Can anyone explain to me how long it takes for rents to catch up after a boom? I live in Perth and there is a rental shortage which seems to be pushing up rents, but does it ever get to the point where buying IPs becomes cashflow +ve or positive geared after booms? Are there rent cycles like there are property cycles?
I tried to do a search on the net to find out a history of rents for areas, but I'm not having much luck. Is there a site that offers this info for free?
In the March issue of API, one of the authors suggests that it takes (on average) 5 years for a negatively geared property to become positive. I can see that this could be pushed along by paying down some principle too, but if there is such a thing as rent cycles where, historically, properties in our cities provide better returns, then maybe I can relax a little
Hi Dee Dee. If your referring to your Shoalwater property there is many plans for the future of Rockingham and when the development starts, workers will be looking for accomodation which will push rents up. It’s all supply and demand so past history may not be the best indication. I’ve found the first 2 yrs are hard financially but then it gets easier. There is also a best time in the year to achieve higher rent (more demand – people wanting to settle for new year). Speak to your property manager to find out best month. I think I was told December but can’t remember so please let me know when you find out!!!! You can relax, in another 10 years your going to be REALLY happy you’ve held on.
There are definitely rent cycles. Actually for income property, property cycles are caused by rent cycles since the value of an income producing property is determined by rents. So if rents cycle property values follow that cycle. You may want to read my article on my website about real estate cycles and their double-positive impact on property values.
Hi Millions! Yes, I wrote the post with the Shoalwater property in mind – you have a good memory I definately want to hold on to it long term, even though it is negative right now, because I think it has good potential to grow in value eventually. I was thinking of what we could do for our next purchase though because we need to focus on something less negatively geared if we are to stay afloat. This is what made me wonder about rent cycles. We bought in Shoalwater at the top of the boom, which I don't regret considering we now have our foot in the door at last, but (as you know) it means the rent yield is really low – 2.5%. I get the feeling that the tenant we have currently will be staying long term as it is really close to the primary school for her kids, but if she decides to move on, it is good to know that the builders will need accomodation – I hadn't thought of that.
Hey Petro – thanks for your reply. From what you are saying, it is likely that the yields tip the other way eventually after a boom. I had a bit of trouble locating "real estate cycles and their double-positive impact on property values". Would you be able to tell me which heading it is under on your website?
I've only been studying the Perth market since 2000. Does anyone remember how long it took for the market to recover during the last couple of booms (and hence an increase in rents)? I understand that there are differing outside factors which determine recovery each time, but it would be great to know anyway.