What is a pre-purchase rental appraisal and why do you need one?

Investing in property has always been a popular wealth creation strategy with Sydney-siders and there’s good reasons for that. But like any investment, there are good investments and bad investments.

With high Sydney property values, it’s more important than ever to ensure your rental income will generate a decent return. After all, you probably need the rent to cover expenses such as loan repayments and rates as well as providing you with additional income.

Therefore, relying on a rental estimate from the selling agent, may not be as accurate as you need because they focus on property values – not rental returns.

That’s why we believe it’s important to invest in an independent, pre-purchase appraisal from a knowledgeable property manager. By independent, we mean a property manager who isn’t trying to win the management because there may be a temptation to over-estimate the rental return.

Instead, we suggest paying for a pre-purchase rental appraisal report that provides accurate, factual data.

What information should be included in a pre-purchase investment property appraisal?

1. Number of rental properties in the area

Demand drives price so if there are lots of properties for rent in the area, rental returns will be lower. For example, in Sydney at the moment, it’s not uncommon for a suburb to have 80+ properties available for lease.

2. Recent rentals gained

Rents in Sydney have changed significantly over the last 2 years. At the end of 2019, rental incomes were much higher than they were in mid-2020. They are now on the rise again. So to know what rental return you can realistically expect, you need to look at what the most recently leased properties in the area are achieving.

3. Local rental property comparisons

Comparing local rental properties with the property you are thinking of buying will give you a more accurate idea of the rental income you can expect to receive. Then you can compare it with your borrowing costs and other expenses to determine if the investment returns are there.

4. Tenant appeal

Minimising vacancy time is crucial to maximising rental income. That’s why it’s important to understand what tenants in the area are looking for and match that with the type of tenant your potential investment property will attract. Number 1 on every tenant’s wish list is air conditioning followed closely by a dishwasher. Then it’s things like modern appliances, cleanliness, space, number of bedrooms and bathrooms etc.

5. Understanding what upgrades may be required now or soon

Purchasing an investment property means you need to cover any immediate or medium-term upgrades and maintenance issues. Knowing what is required before you purchase means you can negotiate harder on the purchase price and make an informed decision on whether the property is the right one for you.

Where to begin?

With over 35 years’ property management experience, you can rely on Brigitte Stills to provide you with a comprehensive and accurate pre-purchase investment property rental appraisal. Her report will cover all of the above factors and provide you with a totally independent assessment of whether purchasing a particular property will be a wise financial decision.

At only $150 + GST, a pre-purchase investment property rental appraisal could be the best investment you make. To find out more or to arrange your appraisal, contact Brigitte on 1300 091 638 or propertymanager@stillsproperties.com.au