It's essential to assess the earning potential or the return on investment (ROI) the investment can deliver and how you can further improve rental returns regardless of market conditions.
Your investment property return comes from two sources - rental yield and capital growth. Understanding rental yield is a great starting point in taking control of your investment. Rental yield measures the profit you generate from your asset. It also helps you determine a property's value and potential.
Part of this equation involves weighing up how much rental income your property generates weekly, monthly, or annually. Higher rental yield equates to greater cash flow - and more substantial capital gain if you decide to sell up down the track.
To figure out the rental yield of your property, measure the variance between your annual rent less the overall costs such as council rates, maintenance, repairs, body corporate, and other expenses. When you know the rental yield of a property, you'll be better able to understand your profit margins, the kind of cash you're working with, and how much you have available to make improvements.
Typically, enhancements don't need to cost an arm and leg. It might be as simple as giving the kitchen a facelift with new cupboards and fittings. Alternatively, adding some ceiling fans might cost a few hundred dollars but add to the appeal of your property, especially in summer. If the budget extends, perhaps an air conditioner or new flooring might help you improve your investment yields, whether the rental market is strong or a bit softer. Maybe a bathroom refresh or adding storage could also improve the tenant appeal of your investment and, in turn, its rental yield.
Regularly reviewing the rent is also vital in acquiring a long-term understanding of your property investment strategy.
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