Property investment is a long-term game. Finding and financing good property are just the initial steps. To succeed, you need to plan for all possible contingencies.
Here are five tips on how to protect and grow your investments:
1. Appoint an expert property manager
If you don’t have time and the right expertise, it’s wise to let an agent manage your property. In addition to their fees being tax-deductible, a good agent will have a firm grasp on how much rent it is acceptable to charge, be able to sort out maintenance issues promptly and cost-effectively and arrange regular inspections of your property. The best agents will also be experienced in finding and scrutinising good tenants, conducting reference checks and ensuring they pay on time, thereby guaranteeing a reliable income stream.
An expert property manager will also be thoroughly versed in their responsibilities. This will alleviate any concerns a landlord might have with regards to complying with regulation. While regulation governing property managers’ conduct is set at the state level, the New South Wales government’s fair trading website gives a typical overview of property managers’ conduct expectations.
Don’t necessarily engage the property manager from the agency that sold you the property. Interview several in the local area to determine which one is best and make sure you trust and feel comfortable working with the agent.
2. Find and retain good tenants
You want reliable, long-term tenants that pay their rent on time and take care of your property. Securing responsible tenants will significantly reduce the financial risks associated with investment property and make it less likely that you will have to endure the time-consuming and potentially costly task of replacing undesirable tenants.
Because of this, it is important not to skimp on advertising, and to make sure your listing is disseminated as widely as possible. You can make sure the right kind of tenants apply by ensuring the rental price is in line with similar properties in your area. This is another area where the benefit of a good property manager becomes obvious. Less reliable tenants will be filtered by the thorough vetting process conducted by the best property managers.
Once you’ve found good tenants, you need to keep them; you don’t want your property to sit empty for long periods or risk-taking on tenants who are less responsible. As an experienced landlord, you don’t want to pay more than you have to for the costs of advertising or vetting costs.
Quality tenants will expect your property to be well maintained, so ensure you have a sound budget for maintenance and repair. Remember that a good tenant/landlord relationship goes some way to retaining tenants, so keep the lines of communications open and consider your tenant’s requests.
3. Know your rights and your tenants’ rights
Be up-to-date on both your rights and your tenants’ rights so that you don’t unwittingly find yourself in breach of the law and can quickly resolve any issues that arise. The rights and obligations of landlords and tenants are formalised through legislation passed at the state level. All states will have something similar to New South Wale’s Residential Tenancies Act of 2010, or Victoria’s 1997 Act.
Tenancy laws in each state or territory are generally similar, but it is still important for landlords to familiarise themselves with their own state’s regulations. It isn’t necessary to labour through the text of the act itself to do this; the rights and obligations they set out will be explained through factsheets and guides published on each respective government website. Good examples include the Consumer Affairs Victoria website and Queensland’s Residential Tenancies Authority website, but it’s important you find the relevant document for the state in which your properties are located.
Common areas of potential conflict range from rental bonds, rental increases, rental arrears, repairs and maintenance to locks, security, access, privacy and end agreements. If a conflict cannot be resolved, the issue will go to your state’s civil and administrative tribunal. There will usually be fees associated with this. Queensland’s and Victoria’s civil and administrative tribunals offer good examples of what you may pay if a dispute reaches this stage.
As with state legislation, tribunals will treat particular issues using methodologies that are similar across states. For instance, when a tribunal is deciding whether a rent increase is excessive, it will consider factors such as rent for similar premises in similar areas, the length of time since the last rent increase, and what the tenant had been paying previously.
4. Be aware of tax benefits to which you are entitled
There are many tax rules that must be followed in order to claim income and expenses properly on an investment property. You need to know what you can claim, what documents you need to provide and have a good system for safeguarding them.
The Australian Tax Office’s website is a good starting point to understanding what you can claim. However, your accountant or tax agent will advise on issues that relate to your specific circumstances. Ensure you understand all implications regarding negative and positively geared property, as well as capital gains tax.
5. Don’t assume you are covered for everything
In addition to building insurance, you will need landlord insurance to manage other risks associated with renting property. Landlord insurance can cover the financial loss incurred from a variety of quarters, which includes, but is not limited to: water damage; the sudden death of a tenant; tenants who can’t pay rent due to financial hardship and tenants who abscond from the property.
Remember, under current tax laws, the cost of landlord insurance is tax-deductible.
Also, suppose you are relying on the part of your employment income to cover the interest cost and expenses of your investments. In that case, it’s prudent to check whether you have adequate income protection insurance in case you find yourself unable to work for whatever reason.
If you have an investment apartment, don’t assume that the body corporate insurance provides coverage for everything. While common areas like lifts, gardens, foyers, building wiring and so on will typically be covered, it is always important to check the policy the body corporate has purchased. For example, some risks, such as liability within your apartment or units, may not be covered.
Insurance policies can be quite complex, and unintended gaps can occur in your coverage if the policy isn’t thorough enough. That’s why it’s wise to receive professional advice and undertake the necessary research before entering into new arrangements.
5 things every new landlord needs to know
Are you considering a property investment with real estate in Australia?
Provided you purchase wisely, rental properties can be a great source of income, as your tenants pay off your home loan while you benefit from capital gains.
According to the Australian Bureau of Statistics, the total value of lending to investors intending to purchase residential property in June was almost $14billion.
It’s clear to see that being a landlord is a popular form of investment. However, what does the undertaking involve?
Here are five things that every landlord needs to know before buying rental properties.
Make sure you buy the right property for sale.
If you want to make money from your investment, it’s vital that you spend time cramming in research to ensure you’re making the right decision.
The best way of doing this is to study market reports and blogs to get an idea of what areas are producing the greatest rental yields.
If you’ve managed to find a profitable location with homes for sale that you can afford, go back to your analysis. How has the area performed in the past and in relation to nearby suburbs? Are there any scheduled developments that could be beneficial, such as schools or improved public transport?
Don’t feel rushed to find tenants.
Good tenants in rental properties are worth their weight in gold, as they will take care of your home and constantly pay their rent on time.
The important thing is to not rush in and accept the first prospective tenants you see, as they could be wannabe rock stars who take pride in destroying your property.
Take the time to sit down with them, and review their application. You should request that they include:
- Photo identification such as a drivers license or passport
- Any reference letters, which can be from previous landlords and employers
- Pay slips to show proof of a steady and sufficient income.
- A deposit ledger, which shows a history of their rental payments (only available if they’ve rented before with a real estate agent)
As a final check before accepting the application, landlords and real estate agents can pay a membership fee to access a database which lists tenants that property owners have had trouble with in the past.
Collect a bond
You’ve invested in real estate in Australia, you’re satisfied with your tenants, now what? It’s important that you request a bond as this acts as your insurance against any damage to your property.
The generally accepted amount is one month’s rent from each tenant. This must then be forwarded on to your states residential tenancies bond authority, as they will hold it for the duration of the renting period.
Typical instances for you requiring access to the bond can include:
- Damage to your property caused by tenants
- Cleaning expenses due to mess from your tenant
- Unpaid rent
- A tenant deserting your property
- Unpaid bills left for you to manage
Organise any necessary repairs promptly.
While your tenants are responsible for keeping the property clean and tidy, what’s important to note is that you can’t make a claim on the bond for general wear and tear.
Essentially, it’s any problems that are outside of your tenants’ influence or control like electrical, plumbing and structural mishaps.
Upon being notified, it’s important that you act quickly. Besides the potential costs mounting, it could become a safety risk, or you could find yourself in front of a disputes tribunal.
Use a property manager.
This is perhaps one of the most important factors, especially for those new to the world of rental properties.
Most real estate agencies offer a property management service. There is a cost (generally a small percentage of the weekly rent), but the expense is justified by the benefits you receive.
Essentially a property manager can take care of all of the above! This includes:
- Helping find a suitable property
- Advertising for and vetting tenants
- Collecting bond and rent payments
- Communicating with tenants and arranging repairs
- Conducting inspections
Similar to selecting tenants, when it comes to choosing a property manager for rental properties, take the time to ensure they’re properly qualified and have good references.
Thinking of becoming a landlord? Here’s what you need to know
There is more to being a landlord than unblocking the sink, collecting the rent and watching your investment grow. Here are some tips for successfully renting your property.
Going it alone
It is possible to manage your own property, but it can be hard work, time-consuming and may not fit around your work and family commitments.
Make sure everything is in writing from the agent or the tenant if you are self-managing.
Living close to your rental property is a huge advantage. Tenants will expect you to deal with a problem straight away and not when it suits you. I once had a series of 3am phone calls from a tenant 80 kilometres away telling me that the lady upstairs had woken her because she was vacuuming. It wasn’t long before I engaged in a property management service.
Find trustworthy handymen and tradespeople for the jobs you can’t do
Build good relationships with professional tradespeople. You will need them to respond quickly when there are urgent repairs as well as completing good quality work at a reasonable price.
Find good tenants
If possible, meet your future tenants. They might sound good on paper but meeting them face to face is the best way to find out all about them.
Landlords should always ask and verify that all references have been checked and vetted over the phone. Positive references are a great indicator of a quality tenant.
Use a property management service.
If you are already busy with a full-time job and spare time is at a premium, then you may find it overwhelming when you need to run inspections, do condition reports, organise repairs, attend tribunals.
Having a property manager will also avoid you having to engage in awkward conversations about why the rent hasn’t been paid.
Research property management agencies within close proximity of your investment property. You want to opt for a local agent because they will have in-depth knowledge about the local area, buyer demographics, the best marketing tools and competition in the area.
Renting out your own home
Suppose an owner leases out a property they have lived in prior. In that case, it’s important to remove any emotional attachments because a home will not return in the same condition and will naturally be subject to wear and tear,.
Get property insurance
Make sure you take out a landlord insurance policy to protect your property and contents says Ciantar and ensure the bond is lodged with the Rental Bond Board and not the agent’s or owner’s pocket she adds. You can opt for additional insurance cover against rent default.
Not everyone will look after your property. I once had tenants ride a motorbike around the living room of an investment property. I was able to replace the carpets through my landlord insurance.
Comply with your legal obligations
Be aware of the rules and responsibilities which bind tenants as well as landlords says. We always recommend landlords grasp even the most basic consumer affairs laws relating to rental properties and inform them of their maintenance obligations.