Positive cash-flow isn’t easy to find, but it’s possible in South Australia. Before explaining that, let me outline The Numbers on rental properties in Adelaide:
- Median house price in Adelaide is around the mid-$4oo’s, according to several industry and government sources;
- Median rent in Adelaide is estimated at $380/week;
- That’s a gross rental yield of around 4.4%
- Property investors know that 20% to 30% of gross rent goes on fees, charges, vacancy (2%-3% in Adelaide, depending on location) and maintenance;
- So net yield is likely to hover a bit over 3%;
- But a residential mortgage currently costs around 4%-5%;
- So the shortfall (“negative gearing”) is likely to be up to 2% or so – $750 or so, per month. This makes entering the rental investment market unviable for many small investors. Of course, the negative cash-flow can lower your taxable income. Even so, most investors will need to supplement the rent by $100-$150 per week.
The question is:
Can you buy SA rental property with net yield over 6%?
Not easily, but yes.
In the past few months, we’ve helped several clients buy such properties. They’re sound but basic houses (not units) in areas where there’s plenty of rental demand. They’re grossing around 8%-9% rental yield. And perhaps best of all, total investment for each one was under $200,000.
We sourced them through our extensive network of investors, property specialists and agents.
If you, or someone you know wants to get into the real estate market, or increase their portfolio, while improving their cash-flow, RealTeam may be able to help!