The newfound surge in popularity of the regional and coastal markets has made rentvesting outside the cities more appealing due to the increased likelihood of finding tenants, experts explain.
Property prices have risen throughout the pandemic – in the year to November 2021, dwelling prices rose 23% in capital cities and 30% in the regions, a trend which Lachlan Vidler, director of Atlas Property Group said saw many home buyers priced out of their dream suburbs.
“In the early stages of COVID, there were a few people who bought a new house when it seemed like the market was a little bit stagnant,” he said.
“Since then, rents have continued to rise, property values have continued to rise.”
While some first-home buyers went down the rentvesting route buying further away from the capital cities, other investors with pre-existing portfolios found themselves sitting on a gold mine.
“Accumulated wealth from their properties allowed them to keep buying more – I saw this a lot throughout COVID,” he said.
Top rentvesting neighbourhoods in 2022
Despite rising house prices, co-authors of The Female Investor: Creating Wealth, Security and Freedom Through Property Nicola McDougall and Kate Hill said there are still affordable areas for rentvestors.
“As well as many young people moving to more affordable areas over recent years, rentvesting has become a popular strategy for those who want to buy property but still want to remain living in an expensive real estate city such as Sydney or Melbourne,” Ms McDougall said.
“Renting continues to be more affordable than purchasing in desirable pockets of major cities, where buy-in prices can easily be millions of dollars,” Ms Hill said.
Ms McDougall and Ms Hill highlighted five key council areas that they recommend as top rentvesting pockets.
1. Casey (50km south east of Melbourne)
Some of suburbs within the municipality of Casey include Cranbourne (median house price of $608,000 and rental yield of 3.3%), Berwick (median house price $821,500 and rental yield 2.8%), and Endeavour Hills (median house price $740,250 and rental yield 2.9%).
Ms Hill said about 60% of locals live and work in the area and generally don’t commute into the CBD, which makes it an attractive lifestyle choice for families along with very affordable housing compared to most of Melbourne.
“The growth charts are steady, vacancy rates are generally low, and rents have been increasing steadily,” she said.
2. Moreton Bay (50km north of Brisbane)
Despite beachside suburbs in Queensland proving to have some of the biggest growth in average estimated value in 2021, there are still some affordable pockets.
Ms McDougall said the municipality of Moreton Bay has some top rentvesting suburbs including Redcliffe (median house price $608,000 and rental yield 3.9%), Clontarf (median house price $597,500 and rental yield 3.8%) and Margate (median house price $612,500 and rental yield 3.7%).
From surging population to myriad major infrastructure projects, including a brand- new university in Petrie and the redevelopment of Caboolture Hospital, the Moreton Bay region ticks many investment fundamental boxes for new and seasoned investors, Ms McDougall said.
3. Onkaparinga (40km south of Adelaide)
This area of South Australia is forecasted to expect large growth in the coming years making it a safe bet for rentvestors.
Some of the suburbs include Clarendon, Christies Beach, and Aldinga Beach (median house price $455,000 and rental yield 4.2%).
“Over the next 20 years, the region is expected to receive an influx of 48,000 additional residents, making it one of Adelaide’s strongest growth areas.” Ms Hill said.
In addition, $1 billion has also been spent on making the area more accessible with the construction of train links.
4. Sterling (10km north west of Perth)
The municipality of Sterling in metropolitan Perth saw strong development in the 1960s and 1970s. The waterside council area offers a desirable lifestyle with top cafes, shopping precincts, schools and multiple transport links to Perth CBD. Each of these lifestyle factors makes it popular among renters.
Some of the suburbs include Inglewood (median house price $845,000 and rental yield 3.7%), Balga (median house price $337,500 and rental yield 5.5%), and Scarborough (median house price $800,000 and rental yield 3.9%).
“The region offers a leisurely seaside lifestyle, being home to the internationally renowned Scarborough Beach, as well as trendy bars and cafes that impart a youthful vibrancy that attracts a steady stream of 20- to 40-year-olds,” Ms McDougall said.
5. Penrith (58km west of Sydney)
Despite many first-home buyers being priced out of inner Sydney, the municipality of Penrith still offers opportunity to rentvestors.
Some suburbs in the area include Kingswood (median house price $776,000 and rental yield 2.7%), Glenmore Park (median house price $888,000 and rental yield 3.3%), and Penrith (median house price $791,500 and rental yield 2.8%)
$22 billion is expected to be spent on Western Sydney on transport infrastructure. Ms Hill said employment in Western Sydney is also expected to grow 47% within the next 14 years.
What makes a good investment property?
Mr Vidler said there are a few key factors to consider when deciding on which investment property to purchase.
1. Low purchase price
Affordability is a major factor when buying an investment property. Although a borrower may be able to get a million dollar loan, it doesn’t mean they should accept it. As financial circumstances change over time, it’s always a good idea to buy at a lower price.
2. Cash flow
It’s important to know that whether an investment property will accumulate neutral or positive cash flow. If less income is being spent then it potentially allows the buyer to build a portfolio faster.
Rentvestors should also consider the suburb’s rental yield. With the current interest rates, he suggests a 4.5% yield will be roughly neutral gearing on a loan.
3. Location, location, location
Choosing the location of a rentvesting property is another fundamental consideration which Mr Vidler recommends.
Regardless of whether the property is regional or city-based, people need a reason to live there. Ensuring that an area has a robust economy, good employment, and is within a two to three hour drive of a capital city are all valuable considerations.
Source: https://www.realestate.com.au/news/best-suburbs-for-rentvesting-in-2022/?rsf=edm:brz:nl:weeklya2