Revenue property in Victoria: invest for success
“You have to be prepared to be a landlord,” Tom advises. “It can be problematic (a lot of work). There are risks. Sometimes it goes fantastically, sometimes it does not.” By following Tom’s advice, however, both experienced and novice investors are thrilled with the success and profitability of their Victoria revenue properties.
Long-term rental investment: Rental restrictions have now been eliminated.
You can no longer restrict any strata owner from renting their property but please check with the updated rules. [1]
There are still a few things to be aware of:
- Rental restrictions are removed for all stratas except for 55+ stratas and leasehold stratas (the land the strata occupies is leased, you never own the land)
- The default minimum period for rentals is now 30 days but a strata may have by-laws requiring longer terms… 60 days or longer
In addition some stratas have been thumbing their nose at these new rules. They probably won’t win that battle but please avoid these stratas for rentals. Be sure to check the rental restrictions and make sure it is allowed in their by-laws if you are planning on renting. The last thing you need to do is be in the middle of a lawsuit against the strata.
Crunch the numbers for revenue property success
If you’re leveraging other assets to run a revenue property as an investment, your mortgage interest will be tax-deductible. It’s a much different financial equation than buying a primary residence. “If you live there, you can put down as little as 5% depending on the house price.” Tom explains. “But if you’re not going to live there, traditionally, you need 20% down.”
He counsels all of his revenue property clients to crunch those numbers. “What do I need to put down at ‘x’ amount of rent for this place to pay for itself?” He advises them to ask. “If you have a $500,000 property, and put $100,000 down, carrying a $400,000 mortgage, ask, ‘What’s the average rent? What do I need to put down in order for this to cash-flow itself?’”
The basic idea, Tom says, is to invest the minimum amount you can put down in order for the unit to cash-flow itself. “That’s the perfect investment. After you put your deposit down, what do you need? Strata fees, repairs, taxes, management company… with all of that, what will it take to get that overhead covered? That’s what I can help people with.”
Victoria sells itself as a revenue property investment
In Victoria, current demand for rentals— both short and long-term— is so high, “if you put a place up for rent and it’s any good, you’ll get so many applications,” says Tom. “It’s a landlord’s market. It’s a good time to be buying investment properties in Victoria.”
Many investors are keeping a sharp eye on a shifting regional property market. Multiple bids on listings are getting less common, and prices are stabilizing— even falling. [2] This is great news for those looking to invest in revenue properties. “With the cooling of the market, as housing prices come down, rental rates will not come down proportionately. They will stay high,” Tom explains. So the cost-to-benefit ratio is getting better and better for investors.
