The market uncertainties being driven by the slowing house prices and rising interest rates are compelling more investors to consider positive gearing as a strategy to minimise any potential risks.
Buyers Agency Australia Dragan Dimovski said there are markets across Australia where investors can achieve positive gearing, where rental income is higher than the costs of managing the property.
"Regional areas often offer the best opportunities, with many people having relocated to these areas following COVID for lifestyle reasons and as the ability to work remotely has grown,” he said.
“This has led to high demand for a short supply of rentals, reducing vacancy rates and seeing rents grow, while in these areas property prices are also usually lower than inner city areas.”
When looking for positively geared properties, the rule of thumb is to look for markets with a yield of at least 6%. However, Mr Dimovski said it's important that the area will still be sought-after by tenants.
“While these properties don’t necessarily experience the high capital growth rates of other homes, particularly those in inner-city areas, the cash flow enables investors to be able to hold their higher growth, lower-yielding properties, hence balancing out their portfolio,” he said.
“Choosing a regional area where there is population growth and accompanying infrastructure, however, will lead to capital growth in these areas over the long term, as long as demand exceeds supply.”
Here are five markets where current conditions present the most opportune time to get positively geared:
1. Mildura, Victoria
Situated in northwest Victoria is the regional city of Mildura.
A three-bedroom house on a large block close to the town centre was recently purchased for $330,000.
The vacancy rate in the area is 0.6% — with the property renting out for $400, this equate to a rental yield of 6.3%.
2. City of Logan, Queensland
There are properties with rental yields in the lower 6% range in City of Logan, which is just half an hour south of the Brisbane CBD.
Mr Dimovski said there was a recent $480,000 purchase for a three-bedroom house in the suburb of Eagleby.
“Following a $20,000 renovation it was rented for $590 per week, equating to a 6.1% return,” he said.
“The vacancy rate in the area is just 0.4%, which means it’s easy to find tenants.”
3. Townsville, Queensland
Dubbed as the unofficial capital of North Queensland, Townsville hosts properties that can provide opportunities for investors to achieve positive gearing.
A three-bedroom house in Townsville was bought for $295,000 and rents for $410 per week.
The market has a 0.7% vacancy rate and a 7.2% rental yield.
4. Bundaberg, Queensland
The regional city of Bundaberg is characterised by its high rental yields and capital growth.
Located in the northern part of the state and just around four and a half hours away from Brisbane, Bundaberg has a vacancy rate of 0.4%.
Mr Dimovski said a three-bedroom house that was renovated 12 months ago on an 800 square metre block was sold for $355,000.
The block is just three minutes’ drive from the town centre.
“The property rents for $455 per week, equating to a 6.7% yield,” he said.
5. Kerang, Victoria
The rural town of Kerang that lies three hours north of Melbourne houses properties with high rental returns but slower capital gains.
Mr Dimovski said a three-bedroom house on a 560 square metre block in the area was sold for a client for $278,000.
“It is rented furnished for $430 per week, equating to a massive yield of eight per cent — what’s more is that the vacancy rate is just 0.3%, so rentals are snapped up very quickly.”
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Photo by Julies_Picks from Pixabay
