How To Make Sure A Property Investment Will Be Rented (Ep227)


When purchasing an investment property you
want to make sure that your property is going to be rented. If you’re investing in a property
and it’s not rented you are the one who still needs to make all your repayments and so it’s
a big drain on your cash flow. Today I’m going to be answering a question from Melinda about
how we can assess an area to ensure that our property is going to be rented.
Let me read you out Melinda’s question. So she writes, “Hi Ryan, one question I have
is, I have tried your advice and bought the investment mag and gone through the suburbs
highlighting the best rental yield areas.” If you’re not familiar with what she is talking
about, inside onproperty plus I have a lesson about how to find high rental yield areas
using a property magazine. “I’ve also looked at some of the houses in those areas and found
that there are some that are within my price range at the moment. When I use your calculator,”
she’s talking about the advanced property calculator which is a tool to estimate the
cash flow of a property before you buy it. You can check out all this stuff by going
to onproperty.com.au/plus. “When I use your calculator they seem to be positive cash flow
properties. My only concern is if the area does not have a high demand for rentals. This
seem to be the scary bit, it would be great to buy a cheap house but that if you don’t
get a tenant reasonably quickly? Is there a way to find out a bit more about the rental
demand in the area so as not to make a big mistake? Cheers Melinda.” Alright Melinda,
she has another question but I will answer that in another video. But what we are going
to tackle in this video is how to ensure that there is rental demand in the area and that
you can rent your property after you purchase it.
First thing Melinda I’m going to go into onproperty plus and I’m going to look at some of the
lessons that I recommended that you should go through. Then I’m going to highlight exactly
what you need to do to find out the vacancy rates for an area. So when you’re in onproperty
plus go down to this one about how to research an area like a secret agent; insider here
I want to direct you to lesson number 1 – Researching Demographics because we talk about using census
quickstats to understand the demographics of an area and ensure there are renters and
also how to find out vacancy rates cause there are a couple of different ways to do it.
Let’s start with using census quickstats. So to find census quickstats; just google
census quickstats and choose the first option. You can choose your year, so 2011and enter
your location. I’m on the Gold Coast so let’s just choose an area on the Gold Coast, 4220
which is near where I live. We click go then basically what this is going to do is bring
up all the details about 4220 which is around about Burleigh Heads, Miami, Burliegh Waters,
those sorts of places on the Gold Coast. So we can see a map there see how many people
live in the area. What we want to do is we want to go into the dwellings section, and
we want to go down to this line marked tenure. So we can see how many people own properties
outright, which means no mortgage, how many people own with a mortgage and how many people
rent properties. So we can see that it’s pretty even, 32 own outright, 32% own with a mortgage
and 32.2% rent a property. So there are 3,658 people or units or family units renting property
in the area. That’s a good sign; I like to see round about the 30% mark. It doesn’t necessarily
have to be that. The next thing that we can do is look at the
types of properties in that area. And so we can see that in this area two bedrooms are
very common at 31.2% and three bedrooms are very common at 39.4% and so are four or more
bedrooms, but one bedroom, its only 3.6%. so if you want to ensure that many of these
potential tenants as possible you kind of want to stick around the types of properties
where most of the people in the area are living. Because if you have a one bedroom unit, so
let’s say that the same percentage applies, 32.2% of 414 is only like a 150 people or
something like that. So that’s going to make it harder to rent but if you have a two bedroom
place 32% of three and a half thousand is over 1,000 people. So there is a big difference
between one and two bedroom properties. So that’s how you can use the census quickstats
to ensure there are renters out there and that you’re purchasing a property that’s going
to be suitable to a wide variety of lenders. Now that’s not all we want to do. Another
thing we want to do is we want to discover vacancy rates for an area. So you’re inside
onproperty plus, go down the bottom, click discover vacancy rates, if you’re not a member
of onproperty plus just go to sqmresearch.com.au/term_vacancy.php. It’s weird but you need to accept the terms
and then you can click to see vacancy rates by suburb or postal code. Type in the post
code again 4220, click go, this will then load vacancy rates in the area. You can see
this starts at January 2005, we don’t care about January 2005. Scroll right across to
the right where you can see July 2014. This is awesome. I love SQM for this tool because
it is so up to date. I am recording this towards the end of August and this is showing July’s
data. So this is really accurate, if you use a magazine which is a technique I show you
in finding vacancy rates, that’s another technique. It’s going to be about 12 or 6 months old
so you can see July last year rental occupancy was 93%, vacancy rates were 3% where as this
year they’re even lower. So you can see what vacancy rates are like for the area by using
that technique. The last thing that I would advise you to
do if you are serious about buying in the area, you want to do this research first.
But before you buy, you actually want to talk to the real estate agent about vacancy rates
in the area and what things are like or you can call up a real estate agent, may be not
selling your property. Pretend to be someone else and say look I’m looking at moving into
the area, how difficult is it to get a property to rent? Are there properties on the market?
Will I have much choice? Do I need to be really quick? How does it sort of work? So you talk
to a real estate agent as if you’re pretending to be a renter and that way you can get an
idea. They can say we have hundreds of people that are open for inspections and places go
within a couple of days and you can go and say this is a pretty busy area. If they say,
look there is heaps of stuff on the market you will have so much to choose from then
that’s going to be a warning sign for you obviously.
So there are three different ways that you can ensure that a property that you purchased
is going to have a large selection of tenants that will potentially rent your property because
we want to ensure that our property is rented after we purchase it. So Melinda I hope that
has helped answer your question, I think that was a really great question because that is
one of the biggest fears that people have before they go out and buy properties, what
happens if that property isn’t rented? You still need to do your sums and assume sometimes
that a property is not rented and you need to have a buffer fund for that because if
a tenant doesn’t pay their rent or you don’t have a tenant you still need to pay your mortgage
and everything like that. So keep that in mind that it’s good to have a buffer but if
you do this research hopefully you’ll never need to access that buffer.
Alright guys if you have a question please email me [email protected] or if you
want free access to my report “10 real positive cash flow properties in Australia” go to onproperty.com.au/free
and if you’re interested in finding out more about onproperty plus which is my premium
membership website where you can get the calculators to analyze the potential cash flow of a property,
you can learn how to find positive cash flow property and you can see updated 5 properties
every single week and an archive of about 80 or 90 properties at the moment that have
high rental yield and a potentially high cash flow; if that sounds like a good deal to you,
head over to onproperty.com.au/plus to learn more. So until tomorrow, Melinda and everyone
else stay positive.

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