Recent media reports have highlighted a shortage of rental properties considered affordable (less than $400 a week) in Australia.
The articles say that affordable rentals now make up less than 19% of all available rental properties. This is down from close to 40% before the pandemic came along.
It makes tough reading for would-be tenants, but is good news for landlords.
And as B.Invested founder Nathan Birch is quick to point out, the properties that his group of companies manages for clients are generally all under $400 a week in rent.
This means that his clients are heavily invested in a very sought after and increasingly rare portion of the market. At this end, risk is at its lowest, as the properties will always be able to be tenanted.
The cost of misconception
People looking to invest often baulk at buying in the most affordable end of the market because they think the suburbs aren’t very nice or they think the tenants might be dodgy, but this is one of the most costly mistakes people could make.
These markets have consistently performed the best in all sorts of cycles and conditions.
The other big bonus is that the rental yields are disproportionately higher than other brackets of the market.
If you have $1.5 million worth of multiple affordable properties in your portfolio, say you have 5 properties worth $300k each, you may be getting $400 a week from each property. That makes $2000 a week in rental income.
If you had one property worth $1.5 million, you’d be getting significantly less than $2000 in rent. Possibly even half that amount.
The affordable end of the market allows you to spread risk and multiply returns.
Property as a vehicle
There is no one size fits all strategy for property investing. There is one thing that everyone needs to remember, however. Your goal is where you want to end up and your strategy is your roadmap to get there. The property investments you make along the way are your vehicles for travelling along that roadmap until you arrive at your end destination.
If you are catching a taxi to an event, it doesn’t matter if it’s dirty, or not a car that you would personally drive. It just needs to get you to where you need to go.
There is no point letting your vision be clouded by worrying whether or not you’d like to live in the property you are investing in. All you need to know is whether the numbers stack up in a way that they will advance your position towards your goal.