Rules Are Made To Be Broken

Posted by Luke Graham

North facing, coastal breeze, top floor premium, ground floor premium … all of these factors and more come into play when identifying the right property.

When it comes to property investment, some of the rules must be disregarded in order to determine what it is the market wants today and what it is the market will want tomorrow.

Rules and preconceived ideas have been smashed by us in the past: new versus old, buying versus renting, houses versus apartments, the herd mentality, affordability and tax offset strategy to name a few.

This week, we will explore a real example of an apartment complex within a more volatile property market, determining its tenancy-seeking performance when under pressure.

North facing is always preferred?

In this case, three of the thirteen sampled apartments were north facing. Two of the three north-facing apartments took the longest to lease out and also had rental yields below the group average.

Holding out on discounting the asking rent will pay off when you get a tenant?

The first four apartments to secure a tenant also had higher rental yields than the rest of the sample group. Those that held out eventually had to discount their rent, resulting in a double loss.

Top (or ground) floor is always preferred?

This development was on three levels. The first to be fully tenanted from our sample group was level one (middle level), then ground, then top. Additionally, the three fastest apartments to have tenants were from level one.

When there is a pool of available apartments, the cheaper ones will have higher rental yields?

In this case, rental yields were not affected by price to any degree of statistical significance. In fact, the median priced apartment had the highest rental yield, and average days on market was almost exactly the same.

Bear in mind that this is a case study of one isolated development project and does not indicate ‘the new rules of property investment’. Every property in every market at any time will have different fundamentals that need to be respected. Consider instead that the rule of property investment is this:

The rules are there ain’t no rules …

Otherwise every Leo Balmudo would be a property millionaire and we would be without a job.