Rent out $1mill + home (Melbourne)

I am planning to build & rent out $1mill + home located within 10km from the cbd in Melbourne.

Has anyone experienced renting out their $1mil+ home (or equivalent for Sydney standard)? Was it difficult to get tenant?

I'm having dilemma between renting it standard lease, or short term stay property through agent.

Look forward to hear your experience. Any recommendation of PM?

 

1 mil is a median priced property in Sydney.
Should be pretty standard procedure in my opinion.

 

that's why I wrote "equivalent for Sydney standard"...I meant maybe like $2 mill property in Sydney

 

Nothing challenging about that. Plenty of Sydney suburbs have medians above $1.5m & still have 30% of stock as rentals and very few would justify being short term rentals.

 

I'd still guess that a 1 mil home within 10km of CBD in Mlb would be close to a median.
For Syd its probably a 30km ring.

 

My question would be is it profitable to do this? Often the higher the house price the lower the yield but $1m is not an excessive price in Melbourne inner to middle ring.

If both options are profitable then you can chose which one you like. Short stay would have higher PM fees and possible vacancies but higher rents. Standard would have lower yield but likely to have more consistant income and lower PM fees.

Samantha from Qura @Lil Skater is a PM in Melbourne and may be able to assist.

 

Depends on the rent, location, market comparables. Mine took 2 weeks. (Box Hill)

 

Thanks for the feedback. I thought people who can pay rent $52k+ will mostly rather buy a home than rent. Box hill leased in 2 weeks is surprising. Thought majority people in box hill would rather own a home.

Are the tenant normally an expat?

 

I tend to think the yield may not stack up. My house in Sydney worth ~$1.25m would rent for only around $650 per week. I guess its not premier enough though.

Executive leasing would give a better yield imo.

 

I saw the rent of other properties in the area. It seems 5% yield is achievable for standard lease, even though this would be above median rent in the area. Majority houses in the area are old and unrenovated. But im just worried about being vacant too long. And not sure about the vacancies if it's short term leased. That's what i want to find out here if anyone experienced the same.

thanks for the recommendation

 

They are landlords too. I suppose one of those 'rent where you want to live' folks. It's less than 5% though

I did not compare the property to older homes. The agent got a better rent than it was listed for, so a good PM would do the work for you. Get an appraisal from them if you are not confident in pricing it.

 

i don't think how much it is worth will dictate how fast it rents in melbourne. it is depends where it is and the condition of the rental - doncaster and doncaster east have homes on large blocks all within the 900k - 1mil mark which fetches anything between 500-750 per week. End of the day, it really depends on the tenant and if he or she likes the place. it could be 2 mil dollar place but still rents for 550 per week if it is a teardown.

 

Hey! This is me!
(not your potential tenant. But I'm working hard on being more princess-ey.)

1mn+ can mean different things in different suburbs.

One inner suburb, townhouses are around the 1mn mark, give or take a few 100k. These rent out easily, newer builds, good location very near PT, shops, schools. Good yield. I think these are sort of "regular" options in this location, if you know what I mean. Families, professionals, often folks seeking a nice school zone.

I'm considering, when the time comes and we need a bigger place, to rent a nice inner Melbourne place (valued around 3mn, rental yield is peanuts); that expensive a ppor doesn't make sense to me from an investment perspective. So I think tenants in the 1mn+ range aren't necessarily expats, but folks who get better returns on their capital elsewhere or maybe just don't believe in buying property.

 

Sounded like my tenants. They will (without fail) find something needed done once every 2 months. When the dishwasher broke, they've suggested a to go get a Miele. When the roof's sharking is damaged, they've suggested cleaning/colour the tiles (the clean/colouring weren't done as it wasn't deemed necessary).

 

Thanks for the recommendations guys, been enjoying the time off

Your higher end properties will usually take a little longer to lease, but there is a market for it. Many people choose to rent for the flexibility, it suits their lifestyle, etc.

Depending on the area and type of property the vacancy period may not be much more than your "standard" properties. $1,000+ per week isn't uncommon in your Prahran, St Kilda, South Yarra and surrounding areas, so if it's around those areas I wouldn't be too concerned.