Out of love with residential? Try rooming houses
They might have a reputation for hard work, but one buyer’s agent believes that rooming house accommodation could be the next big thing for investors.
Dragan Dimovski, Sydney-based founder of Buyers Agency Australia, is a man with a mission: to help investors create robust, generative portfolios. In a recent episode of the Smart Property Investment Show, he shared his insights into why cost of living has caused the demand for single-room accommodation to explode and how investors can capitalise on this trend.
According to Mr Dimovski: “The cost of rent is skyrocketing.” He explained that young people need accommodation that is affordable, close to work or study, and in well-connected metropolitan areas.
Recent data reinforces Mr Dimovski’s claim, with CoreLogic’s latest quarterly rental review revealing that rents have risen for 38 consecutive months. With tenants down $137 compared to July 2020, CoreLogic economist Kaitlyn Ezzy stated tenants are “seeking to grow their household to share the growing rental burden”.
In Mr Dimovski’s view, this is a market that investors can tap into. He emphasised that renting out rooms individually can yield higher returns than single-occupant tenancies.
“Because we focus on this kind of strategy, you can purchase a four-bedroom home for $600,000, furnish it for another $20,000, and you’re getting $850-$900 rental return – and you’ve got someone managing it for 10 per cent. It’s a win.”
With rooms rented out individually to tenants and shared amenities like kitchen and bathrooms, property management can be significantly more complicated. But Mr Dimovski shared some tips to minimise obstacles.
“The people who come in are on a minimum six-month contract,” he said. “It’s not like an Airbnb situation where they’re coming in and out.”
In fact, he highlighted that overlapping tenancies can even be a good thing, as it means that “if you have a vacancy, you might have a vacancy in one room rather than the house”.
“In the particular areas that I deal with, you’ll only have a one-day vacancy because they’re just lining up,” he revealed.
While this investment strategy can be a lucrative option, Mr Dimovski warned against building a whole portfolio out of rooming house assets, urging investors to “diversify in the style of properties”.
Nevertheless, he insists that “fear of the unknown” should not prevent investors from considering tapping into the rooming accommodation market.
Listen to the full conversation with Dragan Dimovski here.
More from this writer:
-
Holding on to the family home until you die? Watch out for CGT
-
Melbourne is now one of Australia’s cheapest capitals – here’s why
-
ACT: Sunset clause reforms ‘working as intended’
-
Should you buy a renovator property?
-
The 20 suburbs that Aussies never want to leave
-
5 high-growth Sydney suburbs for every budget
-
WA builder left client $132k out of pocket