Tips for First Time Landlords
Being a landlord is a significant achievement in Australia, with only 7.9% of Australians being in the property management business.
As daunting as it is for first-time property investors, there are certain things you need to know about property investing that will set you up for great returns and stress-free tenancies well into the future.
With over 10 years of experience working closely with property investors and owning an investment property myself, there are a number of lessons I’ve learned.
Here are ten tips to help set yourself up as an expert landlord from day one.
1. Maximise your rental return
Owning an investment property is like owning a business, and your rent is your revenue. Focus on increasing your rental returns and ensuring your rents are paid on time. You will have expenses (mortgage repayments, council rates, insurance, maintenance etc.) so it’s important to make sure that sloppy rental payments don’t get in the way of your investment property cash flow.
Most tenants will do the right thing and pay their rent on time, but you need to be on top of them when they don’t and be willing to start the eviction process if the behaviour continues.
2. Thorough tenancy checks
Your tenant can either make or break your investment. A good tenant will ensure a smooth, stress-free tenancy, but a bad one can be extremely costly and time-consuming.
Take the time to check each applicant’s rental history, employment history and don’t be afraid to get online and check social media for any extra clues into who you’re about to let live in your property.
A history of poor rental payments or damaging property is unlikely to change, so be weary when that’s the feedback you get from previous agents.
Also be careful of tenants using friends or family members as their agent or employer.
3. Consider the Pro’s and Con’s of accepting pets
Is your property pet friendly? I have some clients who are totally against leasing to pet owners and those who are happy to. There is no right or wrong and definitely pro’s and cons to each.
- Demand for pet-friendly properties is quite high
- Pet owners tend to stay at properties for longer
- Most leases will include specific clauses to include any damage caused by pets.
- You’re opening the pool of prospective tenants up significantly, which can reduce your vacancy periods.
- Pets can cause damage to properties – especially to flooring and gardens
- Pet friendly accommodation could turn off applicants with pet allergies.
- Some pet odours can be very difficult to remove
4. Look at other income opportunities
Most landlords will offer their property up for a long term lease once purchasing and then forget about the property for the length of the lease. Depending on how hands-on you want to be, there are some other options:
- Short term lease – AirBNB
- Long term furnished property
These options may not suit all investors or all properties for that matter, but they’re worth investigating or speaking to your agent about.
5. Know the Law
Understanding your rights and responsibilities as a landlord is essential to ensure you don’t land yourself in a very costly and potentially embarrassing situation. If you’re going to manage the property yourself, it’s essential to know what you can and can’t do and more importantly what to do when things go bad.
6. Present your property to attract the tenant you want
Good properties will attract good tenants. I don’t mean good as inexpensive but well maintained, clean and well presented.
If you want to attract tenants who’ll keep your property clean and well maintained, then it should be presented as clean and well maintained. Touching up paint, giving the property an excellent clean and removing and odours will go a long way in finding good quality tenants. You will also attract a better calibre of a tenant, but your property will stand out in a competitive market.
7. Don’t over-capitalise
I’ve seen this happen so often, I even named it – “The Block Effect”.
It’s such an easy overspend when renovating your investment property, but it’s essential to make sure you remodel with your return in mind. Finding the balance between not skimping and not overspending is difficult. The trick is to skimp where you can but spend your money where you’ll get the greatest return.
My clients’ strategy is to look at what’s currently leasing in the suburb around the rental price they’d like to achieve after the renovation. This helps identify how much they need to spend and what parts of the house require the attention to get the returns they want. This lets us weigh up the cost vs return pretty easily and justify every dollar being spent.
8. Have a great team
“If you think it’s expensive to hire a professional to do the job, wait until you hire an amateur.”
Spend the time on finding a good mortgage broker, accountant and property manager. A good team will add value to you instantly with hints, tips and professional advice.
9. Good marketing is essential
You can’t lease your property if nobody knows about it – so having a good marketing plan for your property will stop you from having long and costly vacancy periods and also help you attract lots of good tenants.
Invest in high-resolution professional photos and good advertising packages on real estate portals to give yourself the best chance of leasing your property quickly.
10. Regular inspections are a must
Most landlords who manage their own properties feel uncomfortable with conducting a routine inspection of their property. It can feel like you’re entering someone’s private place and intruding, but it’s essential to ensure your investment property is being looked after and no maintenance is going unnoticed.
Make sure you inspect the property every six months and keep an eye out for any building damage (cracks in walls, squeaky floorboards, building movement), excessive wear and tear or tenants who aren’t looking after your property.
You should keep the property’s condition in mind when considering extending the tenants lease or increasing their rent in the future.
Five tips to be the best landlord
You’ve come to the right place. But first, why is nailing the landlord role so important?
1. Find an expert property manager
Firstly, invest in a professional property manager who is experienced and has a good track record, she Valentic.
Look for one who has experience in the legislation and has experience in that suburb and understands the rental market.
Make sure they can accurately price your property – not under price it or overprice it – and find good quality tenants that have been vetted correctly.
You’ll want to make sure that the property manager that you choose to work with is able to look after the property well on an ongoing basis and that they have good and experience manner in all communications with the tenants during the lease.
2. Opt for professional photos
Other things to invest in are getting professional photos taken, taking the time to write a good property description and show the floor plan upfront.
Use quality photos and a well-worded description for advertising your property.
More tenants now are using mobile devices when they’re searching online, so that first photo is the most important. That will determine whether they click through or just keep scrolling to look at another property.
Investing money in photos, the description and a floor plan is an excellent long-term investment. It’ll keep paying back every time your property becomes available to lease.
3. Invest in your property
If you want to attract good tenants, you should also be investing in the property itself, says Valentic. Look at putting in heating and cooling systems – heating especially is essential in Melbourne.
Putting in good quality blinds, repainting, making sure the floors are in good knick, installing a dishwasher – these are all investments that will help you attract and keep good quality tenants over the long-term.
4. Have a financial buffer
Going back to thinking of your property investment as a business, you’ll want to ensure you always have a financial buffer. You don’t want to be financially stressed all the time. And you don’t want to risk your credit rating either by defaulting on your mortgage if your rent’s not coming in.
Having a buffer to get you through short-term bumps is an excellent long-term strategy. And then having an insurance policy backing you as well just evens that out.
5. Maintain your property
And, finally, maintaining your property throughout the tenancy period is a vital long-term strategy.
You might think you can save money by knocking back tenants’ requested maintenance, but in the long term, it really does cost you as a property investor,” says Valentic. “You need to make sure your property doesn’t deteriorate and that you continue to address maintenance as it comes up.
If you’re investing along the way to make sure your tenants are happy, it really does benefit you long-term. Not doing maintenance is a short-term view to save you a few dollars.”
4 Tips To Educate Landlords About Maintenance
A large part of the property management role is maintenance, but landlords often don’t see it as necessary. Unfortunately, that doesn’t mean that it can be left to the side and not looked at again – by law tenants are entitled to have a safe and habitable living environment, and property maintenance plays a huge part in giving them this. In addition – that investment property is usually your landlord’s most significant asset, and keeping it well maintained will protect that asset’s value! So, we wanted to help you be able to have this important conversation with any of your landlords that may be slacking on their maintenance responsibilities by sharing our top tips on educating your landlords.
Understand Your Local Laws
To be able to educate your landlords on property maintenance, it’s essential to be working from a solid foundation. And that foundation is with the law. Each state has different statutory laws and maintenance regulations, but they all require landlords to ensure their properties are maintained in good repair. So, start by discussing their legislated responsibilities and reviewing the penalties for failing to meet them.
Discuss the Benefits of Property Maintenance
Beyond discussing the legal requirement of property maintenance, there are a host of other benefits that you can outline for your landlords that might make them more inclined to want to conduct regular maintenance on their properties.
- By conducting regular maintenance (small fixes, small costs), you can avoid more significant problems further down the line (big fixes, big costs)
- A well-maintained property will attract high-quality tenants, and keep them on long term, while a property in disrepair may see good tenants wanting to leave, or attract tenants that don’t care for the property either
- Regular maintenance can help increase the value of the investment and its potential rental income.
- A well-maintained property is likely to be snatched up quickly by quality tenants, so the time between tenancies will be reduced
- Many landlord insurance providers expect homeowners to maintain the property to a certain standard, so regular maintenance may make any claims easier to be approved, as a failure to meet these standards may result in claims being denied
- Avoid lengthy vacancy periods between tenants – the most cost-effective way to conduct maintenance is while the property is occupied, and the rent is being paid. If you wait until the property is vacant, you won’t be able to find new tenants until everything is fixed up, and this may make the vacancy period longer.
When going through these talking points with your landlords, it can help to have some tangible examples from your past experience to support you – any examples where you know regular maintenance could have helped the landlord avoid a costly emergency repair bill or an instance where the landlord had a long vacancy period between tenants while they saw to lengthy repairs.
It can also help to focus on the positives rather than the negatives. Lower costs of regular maintenance, increased property value, good tenants and so on. The negatives can seem scary and overwhelming to landlords and put them off having the conversation altogether.
Make the Process Easy
Let your landlords know they will benefit from your regular inspections when it comes to maintenance, and outline how easy you will make the process for them by looking for immediate repair issues, as well as future possible maintenance jobs, all while doing your already scheduled property inspection. This will help you demonstrate how you are protecting their asset and working to uncover any potential issues needing maintenance action before it gets worse.
Some property managers find it useful to invite their more hands-on landlords along to attend a routine inspection, so they can see what you look for and see the property while it is tenanted. Alternatively, you can suggest to your landlord that you schedule a separate routine maintenance inspection, with them attending on an annual basis, and working with a tradie on a pre-agreed checklist. The easier the process is for busy landlords, the more likely they are to be on your side when it comes to property maintenance.
Communication is critical throughout the process – from making sure your tenants know exactly what is expected of them regarding maintaining the property to get their bond back when they move out, to having the landlord agree on a checklist of maintenance checks conduct at regular intervals.
Establishing easy ways for tenants to report any issues, checklists and templates to use, and regular communication with the way your landlords prefer to be communicated with (phone, email, text) will make the process a lot smoother for all involved. These few tips should help give you some talking points to have the maintenance discussion with your landlord. To get them on your side, you need to show them you have their best interests at heart and will make the task as simple and routine as possible, at the lowest costs possible, while still protecting their investment.