Shortage of Suitable Rental Dwellings?
Australia right now is an ageing population, we all know this right. With a large percentage of Baby Boomers unable to hold onto their homes due to financial stress and bad financial planning, divorce or losing a partner need have found themselves in unsuited and stressful financial positions.
Divorce alone women find themselves probably owning the family home but have very little savings or income. So only a roof over their heads does not allow them to live a normal financial life with sufficient funds to live the life they truly deserve and want for themselves. This too affects couples who have not planned their finances properly.
According to a recent Report by Australian Housing and Urban Research Institute (AHURI), there is sadly a growing number of older Australians facing rental stress based on paying more than a third of their income on rent.
This report also states that in 11 years time, the number of renters aged 54-64 is projected to increase by over 50% where 567,000 people in this category will be renting. It also projects that a further 534,000 over the age of 65 will be renting.
Your investment opportunity is now
Taking the above into account and compounding the situation with those who have lost homes due to the financial ramifications of Covid-19 the amount of people renting out there will continue to grow.
Covid-19 will also impact a significant percentage of the population who intended to buy a home to live in but now unfortunately have experienced financial loss and are unable to buy – but continue to be good tenants.
Then what about all the younger generation leaving home and entering the rental pool also.
The Australian rental population will only increase in size, and what this means to you as an investor is that vacancy rates will continue to remain very low and rental yields will in all likelihood increase as demand for rental properties increases.
This is your investment opportunity, right here.
Setting aside media hype on current vacancy rates due to Covid. The reality is that aside from the apartment market in the CBD’s of our capital cities vacancy rates in the suburbs and Regional Cities/Towns remain under 2%.
Not only this, some regional centres are experiencing a rise in rental yield, further pushing up your return on investment.
A vacancy rate under 2% is very healthy you would have to agree.
Who will be your tenant?
The tenant pool will be determined by the type of dwelling, the location, number of bedrooms etc, meaning it is difficult to quantify who your tenant will be and what is the ideal property to invest in.
With low vacancy rates and owning an Investment Grade property you will have a wider selection of who you want to choose as your tenant. Remember rental demand is increasing and will continue to increase in years to come.
What makes an ideal Investment Property?
What we can tell you is that a very small percentage of residential property qualifies as Investment Grade Property … be very mindful of this!
Anyone can go out there and buy a property, yet very few understand what qualifies an investment grade property nor do they understand the numbers which drive and underpin the investment.
It is sad that the vast majority of want to be investors use emotion over investment strategy, need to see-feel-and-touch their investment, prefer investing where they live because ‘they know the area’ and make comfortable investment decisions.
These same investors tend to ‘buy’ a property, buy wrong, land up owning one investment as a result or achieve a far lower return on their investment in doing so than if they stepped out of their comfort zones and consciously chose to make a challenged and informed investment decision.
An ideal investment property is one which is in a location in which the government is investing heavily in new infrastructure creating new jobs. Where industry is invited to come in and invest and create new jobs. Where by design the population will grow and be attracted to these jobs. In which a growing population places upward pressure and increasing demand on supply for new dwellings to own or rent. Which in turn drives capital growth and increased rental yields.
Investing in a location suited to your budget and purpose for the investment is exceptionally prudent over trying to squeeze a property into your budget to satisfy your emotional attachment. Should I go on or do you have the picture and understand that an emotional investment or a comfortable investment will simply not perform anywhere as near as an informed decision which sits outside of your current comfort zone!