Demand is at a peak for property at the moment, and the rental market is at an all-time high! Unprecedented rates of interstate migration has caused pressure to mount on rental availability and price. In Brisbane alone, gross rental yields are between 4 and 5.2 percent, much higher than Sydney and Melbourne (Source: Property Update, April 2021). This means there is plenty of opportunity for you at the moment if you’re considering becoming a landlord.
Staying in your home has some favourable benefits in terms of costs, eg saving on agent fees, stamp duty and general moving costs. But, if you’re thinking you’d like to jump on the ‘rental market’ bandwagon, you might be wondering if you could turn your home into an investment property. You probably have a stack of questions about doing this so let us help you with some answers and things to ponder.
#1 Firstly, once you start renting out your home, be aware that Capital Gains Tax (CGT) will kick in when you sell the property down the track. CGT is not applicable when you’re an owner-occupier as it’s not paid on your principal place of residence. Have a chat with your accountant about this. No doubt they will have insights into all of this.
#2 Ask a property manager (we at Beyond Property Management can help) to provide you with your suburb’s rental market stats. Whilst vacant rentals are extremely low at the moment, tenants could still tend to be choosy about where they rent and it could affect how much you can rent your property out for. If there’s a strong rental market in your suburb, you’re on a winner!
#3 Beyond Property Management can also help you to understand what local tenants want and if your property is a suitable match. Certainly, good schools nearby would attract a family with school-age children but a large home with a high maintenance backyard could be a turn-off for some. Knowing your property rental appeal really helps.
#4 If your home is financed, ensure you talk with your mortgage broker or bank manager as your loan may need to be re-structured to cater for the move from owner-occupier to landlord.
#5 Lastly, renting out a property requires a different mindset to owning your own home. Once you become an investor, you need to be able to trust and operate using your head. This can be difficult if you’ve lived in your home for a long time and created beautiful memories to cherish. Be aware that tenants probably won’t feel the same way about your ‘home’ as you do so it will help if you can let go of any emotional connection on the outset.
Being an investor can be exciting and very lucrative but it’s handy to know some of the benefits and barriers you might face. There will be a lot more but hopefully these few considerations provide you with some food for thought.
Contact us at Beyond Property Management to discuss all your rental property needs – we’d be happy to help you.