As an investor, is a 5 year lease for me?

tenants

With the recent news that the residential tenancy’s act is to be amended to allow for 5 year leases a number of investors have been asking me “is this right for me?” My first thoughts were, what about rental increases, vacant possession for the purpose of sale, what will be fair wear and tear on a property over a 5 year lease?

When considering an asset like real-estate a few things should be taken into account. How long do I plan to hold this asset? Am I hoping to be negatively or positively geared? What would I do in the event of a major change of life? Is rent climbing in my suburb, falling or steady? – if rent is changing will a 5 year lease keep up with those factors? Are there major plans in my suburb in the next 5 years  – new schools? New hospitals an upgraded train station? All these and more could significantly impact rent and sale values how would that impact your plan?

If some of these questions seem a bit daunting, don’t worry, they often are for most investors but some things to consider before making the change. A five year lease provides stability but reduces flexibility. When interests rates go up what will that mean for you? If you had to sell at any point in the next 5 years would you want to exclude the lucrative owner occupier market including tenants looking to buy a home?

Whilst its early days and the full details are yet to be made clear what is clear its important is that this is by no means a simple decision and whilst beneficial for tenants will it be of any assistance to you? If you’d like to chat further about your options before considering this kind of lease in the inner city please feel free to contact me.

For more information on the proposed changes click

http://www.premier.vic.gov.au/long-term-security-for-tenants-and-landlords/

James Edmundson - Harcourts Melbourne City

James Edmundson
Senior Sales Consultant
P: 0411 456 770
E: james.edmundson@harcourts.com.au
W: jamesedmundson.harcourts.com.au/ 

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