Have you ever arrived at a hotel and noticed that the place isn’t clean or it is in need of a revamp? First impressions are everything and I bet you wouldn’t go back unless the price of the hotel was factored in. In other words you get what you pay for and when you pay top dollar you have higher expectations. The same can be said about the rental market.
As the state of the market changes in Mackay from a “Workers Accommodation” market to a “Lifestyle market” I have seen a significant shift in the expectations of tenants and the landlords that cater to those expectations continue to attract quality, high paying tenants. The ones that don’t, will see further price reductions and higher vacancy periods without doubt.
Great options for upgrades
A few years ago tenants did not have the luxury of being picky because there was limited supply of housing and the expectation at the time was a roof over your head. Landlords could get away with letting maintenance go and if the tenants didn’t like it there were plenty more to replace them. It created an “us and them” attitude and many people would treat their investment property like just another rental. I actually hear these words quite regularly, even in today’s market. “It’s just a rental”.
When I was growing up I lived with my single mum and I will never forget that we moved around a lot and she was regularly treated like a second rate citizen because she was a renter. It was almost to the point of being embarrassing to say that you don’t own your house and that you just rent it. She often took on properties that were run down but where she could see the potential to fix up and turn in to a home even though she didn’t own the place. Funny thing is that the landlords would quite often expect her to pay more rent on lease renewal when she was the one that had improved the condition of the property. Knowing that if she moved they could increase the rent.
Those days are well and truly gone but the situation continues with many people. They treat their tenants like second rate citizens. I even experience this myself. I own a house but I lease a property that gives me a better lifestyle. You pay your rent on time, keep the place looking great but when it’s time to do routine maintenance it always gets shelved. It makes you wonder how they would feel if you stopped paying rent for a while until the maintenance was sorted out? I can guarantee it wouldn’t go down well. So I understand it from both sides of the coin.
In 2009 when I was working in Brisbane I saw many owner occupiers selling up to go rent. Owner occupied residences were losing value and the cost of owning the properties were increasing with rates, insurance and other outgoings. I saw many wealthy people selling up and entering the market as tenants. It was actually a very common occurrence and it made me change my mindset about renting. When you think about it, it made perfect sense. Why would you have all this money tied up in a property that is falling in value with no light at the end of the tunnel?
Anyway, getting to the point of the story. The state of the market has changed and you have a choice. Adapt and change with it or keep doing what you are doing. By adapting and changing I mean recognising the change in the state of the market and setting up your property accordingly. But what has changed and what do you need to do?
As the prices have come down the value in the market has increased significantly. Houses that were once $700 – $800 per week are now $400 – $500. Units that were renting for $450 per week are now $200 – $250 per week. These are real figures and the obviously substantial adjustments. But what next? Many people often ask me if we are going to find tenants and they become stressed because they are constantly hearing and reading negative information about the market. I would say you have two options. 1. Be a victim to the market or 2. Improve your property to increase the appeal.
So what do tenants want? I would say that tenants want clean, modern properties that are well positioned to their lifestyle needs. The things they used to see as luxuries are now expectations and that’s what is crucial to understand if you are a landlord. Dishwashers, quality air-conditioners, remote garages and even stone bench tops. These things are no longer luxuries and if you want to attract quality tenants you must have these things otherwise your property will be crossed off the tenants short list.
Floor vinyl and stone samples we are offering to our investors and home owner’s
Floor coverings are really important. I often see rental properties that have the cheapest, nastiest carpets and vinyl available. I call it “school library carpet”. Its durable and hardy but it just looks crappy. This was ok in the “worker’s accommodation” market but it won’t cut it in the “lifestyle market”. The actual difference in cost is not that much but the quality is so obvious. There are also depreciation and tax benefits for getting a better quality so why wouldn’t you go with the good stuff. Is it because, “It’s just a rental”?
In my opinion you should be thinking about your investment property like a hotel. Airbnb has become a very lucrative option for property owners across the world. The expectations of guests in hotels has changed just like tenants. Airbnb has disrupted the market by offering another option and the growth is phenomenal. The owners and the guests are held accountable by the review process so if the place isn’t clean or as it has been advertised the guest can leave a negative review. This impacts the hosts future bookings so it is in the hosts best interests to make sure the place is clean and accurately advertised.
The fact that landlords are competing with the hotel industry is evidence that the market is changing and that the consumers demands are higher. If you don’t listen to that then the guests/tenants will go elsewhere. Because they can! If you do listen and set up your properties to cater to the market you can increase the return and the vacancy periods. You wouldn’t put “school library” carpet in a luxury hotel so why would you put it in your rental property in a lifestyle market?
Paul Bryan, Director