Once you’ve bought your little piece of planet earth, now what? You should rent it out to someone else, of course! In this article, we’ll dive into the ins and outs of investing in real estate for rentals in Adelaide, and why you should consider Adelaide as one of Australia’s top property markets.
Why Invest in a Rental Property?
If you have the spare income and down payments available to buy a second property, renting it out shouldn’t be a problem, especially in a growing market like Adelaide. A smart goal is to have the rental cost come close to or even exceed your mortgage payment—this way, you can build free equity in your home.
After a couple of years of steady rental income, you can begin to include this as part of the income statement you present to the banks when you go to buy your second rental property. Furthermore, you can negotiate rent in Adelaide as property value rises.
As you can see, if you play your cards right and choose a market where your rental return rate is high enough, you can find yourself owning quite a few properties all while gaining equity in each of them as every month passes. Having this much equity on paper is considered by banks to be a tangible asset that has real value. This means that, on paper, you have the money to repay the banks by selling your other properties if something were to go wrong, meaning the banks are more likely to back you in purchasing more homes.
Why Adelaide?
One look at the charts and you can see that in most major metro areas, including Adelaide, the median home value has doubled in the last fifteen or twenty years. Though there are several Adelaide property rental myths you should be aware of, this increase in value alone is a fantastic reason to buy properties in Adelaide.
When you couple this growth with the fact that the average annual rental return rate (the rental income versus the value of the home) sits at around 5%, your home will likely double in value and also pay for itself in twenty years.
The economy of Adelaide is strong–its economic footprint represents some 20% of South Australia’s entire economy. People from all over South Australia flock to Adelaide for its jobs, nightlife, and proximity to the cool sea breeze. With plenty of room for expansion in the northern and southern suburbs, lower-cost opportunities abound outside the city centre for those who find urban real estate too expensive.
Another fantastic advantage of new homes in the suburbs is the near guarantee that your rental home will remain maintenance-free for at least several years. This means more cash in your pocket and less money spent fixing a toilet in the hundred-year-old Victorian house that’s charming and marketable but comes with hidden costs.
Final Thoughts
Ask the average homeowner who’s purchased property in the last twenty years in Adelaide if they think they made the right choice, and you’ll most likely receive a resounding yes. By adding equity slowly over time and having another person paying the mortgage, you can be increasing your net worth with each passing month while doing little more than cashing checks and occasionally calling an electrician to fix a light switch.
Down the road, this can also provide you with tremendous financial flexibility. Once the home is fully paid for, the rental income becomes a sort of pension. Many rental investors have found themselves being far short of the standard retirement age, and with more cash in the bank every month from rental properties than from their jobs.
They say the best time to plant a tree is twenty years ago and the second best time is today—the same holds true for real estate investors who are savvy and choose their markets carefully.
Check out the wide array of Adelaide rental properties available right now on Soho–we’ve got you covered!
