The Hunter Valley town of Cessnock has beaten Australia’s most glamorous holiday spots as the best place to buy an investment house.
The average rental yield from a house in NSW’s peak wine growing region was one per cent better than that of Byron Bay and two per cent better than Port Douglas, Airlie Beach and the major capital cities.
Yield is how much rent you’re getting compared to the value of your house, so a cheap house with a reasonable rent would get a better return than a more expensive one with the same rent.
Some of Tripadvisor’s 2014 list of Australia’s Top 10 Destinations got the worst rental yields.
The median house price in central Sydney is $1.75 million but with an average rent of $1,120 a week it only had a return of 3.33 per cent.
However, Cessnock return was twice as good at 6.3 per cent, thanks to having the lowest median house price of the top 10 destinations.
Michelle Hutchison from mortgage comparison website finder.com.au says it’s a good idea to look beyond the more popular, and expensive, places when buying an investment property.
“It’s important to take off your holiday glasses when assessing potential investment properties,” she said.
“It’s always nice to imagine what it would be like to own an investment property at your favourite holiday spot, but our findings revealed there can be a big difference between the value of return you can receive for the most popular holiday destinations.”
Tripadvisor puts out their Travellers’ Choice Top 10 destinations for 2014 in April, and Finder.com looked up the median home prices and rents for those destinations from the Residex index to get their findings.
The figures are for all rental homes, not just holiday rentals.
Ms Hutchison said housing investors should be careful when deciding whether to rent out their property to residents or as holiday accommodation.
“It really does depend on the property and it’s good to get advice on what kind of yields you can expect and what type of rents you can charge,” she said.
Finder.com’s analysis also found that in many cases investment returns for flats were very different to houses.
The best return from flats for a second year in a row was in Port Douglas, yielding 7.77 per cent, almost one per cent better than Darwin, which came in second.
Cessnock came in at ninth place with a yield of 5.81 per cent.