Tenants have different wants

TO GET runs on the board, residential investors have to be able to identify in-demand rental areas.

This is not as easy as it looks. Families who rent, older people and single and couple members of Generation Y want different amenities.

And, because of affordability issues, tenants will favour some areas over others.

If you are looking to buy an investment property, it is important to look beyond broad residential vacancy rates.

For example, renters under the age of 35 often share accommodation so that they can afford to live in preferred locations.

Added to this, tenants of all ages are leaving lesser quality properties, or staying in this accommodation on increasingly shorter leases, and switching to quality, well-maintained properties.

A veritable smorgasbord of factors comes into play in making an area popular with tenants. Affordability, desirability and access to lifestyle attractions, as well as access to schools, shops and other amenities are just some of the drivers of demand. What should investors look for? Being able to identify transient areas is critical. Richard Reed, who lectures in real estate and property at Deakin University, says because renters typically rent in the short to medium term, it i best to focus on areas where residents move every couple of years, rather than every decade or so.

“Inner-city locations and unit developments close to trains, trams, freeways and shops are the best locations for rental properties,” he says.

“An investor can visit a particular area and observe the relative high frequency of removal vans on weekends to confirm this theory.”

Professor Reed says another indicator of transience is when storage facilities open in a suburb.

These are usually close to areas where households are in transit from one location to another, and point to a high number of renters.

While the nuclear family is Australia's most common household, the fastest growing household is the no-children couple.

Census data shows this category accounts for 30 per cent of households and is growing fast. Couples can be rolled-gold tenants. “A working-couple household without children often has a relatively large regular income and prefers to rent accommodation which suits their current lifestyle,” Professor Reed says.

Landlords should take stock of the fact that a higher proportion of young people rent compared with other age groups.

As more Gen Ys put off buying a home in favour of the flexibility that renting offers, the trend is only likely to intensify, Professor Reed says. - Chris Tolhurst Domain.com.au