Buying for short-term rental success

Buying an investment property doesn’t always have to be about playing the long game.

Some buyers want to get in, minimise their expenses and maximise their returns in the shortest possible time.

If short-term rental success is your biggest priority, here’s how you might approach your next investment property purchase.

Ready to go

One of the key planks of short-term rental success, of course, is ensuring that the property is rented as quickly as possible.

Depending on the size of the property and the suburb in which it’s situated, every week of vacancy will cost you hundreds, or even thousands, of dollars.

And it’ll take you months to make up that shortfall, so it’s critical that your property is able to be rented and lived-in immediately.

If it’s in need of some repairs or any kind of renovation, it’ll be some time before you’ll be pulling in any sort of rental income, so restrict your search to only the properties that are ready to go.

Think like a renter

Tim Jess, from Investment Property Health, says that if you want short-term rental success, your investment property needs to be one that will always be in peak demand from renters.

And in most cases that means it should be ideally be in a desirable inner-city suburb, or at least one that’s close to key amenities and public transport.

“Properties that rent out really, really quickly are ones that are in really good proximity to public transport,” Jess says.

“You think about who these people are that are renting – they’re people who want to use public transport regularly.”

“Renters are becoming more and more picky. If renters have got the choice of being able to walk five minutes to a train station and hop on a train and get into the city for work, versus driving 15 minutes to the station or hopping on a bus to get to the station and being stuck in traffic for 15 minutes, it’s an easy choice.”

“If you think of cafes, nightlife, parkland – proximity to all those type of things is where people want to live.”

Maximise your tenant pool

Buying in popular areas means you’ll have potential renters at almost every price point, Jess says, which is critical to ensuring you can rent it quickly, while the competition among renters means they’ll likely pay you handsomely for it.

“If you think of the areas that people really like to rent, the average price for a one-bedroom apartment might be $380 a week, and you’ll have a tenant every day of the week at that sort of price,” he says.

“You have very small periods of vacancy.”

Balancing rent vs growth

Jess says that finding an investment property that will deliver good rental returns but also achieve good capital growth can be a balancing act. In the end, it’s up to you to determine your priorities.

“There’s a bit of a trade-off from an investment perspective. You can get really high rental yields for certain properties, but the trade-off is you don’t get as good capital growth,” he says.

“For example, you can get really high yields for an apartment. It doesn’t cost you that much because it’s got really strong rent, but you might not get the same capital growth. Whereas if you go for a house or a townhouse a little further out, you don’t get the same strong yield but you’re getting more capital growth with that investment. It’s about getting the balance right, that’s the key.”

Risky propositions

Some properties lend themselves to being rented as short-stay accommodation, which can be a lucrative but also somewhat risky rental proposition.

On the one hand, you’ll receive far more per night or week than you would from a regular rental, but you may also have long periods where the property remains vacant.

“A lot of people are talking about an Airbnb approach to property investment, where they can get really high yields but they’re inconsistent,” Jess says.

“(But) most people just want set-and-forget-type investment properties, particularly with interest rates where they are at the moment.”