Thousands of property investors in Australia search the internet for how to increase the rental yield on their investment property every month. If you've had your investment property for a while and it's not delivering the returns you want, the rental yield will likely be on your mind.
But it can be hard to know where to begin and what to look for.
Your property's net rental yield is the annual rent your property brings. You calculate it as a percentage of the property's value after subtracting maintenance costs.
Depending on if you have a suburban or a regional property in the Australian property market, as well as the condition of your rental, a healthy rental yield will range between 3-5%.
Luckily, investing in ways to increase the returns on your investment property doesn't have to break the bank.
To help you out we've created a list of tips to increase cash flow from your rental property. You'll see how small changes can have a large impact on your rental yield.
1. Get pet-friendly
Let’s face it - Australians love their furry friends. Approximately 61% of Australian households own pets and 30% of them are renters. It makes perfect sense why you should accept tenants with pets for your rental property.
Tenants with pets are willing to pay over 14% extra in rent for a pet-friendly home. That means you can charge more in maintenance and cleaning if you allow your tenants to bring their fluffy significant other.
It's perfectly fine to make your decision on a case by case basis. Your property might be ideal for small pets, but not for larger ones. It’s important that you factor in the size of the pet and the kind of property you have and whether it’ll be a good fit.
Make sure you read up on how to pet-proof your investment property and ensure you're covered by landlord insurance in case of any damages.
2. Tidy up your front yard
The front yard of a rental is like the initial handshake with potential tenants and even buyers. It should be spick and span! You don’t want your front yard to be used as a depot or to be covered with a three-month-old lawn.
Luckily, keeping your front yard tidy is pretty easy and cost-effective. Mowing the lawn and pulling out weeds is something you can do yourself or outsource for a low cost.
To add character to this space, consider low maintenance plants like hedging plants. Some other low maintenance options include native plants and succulents.
You could also level the land, install a new lawn, or add structures such as fountains or benches.
3. Spruce up the backyard and outdoor living area
Australians love having a hospitable backyard they can retreat to. Improving the outdoor living space is a great way to increase your rental yield.
A recent poll found 58% of Australians prefer a garden to city views.
Due to the current work-from-home trend, Australians are spending more time at home. A fun outdoor area lets your tenants entertain their guests and themselves, which they're willing to pay more for.
Invest in proper outdoor living furniture. Some sunlounges and a proper setting will make inspecting tenants fall in love with the place. A BBQ for icing on the cake.
4. Refresh the property with light renovations
When it comes to giving the interior of your home a bit of TLC, you can’t go wrong. Even the simplest of upgrades can have a massive impact on your rental yield.
- Professional Cleaning: If you hire a tradesperson to give the place a proper clean, especially the kitchen and bathrooms, then you can use that when you're advertising the rental property to increase your rental yield.
- Bathroom: Renew the shower caps and shower curtain. Or, take the next step and refresh the walls and floor tiles.
- Carpets: Refresh the carpets by giving them a good clean, or buy new ones.
- Repaint: A new paint job adds oomph to a living space. Opt for neutral colours such as white or beige. A fresh coat of paint means an extra $10 to the weekly rent!
- Renew curtains: Add character to the rooms with some good quality curtains.
5. Modernise the rental property
You want your property to deliver on what tenants expect. In the digitised world that we inhabit, a good internet connection is no longer an accessory - it's vital for most.
Start by adding more electric outputs. Busy tenants who need to charge their devices several times a day will love you for it.
And if you really want to tech it to the next level, why not transform your property into a smart home?
To do that, start by buying some smart plugs and bulbs and investing in a digital assistant like Google Home. You can read our article on top smart home gadgets to learn more.
6. Add storage space to your investment property
The more storage space your property has to offer, the happier your tenants will be.
Turning dead space into storage space is a brilliant way of increasing your property's rental yield.
You can add more storage space by adding built-in wardrobes and storage units in the garage.
Try replacing the kitchen pantry and cupboards. Tenants will always appreciate more storage in the kitchen!
7. Upgrade the rental property with complete makeovers
If you’re wondering how to get a serious increase in cash flow from your rental property, full makeovers are certainly one way to do it.
The renovations we’ve listed below are pricier than our previous recommendations. However, some will be tax-deductible home improvements and they’ll bring in better return on investment as well.
- Renovate the bathroom: renew taps, showerheads, and the vanity, plus repaint and retile. A modern bathroom will allow you to increase rent by up to $20 weekly.
- Add bedrooms: properties with more bedrooms receive higher rental returns. If you can, convert one of the living areas or study into an additional bedroom. Though, while we're working from home, a dedicated work space is great too.
- Upgrade kitchen/laundry: Renew the appliances in the kitchen and laundry. This will increase the value of your property and save you repair costs down the line.
- Install/renew cooling and heating systems: A cooling/heating central system means you’ll be able to increase the weekly rent by 8.5%.
- Furnish: consider renting your home furnished. Investing in furnishing your rental means that you will be able to increase your rental yield by 20%.
8. Add car space to your rental property
If your tenants own a car they're going to see it as a significant drawback if they have to look around for parking every day or walk 5 minutes from where they park their car.
So we recommend investing in a car space for your property if you don’t already have one.
It'll be super valuable and will increase your rental yield if you add it to your rental property. This is especially true in inner-city areas, where off-street parking is really hard to come by.
It will also increase the overall value of your property, especially if you come to selling down the line.
Granted, it's not feasible to do this for a lot of investment properties, especially if you own a smaller apartment. But if you're allowed, you can build a driveway, dedicated off-street parking, or reserve a parking spot.
9. Install solar panels
Have you thought about going solar? Homes with solar panels are attractive to renters as it means they get to save on electricity bills with the added benefit of getting their electricity from a more ethical source.
For you, that means you’ll be able to charge tenants an additional $20 on a weekly basis, boosting your rental yield. When it comes time to sell, solar panels will add up to $10,000 to the sale price. On top of that, you'll be doing your bit towards the environment.
Have a read of our solar installation checklist if you're interested in installing solar panels to your rental property.
10. Improve the safety features of your rental home
Tenants will be more than willing to pay extra for a safer home. If the locks and bolts are starting to get loose in your rental property, renew them. Install screen doors and an alarm system. You can also add fencing if it's a house.
Make sure your pool is secured if you have one.
Renters staying in a secure home with safety systems can get a discount on their contents insurance. So it's a fair argument to say that they can pay that extra bit in rent, in turn boosting your rental yield.
11. Hire a property manager
They'll be able to ascertain the health of your rental property and how you can improve it. Boasting experience with upgrades and renovations in the past, they'll know a good fit for your specific rental as well as your target market.
In addition to that, property managers can find you better quotes from tradespeople with their trusted network.
Property managers can be a great source of input for improvements to your rental property.
When it comes to increasing your rental yield, a little goes a long way.
You may not be able to apply every suggestion we’ve made here. Doing what you can with your existing budget will still see your rental yield increase, so the more the merrier.
Disclaimer: The views, information, or opinions expressed in this blog post are for general information purposes only and should not be relied upon. We have not taken into account specific situations, facts or circumstances, and no part of this blog post constitutes personal financial, legal, or tax advice to you. You should seek tax advice from your accountant, specific to your situation.