Current Rental Yield vs Rent Growth Potential

I have been investing in property for some years and bought a few properties. One important lesson I learnt is that rental yield has two aspects, the current rent and the potential rent growth. A lot of people bought in Logan because its rental yield but when we look at the past 3 years the medium rent stalled or even dropped. We also saw periods the vacancy rates went over 4%. Some friends' properties are vacant for almost 3 months and had to drop rents to get the properties tenanted.

I don't mean that I don't like Logan. What I try to say is that we need to pay more attention to vacancy rate and potential rental growth in the next few years when we are doing research of a market.

In cities like Sydney, Melbourne, Geelong and Hobart, we saw both good capital growth and rent growth in the past few years. Rent will go up much quicker if the vacancy rate is low and there is high demand for properties.

 

Rents can also go down, its very much dependent on volume, if there is an oversupply of a certain product rents will not continue to rise

Just what I have observed.

 

I agree @Mark over the long term rent growth is more useful than stagnating yet good cash flow at the time of purchase. A bit negative geared but growing consistently today is going to be a lot more useful in the long term for both personal use and future affordability and lending purposes.