Savvy investors looking to make a healthy income can’t go past property investment. Property is widely recognised as a lucrative source of income because of its potential to increase in value over time. Investing in property offers the opportunity to gradually build wealth and hedge against inflation. Though these profits aren’t a given — you need to be strategic and plan carefully — property investment is a strong choice for investors.
Part of making a strategic property investment is choosing the right location. Though places like Sydney and Melbourne can offer great long-term outcomes, it can be difficult to acquire and maintain a foothold in such penetrated, high-competition and costly markets.
Darwin, on the other hand, is lower competition and bursting with potential. With several major developments in the pipeline, like the HyperOne Network, the city is set to flourish over the next decade or so. Perfect for property investors looking to play the long game.
Investing in Darwin’s property market tends to take one of two main forms: long-term rental or listing an Airbnb. A long-term rental is typically considered to be any lease that is longer than six months (typically 12 months with opportunities to extend). You can expect your tenants to be locals or newly minted Darwin residents looking to set down roots in the area.
Though listing your property as an Airbnb can be very lucrative, it’s quite a volatile and unreliable income strategy. With fluctuating demand and high maintenance requirements, there’s no guarantee of stability. We instead invite you to consider using your investment property as a long-term rental. Though it may not sound as exciting or flashy as managing an Airbnb, it retains significant advantages that we think you’ll enjoy.
The benefits of long-term rentals
Stability and predictability
Long-term rental properties offer stability to both tenants and landlords. Tenants can feel secure thanks to their predictable, long-term housing situation. Meanwhile, landlords can count on a consistent and dependable rental income for an extended period. This also reduces the risk of having vacant units, which is a high-risk factor when using your property as an Airbnb.
Reduced turnover costs
Long-term leases can significantly cut down on turnover costs for landlords. When tenants vacate a property, landlords typically incur expenses and spend time on activities such as property advertising, tenant screening, and unit preparation for the next occupant. With long-term leases, these turnover events occur less frequently than they do with short-term leases, translating to substantial time and cost savings.
Lower maintenance costs
When tenants commit to long-term rental property agreements, they typically treat the property with greater care as they view it as their own residence. This minimises the wear and tear on the property, and with fewer tenants moving in and out, there is less need for frequent repairs and renovations. Landlords can also conduct regular maintenance and inspections during the tenancy, addressing issues proactively. In the long run, this can lead to significant cost savings and help keep the property in better condition.
Improved tenant screening
Long-term rental property agreements grant landlords the opportunity to conduct more comprehensive tenant screening processes. With the opportunity to thoroughly assess potential tenants, the chances of hosting problematic tenants who might damage the property or make late rent payments are reduced.
Rent increases
In addition to the above benefits, long-term rental properties enable landlords to gradually increase rent over time. Shorter lease terms may make landlords reluctant to raise rents due to the fear of tenant departures. However, with long-term leases, landlords have the flexibility to incrementally adjust rental rates. Though these increases must be reflective of the property’s value and the broader competitive market, these incremental rental increases can result in a steady and predictable growth in rental income.
The disadvantages of long-term rental properties
Though there are clearly many great advantages to having a long-term rental property, no investment can be perfect. It’s important to consider both sides of the coin when deciding whether to make your property a long-term rental.
Lower rent prices
One downside of having a long-term rental property is that you often have to charge lower rent prices in comparison to what you would charge for an Airbnb. That’s because Airbnbs are priced per night to compete with high hotel prices and to cover costs like furniture and cleaning fees. It’s a trade-off between having stable, long-term tenants and the potential for higher rental income in a competitive and sometimes unpredictable market.
Start your investment journey
If the stability and reliability of a long-term rental property sounds right for you, we’re here to help! Get in touch with us today and we’ll guide you every step of the way through investing in Darwin.