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Leaving tenants and zero return

The impact of poor maintenance, poor facilities or noise can destroy the returns on a rental property. With capital appreciation in city apartments set to stabilise or even decrease in some cities, this is more critical than ever.

The modern rental property is valued on a rental return of between 3.0% and 7.0% depending up on the market, the likelihood of capital gains in that location, and the market demand for property in that area. The typical investor looks for something at 3.5% or above. According to the global property guide, Australian rental yields currently average 4.39% (based on resale apartments in premier city centres).

This is a Gross Yield (before rates, maintenance, insurance, and other costs).

Really, it is not a big number.

When you look at a rental property, 4.39% is the same rent that you receive in approximately 2.28 weeks. So if your tenants stay on average for 12 months, and then you have 2 weeks vacant before new tenants move in, your gross returns are completely wiped out - and after costs, you are going backwards.

Before investing in a rental property, and as you manage that property, consider the factors that will drive away tenants and do what you can to minimise departures.

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