enerating passive income is emerging fast as an attractive prospect for investors and individuals keen to achieve financial stability and develop long-term wealth. During the last few years, rental properties have become a popular and reliable source for passive income seekers. Rental income provides a steady cash flow, diversification in an investment portfolio, and a decent appreciation over time. Whether you’re just starting to invest in real estate to get financial growth or you’re a seasoned real estate investor, maximizing rental income emerges as the common concern. This blog shares data-driven insights into the Australian rental property market to help you maximize rental income and repay your loan faster.
Is It Worth Investing in Rental Property In Australia In 2024-2025?
With an estimated increase of house prices by 6-7% in 2024 and predictions about the trend to stay in 2025 also, the Australian real estate rental market seems to go upward. The rent price index in Australia in the 3rd quarter of 2024 was 119.5 showing a significant increase from the same quarter of 2023 – Statista Research Department, Nov 4, 2024. Among the Australian capital cities, Sydney was listed to get the maximum average rents. Housing affordability is still a challenge in Australia that contributes to the increasing trend of renting a house. Projections from the top financial institutions like Westpac, ANZ, NAB, and Commonwealth Bank indicate varying degrees of growth ranging from 5% to 6%. The data analytics in 2024 show that investing in a rental property is a smart decision to get passive income; now, it depends upon how you maximize rental yield.
Two Types of Rental Yields: Do You Know ‘How to Calculate Rental Yield’?
When it comes to income from a rental property, you get two types of rental yield –
Gross Yield: It is the total income you get from the property but you pay all the related dues like electricity, water, management, etc. To calculate gross yield, divide the gross annual income by the purchase price of the property and multiply it by 100. You purchased a property for $700,000 and rented this property for $33,000 a year. The gross rental yield is 4.71% ($33,000/$700,000 x 100).
Net Yield: It is the total income you get from the property after paying all the expenses. To calculate net yield, let’s use the same example as above. The property purchase price was $700,000. The annual rental income is $33,000. The expenses associated with owning the property cost $7,000 a year; so, the net income is $26,000 ($33,000 – $7,000). The net rental yield is 3.71% ($26,000/$700,000 x 100). Note: When calculating net rental yield, investment loan repayment is not included as it depends on your own financial situation.
So, you need to focus on increasing gross yield because of some of the expenses you have to pay essentially. If you succeed in maximizing gross yield, you will succeed in getting higher net income which is your objective. Go through the following trends-based insights to plan better for increasing rental income.
Can You Get Better Than Average Rental Income? 12 Tips to Maximize Your Rental Income
What is the average rental income in 2024 in Australia? Rents in Australia have reached a record high recording the median weekly rent at $627. Rents are 8.5 percent higher than this time last year- https://www.abc.net.au/. As of June 2024, the average weekly rent for a house in Sydney was $750; it was the highest average rent across the major cities in Australia. Though the market is favorable to you, still, if you follow the below twelve tips to increase your rental income, you can repay the loan faster –
- Go for renovations that suit your budget: Because of being proactive with rental property, investors can achieve a 30 to 50 percent increase in rental income. Even the low-cost updates like paint, light fittings, blinds, carpets, toilet seats, and vanities make your property more appealing. Instead of doing a full bathroom and kitchen renovation, you can invest a little in upgrading wardrobes, installing a dishwasher, and fixing the air conditioning system.
- Add an extra bedroom: Look to convert an unused space into an extra bedroom. It will help you increase rental income. The cost you pay initially will reap a good gain in the form of increased rental prices forever because it attracts more tenants from a wider segment. Adding an extra bedroom might also make your property appeal to a wider group of tenants.
- Plan to increase storage space: Enough storage space is a plus point that attracts most tenants. You can add storage space anywhere. Additional kitchen storage space impresses the tenants to pay a little more rent for the extra convenience that they need.
- Make your rental property Pet-Friendly: Australia has a high pet ownership rate. Approximately 61% of Australian households own pets. Pet owners also have longer tenancies because of having limited options to rent another property. Tenants owning pets usually pay more rent for a property that keeps their pets safe.
- Improve the security: Security has always been a top concern of tenants. They pay more for a property that makes them feel safe. You can plan to install screens on doors and windows. You can fix motion lights in open areas. A property with a security system and home access control provides tenants the peace of mind that they don’t find in other properties.
- Arrange a parking space: Dedicated parking space is a ley selection parameter for many renters. As off-street parking is limited, tenants prefer to rent properties having dedicated parking space. Even a simple shade sail will serve the purpose without compelling you to go beyond your budget.
- Make the front yard attractive: The front yard is the first impression for the tenants. Get plants that need low maintenance. Fix a bench and a mailbox to add a signature style to your property to make it stand out.
- Upgrade backyard to increase usage: Like your front yard, the backyard allowing for multiple usage convinces tenants to rent a property. Working from home has become a culture, a lovely outdoor area appeals to the tenants to make it their working station or a space to entertain guests outdoors. If budget allows, you can plan for outdoor seating arrangements and a barbeque.
- Reduce noise: Noise pollution might put off the potential tenants. You should focus on minimizing noise from the street. Using weather-stripping tape and seals on the doors and window frames is a low-cost noise-reduction method. You can use thick curtains over the windows also to create a barrier for noise. Both budgetary practices support aesthetic appeal.
- Install solar panels: If your budget allows, you can go for solar panel installation. Though it is a considerably big investment, you get the cost back within five years with the long-term benefit of electricity bill reduction.
- Get professional guidance: Hire a real estate agent or a property manager to recommend benefit-oriented upgrades and renovation ideas. Mortgage brokers, real estate agents, seller agents, and buyers’ agents like professionals have deep insights about the liking and preferences of tenants in the particular area.
- Increase rent as per the current scenario: Increasing rent is also a good way to get higher rental returns but the rent increase should be in line with the trending market price. What should be the ideal rental yield in Australia you can expect as an investor? The average rental yield of houses in Sydney, NSW, was estimated at 2.98 percent in September 2024.
If you’re an experienced landlord or going to invest first time in a rental property, it’s highly recommended to periodically assess the best rental price of the area or the portfolio for rental income-increasing improvements. The average rental income or gain is a varying factor; the local mortgage broker or real estate agent providing consulting for real estate investment and finance may give you a real-time assessment.
ASK Financials in Bentleigh is a dependable agency that may help you get comprehensive service support to get finance for investing in a rental property promising a decent return. You can book your session for free consulting.
