Why Multi-Bedroom Homes Are Gaining Appeal Among Investors

The recent cost of living surge is reshaping rental trends and influencing property investors’ decisions. Here's an in-depth look at the shifts in the rental and investment markets and why multi-bedroom homes are becoming increasingly attractive.

Lending to property investors has surged nearly 30% year-on-year as of May 2024, reflecting a robust investor presence in the property market. This surge is partly driven by rising property values, which have climbed 10.14% nationally since the lows of late 2022, resulting in significant capital gains for many investors.

However, successful property investment often involves targeting properties with strong tenant appeal. Recent findings from CoreLogic reveal a growing preference among renters for homes with more bedrooms.

Why Are Renters Flocking to Multi-Bedroom Homes?

As the cost of living escalates, renters are feeling the pinch. They are not only facing increased utility bills and higher grocery prices but also experiencing a national average rent increase of 8.2% over the past year.

To manage these rising costs, many renters are opting for larger properties. These properties often serve as sharehouses or multi-generational homes, offering a way to distribute rental expenses among several occupants. CoreLogic’s research supports this trend, showing that rents for multi-bedroom homes are climbing faster than those for smaller residences.

For instance, while rents for 1-bedroom units and studios have risen by 7.1% over the last year, and for 2-bedroom apartments by 7.9%, rents for houses with five or more bedrooms have surged by 8.7%.

Despite the higher absolute rents for larger homes, the cost per bedroom tends to be lower. On average, the weekly rent per bedroom in a 5-bedroom house is about $175 nationally, compared to $293 for a 2-bedroom unit and $541 for a 1-bedroom apartment.

What This Means for Investors

While multi-bedroom homes might offer higher rent increases, they aren't a one-size-fits-all solution for investors. Larger properties often come with a higher purchase price and potentially greater wear and tear, which could lead to increased maintenance costs.

Additionally, 4-5 bedroom homes are frequently located in outer suburbs, where price growth may be slower compared to inner-city areas.

Ultimately, the key for investors is to align their property purchases with their investment goals and preferences.

Get Expert Guidance for Your Investment

Selecting the right loan is crucial when considering an investment property. We, at Osinski Finance, can assist you in this process.

Contact us today to assess your borrowing capacity and explore financing options that best suit your investment needs.

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