Tenancy Rates

This will vary from suburb to suburb, city to city etc.

When you do your due diligence you need to research the area you want to invest in and find out what type of properties are in demand for rent.

For example; single bed apartments may not be in demand in a suburb 1 hour drive from the city. Most people out there are families in houses who want land, and are prepared to commute. On the other hand, in the city you have a lot of younger people who need to be close to work, can't afford to buy just yet so have to rent, and maybe don't earn a lot so a 1/2 bedder is more popular. Families tend to not live there.

If you talk to the local agents you will soon find out what is in demand and what isn't in that area. A good sign may be that there are a lot of 3 bed houses for rent; this means there is not much demand for them. There may be very few 2 bed units for rent, so these would be what the area wants.

Also look at the demographic of the area. You can see this simply by driving around; look at how many old people are out and about. if there are a lot, you know the area has a disproprtionate number of retirees, there may not be a lot of younger families or singles to rent your property. A place such as this is Rosebud on the Mornington Peninsula – full of old pensioners now, but slowly this will change. They may not be renters, so there may not be a big demand for units there. On the other hand, older people these days do rent, so you would need to question the agents to find out.

Also, how many schools, universities, employment places are there around; is there good public transport and freeway access.

As a general rule, 2 bed units are always in demand within a reasonable commute to the CBD, and near public transport such as train lines. Private parking is a big plus. Somewhere near the cafe strips is also promising, as younger people who are more likely to rent units also like to eat out and spend time in cafes etc.

My advice is to try and maximise EVERY factor pertaining to the investment. By this I mean don't just chase cap gains and struggle along with a pathetic rent return for 5 years until the property goes up. That is no fun I can promise you.

Here's a few criteria to follow;
1. Try to look for areas that have a good likelihood of cap growth, or an over-flow suburb near a more expensive one with good amenities.
2. have some decent rent returns,
3. units that have some ability to add value through some renovations,
4. built after 1987 so you can get some decent depreciation to maximise the cashflow,
5. under-cover private off-street parking.
6. look for smaller more private complexes of less than 20 units.
7. located in quiet streets, near amenities such as public transport, shopping malls, parks, hospitals etc.
8. interest only loans for cashflow.