3 useful tips to buy for better rental yields

31 May 2018

Before 2017, property prices in the Victorian capital were growing by around 10 per cent a year, every year. according to the Australian Bureau of Statistics. Home values may have skyrocketed but rent has remained relatively still, causing yields city-wide to flatten.

That makes finding solid rental yields in Melbourne similar to finding a cash flow positive needle in a haystack. We've come up with three tips to help you find that needle.

High rental yields can be hard to find in Melbourne. High rental yields can be hard to find in Melbourne.

1. Be logical when picking the area and property type

Sometimes,  the properties with the best returns aren't the most appealing or impressive. When buying for rental yields in Melbourne, it's essential that you put emotion to the side and look at the purchase from a purely logical and analytical perspective. 

Some of the best returning property types are multi-units, smaller apartments or compact houses. Often up-and-coming or even out-of-the-way areas that you mightn't usually consider also show better returns.

Furthermore, if a home is in need of some repair work and you're confident doing it yourself, you could purchase it for a steal, which of course means better rental yields. 

2. Do your sums (all of them)

When you find a property that you think shows a decent return always get a rental appraisal from a real estate agent. From there,  it's a good idea to have builders, plumbers and electricians inspect the building to find if any work's needed, and estimate the future cost of maintenance. 

When calculating the rental yield remember to include:

  • Rates,
  • Property management fees,
  • Insurance,
  • Body corporate fees (if applicable),
  • Repairs and maintenance,
  • Home loan fees and interest,
  • And any other costs you incur while holding the property. 

It's important to factor all the costs in while calculating your rental yield, because only then can you get a true picture of its potential as an investment. 

It's important to factor all the costs in while calculating your rental yield.

3. Know that yields aren't everything

Before you start scouring Melbourne for high rental yield areas, remember that there's more to investment than rental returns. Capital gains are equally as important, and you should consider your investment on all of its merits.

While it can be difficult, buying in a future growth area is your best bet. Areas like these still have low prices (which means high rental returns), and often promise strong capital growth down the track when others start to catch on. 

For help finding the ideal Melbourne investment, yields and all, get in touch with your local Brad Teal Real Estate office.