Steve is looking for investment properties to add to his portfolio. He’s been a landlord for years and at the moment, he owns four 2-bedroom units: three in Melbourne and one in Sydney. He’s looking to buy again, but he’s wondering if he’s limiting himself too much by sticking to 2-bedroom units rather than family homes. He wants to know what we think. Here’s what we told Steve:
- Family rentals are becoming more and more popular as housing affordability declines. The old view that only singles and young couples rent is increasingly outdated.
- Demand and yield are often negatively-related. There’s a high demand for family homes in the leafy, almost-inner city suburbs. In Fitzroy in Melbourne, for example, rental demand is very high for family accommodation. You’d be unlikely to have your well-presented 3-bedroom home vacant for long. Yields, though, are down to 3.0% on average. In Craigieburn, however, there is less demand, but 3-bedroom properties are clocking up 5.1% yields.
It is similar in Sydney. Collaroy has a high demand for houses (an average of 1369 visits per house), with a yield of 3.7%. Whalan, on the other hand, averages 4.9%, but the demand is average (386 visits).
There are exceptions, though. Springwood, NSW, for example has average yield of 4.9% and demand is high (with houses getting an average of 706 visits).
In Steve’s case, he’d be diversifying his portfolio by branching into family homes. He’d be dealing with different tenants, with different requirements, so we’re happy to advise him on what to look for and where.