Property investment proceeds not an alternative to full-time job: Australian buy-to-let landlord survey

Only one in 20 property investors is making enough money from his or her rental portfolio to no longer have to work full time, according to a landlord survey carried out by research consultancy group BDRC Jones Donald.

Based on an online survey of 500 Australians who own one or more rental properties, it found that just 6% of respondents earn a profitable full-time living from rents paid by their tenants.

Just over a third (35%) derive income from their rental properties to supplement their full-time income, while a quarter (26%) break even on rental activity, and just under a third (32%) make a small loss.

While the report does not delve into the actual dollar earnings of the landlords who are making a living off their rental yields, it does reveal that the average property value for those making a profitable full-time living is $915,000, with these landlords holding a portfolio with an average of 4.3 properties, equating to total average value of $3.9 million.

 "Of these people, the average household income is $111,000 before tax," says a spokesperson for BDRC Jones Donald.

The most recent statistics from the Australian Tax Office (ATO) for the 2009-2010 tax year show that the majority of property investors own just one investment property, indicating that it is not a full-time occupation for most.

Of the 1.7 million individuals who reported net rental income from rental property in the 2009-2010 tax year, 73% own just one rental property.

The ATO figures also show that 63.4% of property investors with net rental income reported a taxable loss (net rental income less than zero) from their rental property.

The results of the Australian Private Property Investor Study also suggest a degree of complacency among landlords about the performance of their investments, with more than a third (34%) being unaware of the rental yield earned on their investments.

This lack of awareness is even higher (40%) for those landlords who manage their own investments, compared with 34% of landlords who use a professional property manager.

Sentiment about property investing remains positive, though, with 77% of Australian landlords feeling very positive about their rental investment and nearly a half of respondents noting an increase in demand from tenants. Only 12% reported a decrease in demand from tenants.

Overall the survey found that landlords are better off financially if they use a property manager both in terms of rental yields achieved and profitability.

Around 20% of landlords that used a property manager earned yields of 6% or more compared with 15% of landlords that managed their properties themselves.

Similarly, 46% of landlord that used a property manager derived a positive income return from their investments compared with just 34% of landlords that that managed their properties themselves.

The findings of the survey indicate that the majority of landlords (77%) use the services of a property manager.

“In the current market, landlords are seeking advice to ensure that their investments are working hard for them,” says Roger Donbavand, managing director of BDRC Jones Donald.

“Along with real estate agent support, six out of 10 landlords would welcome receiving more information and advice from their lender.”

The survey suggests there is some appetite among landlords to increase their investment portfolios, with 21% looking to increase the number of properties they own over the next 12 to 18 months – higher than the 12% who plan to decrease the size of their portfolios.

Half of landlords (48%) don’t plan to make any acquisitions over the next 18 months, while a significant proportion (18%) remain unsure whether to buy or sell.

Donbavand says the study reveals that to get the best results Australian private property investors must consider both houses and units when looking for an investment opportunity.

“The Australian Private Property Investor Study has shown that more private property investors have purchased houses over units. However, units may offer better returns in some instances,” he says.

“While Sydney, Perth, Darwin and Canberra all boast increasing unit rental returns, our in-depth research demonstrates that investors who seek real estate advice will see better financial results overall.”

According to the study, the majority of property investors are typically married, professional couples with an average of 1.9 properties in their portfolio.

The study can be purchased in full from BDRC Jones Donald.