These are turbulent times, so having a strategy to pandemic-proof your investment property is essential for astute investing.
Property advisory group Suburbanite has issued some great tips on how the pandemic is impacting investment property and what investors can do to take advantage of the new environment.
Here are the five things to do to pandemic-proof your investment property – and your home, too.
1. A home office is key
The changing working-from-home and blended work environments that has emerged over the past two years is frankly here to stay. In years gone by one study was suitable, but that’s no longer sufficient.
“This year, the ‘his and her’ study is the must have item for an investment property – or any property really,” Suburbanite principal Anna Porter told Channel 7’s Sunrise. “People are sick of working from the dining table, or in the bedroom with their blurred backgrounds on.”
If you don’t have a study in your current investment property, Porter suggests looking at the yard space to see if you can put in a pop-up office with a backyard pod or converted shipping container.
Porter estimates that having additional study space could command an extra $50 – $100 per week in rent in some locations.
2. Look outside the CBD
People value health and exercise more than ever.
Once upon a time it was how close the property was to the CBD and being in a concrete jungle wasn’t an issue, but now people want to be near national parks, waterways and open spaces so they can make the most of lockdowns and isolations.
“When we were in lockdown, we became very aware of what was within five kilometres of our home,” says Porter. “It used to be that people wanted to be close to the CBD, but we are changing those behaviours and working from home a lot more now.”
As people entertain more from home, units with on-site facilities like gyms, pools and BBQ facilities are more appealing to tenants than ever before.
3. Avoid high-risk sectors
Airbnb, serviced apartments or CBD units are not as low-risk as the used to be. Also be cautious with outlaying on regional and tourism areas. They are popular right now, but when the economy changes gears they will bounce back and vacancies could rise, so be sure to look at the long-term fundamentals.
“At the moment, it’s very attractive and people are paying premiums in these locations and for these types of properties,” says Porter. “But when the market comes back a bit, when this economy shifts gear a little bit, you could be left having paid a premium and the market may not sustain that. So you’ve got to be a bit cautious.”
4. Be vigilant with tenant selection
Ensure prospective tenants have job security. Porter recommends not just looking at their current employment, but whether they are in an industry that is sustainable and they can continue to afford to pay the rent.
If you think they may be at risk of losing income due to the pandemic, have a proactive conversation with your agent on how to help them manage the repayments.
5. Consider your budget
The most important one – do a non-COVID budget! Everyone is spending less right now and interest rates are low.
“There’s a little bit of excess cash flow, people are spending that on real estate, significantly pushing pricing up,” says Porter. “You’ve got to make sure you can afford it post-COVID when we’re back to holidaying, back to eating out.”
Consider your budget when things go back to normal and rates may be a little higher. Can you still afford the investment property?!
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