Maximising Returns on Your Rental Property

In recent years, owning an investment property, particularly in Victoria, has become increasingly expensive.

Rising interest rates, doubled land tax, a Covid debt reduction tax imposed by the government, new legislation that has increased compliance costs, and higher maintenance expenses have all contributed to this challenge. However, there are several strategies property owners can employ to help mitigate these costs and maximise their returns. For over thirty years MRE’s business development team has been educating Melbourne investors on the best way to maximise their returns with these three vital fundamentals.

• Negotiate with your existing bank:
  We have recently seen interest rates stabilising, which is seeing banks more open to negotiating lower interest rates. The banks often rely on customers’ reluctance to negotiate, but taking this step can significantly impact your bottom line. For instance, a small reduction of 0.25% on a $500,000 loan translates to a savings of $1,250 per annum, or nearly $25 per week. This amount is almost half the cost of employing a property manager. So, be brave, pick up the phone, and start negotiating.

• Request a rental review:
  It is crucial to ensure your rental income is in line with current market rates. If you haven’t recently asked your property manager when the last rental increase took effect, now is the time. Rent can only be increased once per year, so timely reviews are essential for your investment. Being $50 per week under market value can cost you $217 per month. Rental increases now need to be justified, so request evidence from your agent to support the proposed price. If you’re not convinced, seek a second opinion from another agent. Two evidence-based rental estimates are better than one.

• Consider furnishing or making improvements:
  Enhancing your property can significantly boost rental income. For example, furnishing a one-bedroom apartment can increase rents by up to $200 per week and typically costs around $9,000. This investment can be recouped in less than 12 months, leading to substantial revenue increases. Consult with your agent to determine if the furnishing is suitable for your property. Additionally, consider other improvements such as installing air-conditioning, updating a tired cooktop, tidying up the garden, repainting high-traffic areas, or replacing old carpets with timber flooring. These upgrades can enhance your property’s appeal and justify higher rents.