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David Johnston (founding Director of PPA) is a regular media contributor and blogs fortnightly for “Smart Property Investment Magazine”. In the second part of this article “Driving Your Dollar Further” he offers some ideas to increase rental income. (Part 1 of the article can be read here).
Already purchased an investment property? Here are 13 creative ideas to improve your cash flow.
If you have already taken the plunge and purchased an investment property, below are some creative ideas and more obvious ideas around enhancing rental income.
1. Offer a longer term lease in a tightly held area with high rents eg. If the location is a really hard place to get a rental property offer your tenants a 2 year lease with six month rental hikes. It gives them certainty and it gives you a better yield.
2. Think about how the property could be equipped to offer a dual tenancy; eg. a granny flat or converted garage or part of the house that can be separated from the main living space.
3. Ask the tenant if there are any items they want which they’d pay more for, eg. split system air-conditioning, Pay TV, security gates etc. For the cost of the works, the return is usually really good. You could put in a security door on request for an extra $15 pw and the cost of the door means that your return is around 20%pa. Using tax deductable dollars, it stacks up.
4. Allow pets and cater for these tenants with secure fencing. A desperate tenant with a much loved dog will pay more for such a property
5. Find a tenant who likes to do their own gardening and send them gift vouchers/gifts instead of paying a gardener every month.
6. Doing a deal with any neighbouring property owners for gardeners. It’s a lot cheaper if all 3 nature strips are mown at the same time.
7. Renovate – kitchen and bathrooms in particular and these two aspects of the property will have quite an emotional pull for many tenants and help determine the price point they are willing to pay
8. Improve interest rates on loans and loan structure – You should chat to a PPA mortgage broker that understands property investment and is an expert in loan structuring. Many lenders offer superior service and interest rate propositions to the most credible brokers such as PPA. This means if you use one of these brokers you are more likely to receive superior service throughout the loan approval to settlement process as well as better interest rates on loans.
9. Set up or link your offset account on your mortgage to investment debt if you have no non-deductible debt and you have surplus funds sitting in term deposits/cash management accounts earning a lower rate of interest whilst also being taxable
10. Negotiate better property management fees – reduce your property management costs keeping in mind you tend to get what you pay for
11. Change the property manager or manage yourself to save money – although this can be fraught with danger due to real estate law.
12. Conduct a rental review – This could involve speaking to your property manager about what rents people are paying and researching advertised rental prices for comparable properties.
13. Reduce your debt more rapidly and/or place more surplus funds into your offset account to minimise your interest holding cost on the investment property.
As with anything that you want to do well, the more effort you put in, the greater rewards you will receive.
Written by David Johnston, founding director of Property Planning Australia (PPA) and co-author of Property For Life – Using Property To Plan Your Financial Future. Property Planning Australia was established in 2004 and is a multi-award winning property, finance and financial planning consultancy that provides its clients with a holistic approach to financial and investment advice.
The PPA team specialise in developing holistic property strategies for first home buyers, investors, upgraders and those transitioning into retirement. To find out how PPA can help you make the right property decision today for your tomorrow, contact us.
