When considering renting out an investment property, many people immediately think of long-term leasing. It sounds so simple: you engage a property manager, they find you a tenant, they sign a lease and you get regular rental income.
In Canberra at the moment there is a strong case for investing in a long-term rental strategy. A Canberra Times article from earlier this year offers some compelling statistics: “Over the past year, rents in Canberra increased by 6 per cent, the fastest rate in the country bar Hobart...For investors, Canberra's unit market is proving to be a gold mine, with gross rental yield growing 3.2 per cent in the last quarter to 5.84 per cent. This is the second-highest in Australia after Darwin at 5.89 per cent.”
Does this strategy offer the very best return on investment for a savvy investor though?
Depending on the type and location of the property you have, you might be able to increase your return exponentially through other channels, such as short-term premium leasing.
Canberra attracts many people for work, and a large number of these people are professionals, who can be your ideal long-term tenant. However, instead of relocating to Canberra, this same demographic is often required to travel to Canberra for short periods of time, requiring accommodation on a short-term basis. If you have a townhouse or an apartment in a convenient location, short-term rental with a local short-term property manager could offer a higher return than a long-term rental. For example, you could expect a rental return for a near-new one bedroom apartment valued at $390,000 to $420,000 (with an investment of approximately $16,000 in furniture) to be around $975 - $1,100 per week. Rent for two bedroom apartments increases to around $1,075 - $1,400 per week. These rates are influenced by the overall presentation of the apartment, length of stay and other services or facilities the building offers, but this is a solid investment proposition when managed properly.
The other advantage of engaging a local short-term property management company is they know the market and what other properties are available, ensuring you get the best price possible for your property. They manage the entire booking process, as well as the check-in/check-out process and cleaning. It is like having a property manager for a long-term rental property, but maximising your return. Ultimately, if there is an issue with your property there is a local agent on the ground who can visit your property in person to check or resolve any issues.
There are other options when it comes to short-term rental management, such as online marketplaces where people can rent out anything from a room or a whole property. The advantages of this type of business are that the service charges can be as low as 3%, and the monthly return can be as high as $3,446 AUD for a property in Canberra. However, these companies are often global, and don’t offer local information or advice to property owners. The onus is also on the property owner to ensure listing information and available dates are accurate and the property is adequately serviced between guests. There is more work involved with this model in comparison to engaging the services of a local short-term property manager.
If you have a property in a central Canberra location or near government departments, short-term rental could be a strategy worth exploring.
The team from Accommodate Canberra are experts in Canberra’s short-term executive accommodation market and manage properties in Canberra's most prestigious and sought after apartment complexes. Contact them to discuss your investment strategy further.