Brisbane landlords: 7 ways you might improve your net returns in 2021
Smiling or frowning?! Over the past fortnight Brisbane landlords received your annual statement from your property manager, summing up the income and expenses from this past financial year. And for many of us this is the time to do a review of how our investments are really performing. Now I’m not a financial adviser but I am a property investor, so this is what I’m doing right now.
I’m checking my numbers and I’m checking them twice. Finding out which property has been naughty and which one has been nice! My agents only pay some of my expenses so I’m adding it all to a spreadsheet and I’m looking at my net return (my true net) against the current market value of my property. And I’m working out what I can do to improve this in the new year.
1. Checking finance costs: Don’t tell me this one is really obvious because I know most of you aren’t doing it! Carrying debt goes hand in hand with investing in property and checking you’re on the best interest rate is now a far shorter process than it used to be. Bank of Queensland’s Brett Smith says investors with a solid track record on their current loan will cut time from an assessment. “If we can see you’ve been on track with your repayments and have solid equity, it’s a very quick step to see if you’re on the best rate possible. It only takes a short phone call and a few pieces of information.”
Brett says many Big 4 customers find they’re a long way above current market rates. “It’s not unusual that we’re saving investors 0.25% to 0.5% and that’s often thousands of dollars every year.”
2. Maximise depreciations: I found all of this confusing for a long time and every now and then the government or the ATO change things around to keep us all entertained. So please don’t be embarrassed to ask your accountant if you should get a fresh depreciation schedule prepared. Talk to them (or another suitably qualified expert, not a real estate agent!) about maximising your claims, especially if you owned the property prior to the 2017 changes to plant and equipment. We’ve seen a lot of our clients really ramp up their deductions after getting a new schedule and, big bonus, they’ve also gone back and amended previous years’ returns to claim extras.
Extra bonus – you might still be able to get a schedule done now that can be used for your 2019/20 tax returns.
3. Understand your customer: Do you really know what tenants want? If you’re sitting in your 4 bed house with freshly mowed lawn, do you have a clear insight of what your city apartment-dwelling tenant looks for in their home? We’ve made sure we can give the best advice to our Brisbane landlords clients by surveying a big chunk of this city’s tenants every 2 years. And they don’t want views, or ensuites, or pools. The items they’ll actually pay more to have are far more practical and you can read some of the results for yourself.
In a competitive market (and we’re in one right now) knowing what features should be highlighted in your property’s promotion, really can earn you more rent and a shorter vacancy. And more broadly, how else can you put yourself into the shoes of your customers? Are your agents giving them good service, responding to maintenance as quickly as possible? Taking a genuine interest? A crappy renting experience will discourage them from staying and turnover costs you money.
4. Broaden your appeal: Don’t misread what we’re about to suggest here as “real estate beige” is not necessarily the answer! But sometimes a distinctive decor or interior feature can be a real turn off. Bees Nees General Manager Clint Dowdell-Smith says there’s sometimes a simple item that can cost landlords heaps in extended vacancy.
“We know from our surveys that tenants don’t put a big premium on everything being brand new, provided it is in good condition. But what they shy away from is strong colours in carpets, benchtops and blinds for example. They usually want their own furnishings to be the stars. That’s how they personalise the space and make it their home”. Our team work with clever (and inexpensive) interior designers who can help give rental homes the fresh face they need to open up their market.
5. Reach a new market: Similarly to sales values, the way to completely change the rent is to add bedrooms, bathrooms and living spaces (in that order of priority.) It can be almost impossible for apartments, although we have seen roomy two bedders turned into 3’s. But where you can do a bigger renovation and reposition yourself into a new market, there’s often excellent return on those extra funds spent.
A house with 3 bed 1 bath changed to an ensuited 4 bed will unsurprisingly attract a far higher rent. Our sales team can provide a market appraisal on the concept before you proceed so you’re comfortable you’re not over-capitalising. We work with renovation firms that can assess, quote and supervise the full process. And for simpler options check back to our survey results. Can you add an outdoor living space? Extra storage? Improve security?
6. Buy ‘off-peak’: We’ve been talking about the ‘new’ smoke alarms for over 3 years but in less than 18 months time they’ll be mandatory in all Queensland rental homes. (See a quick video on what’s required.) There’s over 600,000 properties that’ll need them by the end of 2021 so when do you think most Brisbane landlords will have them done?! The prices right now are good.
And another obvious one: Our surveys show airconditioning is highly valued by tenants (“expected” at some price points) so getting them installed and serviced in winter is a sure way to save money.
7. Landlord insurance: Right now they’ve limited their new policy offerings and aren’t including tenant default on rent, but hopefully that will change once those Victorians sort out this COVID mess! Again, as agents we can’t advise you on insurance. But as an investor I can do the math on my (tax deductible) premium of approx $330 covering me for weeks of arrears and vacancy if I get unlucky on my tenant selection.
For now my properties’ net returns are okay for me. I’m not thrilled but I recognise rents have been stalled by COVID and I’m feeling optimistic about Brisbane city. I’m watching my expenses, working hard to maximise rents and deductions. And I keep an eye on comparable sales so I know what yield I’m really getting. Now’s a great time to review your property’s performance.
Our Bees Nees property managers can help with all the above, working with experts to assist in each area. Or like an updated sales market appraisal? Just reply to this email and we’ll lend you a hand!
##NB: Please get expert advice for financial and tax planning. Real estate agents understand the broader rental and sales market but we’re not qualified or licensed to give you investment advice.