event that you discover that the tenants are causing damage, get the tenants to fix the damage immediately or find ways (legal of course) to change the tenants! Taking these steps will radically reduce the risk of unnecessary costs and damage.
7. What are the main functions and responsibilities of a property manager?
A: The main functions and responsibilities of a property manager are to ensure that the property is being well looked after and that you, as an investor, are getting the best level of return from your investment. Property managers should do this by minimizing risk and maximising every investment opportunity possible.
Property managers should only place good tenants in the property and this is done by thorough reference checks on any prospective tenant. Property managers should also keep rental returns at optimum levels and this is done by conducting regular rent reviews. Finally, any vacancies should be kept to a minimum and good property managers do this by acting quickly and attracting new tenants as quickly as possible. Your property manager should offer you piece of mind that your investment is safe and yielding the maximum return possible.
8. When selecting a property manager, what questions should the investor be asking to ensure that they select the most suitable property manager for the job?
A: Finding a good property manager can mean the difference between a trouble free investment property and an ongoing nightmare. While many investors put a huge amount of effort into finding their investment property, they rarely spend the time looking around for a good property manager.
When selecting the most suitable property manager the following questions should be asked:
-How many years experience does the property manager have?
-Is it a specialist property management business?
-How many properties are under management and how many does each manager look after?
-Does your property manager have local knowledge and are they up to date on the current legislation?
-Do they do regular inspections and rent reviews?
-What kind of tenant filter process do they have in place when choosing tenants?
-Do they handle all repairs/maintenance on the property, using only qualified tradesmen?
-Do they pay your insurances, rates, levies and outgoings on your behalf and provide you with a financial statement every month?
9. How strong is the current rental market in the areas that you cover?
A: The main area that Just Rent Sydney covers is the Inner West and this is an area that is perennially in demand.
From our experience, there was a plateau in rental demand in the last year or two due to the availability of the First Home Buyers Grant – especially in the one/two bedroom unit price bracket. We have found that the strongest rental market in recent times was in 2007.
However, we are starting to see increasing demand in the rental market due to housing affordability decreasing as house prises are on the rise. Therefore the rental market is currently strong and continuing to gather momentum.
10. Finally, what are your predictions for the Sydney rental market in 2010 and beyond?
A: At Just Rent Sydney we believe that the rental market will continue to increase into the foreseeable future due to a general decrease in housing affordability and an increase in population and skilled migration driving up demand for housing.
Michelle Galletti - Expert Residential Property Manager Sydney