Are rental returns reliable?

there's a lot of talk about prices falling but what about rental returns? I'm considering some strategies that will provide high rental returns in the current market but my thought process is "will these returns remain consistent during a downturn".

Can we rely on rent or will this also suffer during a flop?

* I'm talking about things like air BnB which have great returns at the moment

 

In my experience, rents are not reliable. I had a property in Perth that was returning $440 per week during the boom. It is currently returning $280 per week. The thing is that I knew that $440 per week was boom prices that could not be sustained. I used that time to build a cash buffer for when prices dropped.

My understanding is that rents dropped all across Perth. This is something that investors need to be aware of and prepared for.

 

Rental rates depend on supply and demand.
Rents can rise, but can also fall.
Marg

 

My houses in Perth were fetching $950 during the boom.
The latest renewal was $590 + 2 weeks free rent. My agent says that they would probably fetch $600-620 today (6months later).
Throw in a vacancy or two and I would say ‘no’.
Rents are just as volitile as divs.

Blacky

 

I really think this is property and strategy specific though. I don't think a general statement on rental volatility is much help to you.

Whats your strategy exactly?

 

Depends what you mean by downturn.....Ask those who bought in mining towns how rents and value is performing. The ACT follows the fate of government spending cuts in public service and consultants or booms when they mention investment. Infrastruture spending is driving some job growth areas etc.

Risk v's reward applies in the chase for high yield. eg Holiday rentals. Yes you can rent for $XX,000s a week. But when tourism declines vacancies abound. Places go on and off trend. Low foreign airfares and package deals mean its often cheaper for a family to fly to Bali, Malaysia etc than to spend 2 weeks on the coast.

Airbnb is a finicky market but can be a strong yield for someone with the time to spend. Its not passive income but requires daily effort. Many airbnb people are competing with hotels etc that charge far higher per night. The rental market has almost no bearing on the daily rate. A glut of Airbnb would harm earnings of course and its geographically based...eg 200 decent airbnbs in St Kilda would be bad news.

 

Noooooo
Noooooo
Noooooo

No investment strategy is ever reliable.

 

Nope.....some people in Sydney...Melbourne...are about to find this out the hard way. .....