In Australia alone, the statistics for the 2017-2018 tax year said that there were 2,207,905 property investors in Australia. Being a landlord can be a busy and challenging affair, especially when you’re starting out. Finding and screening tenants, creating and following a rental agreement, ongoing maintenance and collecting rent online are just a few of the speed humps you have to get through. We created this list to guide you through all the important landlord tasks.
- Carefully choose the right property for future sale
If you want to make money out of your investment, it’s vital that you spend time doing research to ensure you’re getting the best deal possible. This includes studying market reports from reputable sources, such as CoreLogic and realestate.com.au, to get the best idea on what areas are making the greatest returns. If you manage to find a profitable location that’s within your budget, always return to your analysis and ask questions like “how has the area performed in the past and compared to nearby suburbs,” and “are there any planned developments, like schools or public transport, that could make this area more attractive?”
2. Treat your rental property like a business
Managing your property might not be your only job, however if managed correctly it can reap significant financial benefits, so look after it closely. Always remain professional with your tenants, keep regular tabs on the accounting and routinely organise inspections of your property. Like any business, it’s important that you follow all mandated federal, state and council laws and regulations to avoid legal headaches. Before you list your property for rent, immerse yourself in the legislature before taking the dive so you know what your responsibilities are.
3. Set the right rent price
To set the right price, we recommend that you research your area looking at similar sized and equipped houses to see what the going rate is, and then make a judgement about what you could possibly get. Pricing the rent is an important balance between your property being snapped up quickly and finding suitable tenants, so choose carefully. Keep in mind that the rent price is the major source of income for the property, and check to see that the expenses do not outweigh the profits. By comparing your fixed (mortgage, insurance, taxes etc) and variable expenses (utilities, repairs, improvements etc) you will see how your rent prices affect your monthly revenue.
4. Use a tenant screening process
Setting the rent price is only one part of the journey, as the price doesn’t matter if the tenants don’t pay on time! By creating a tenant screening process you can evaluate the potential of the renters, and make sure that they will pay their rent on time and care for the property as if it were their own. By checking their criminal history, past rental history and their credit score, for example, you can begin to gauge what they will be like living in your property. If nothing else ensure you have a tenant application form and ask for occupational and personal references.
5. Don’t feel rushed to find a tenant
After the screening process, don’t be afraid to turn offers down. Securing long term, responsible tenants will significantly decrease the financial risks associated with rental properties and save you the hassle of replacing shorter term residents. Don’t rush, keep an open mind and wait as long as is possible, to pick from the broadest range of applications.
Because of this, it is important that you get your listing disseminated as widely as possible, through advertising or word of mouth. This can speed up the process of finding the best tenant and save your time.
6. Collect a bond
Once you’ve found the best tenants for your property, it’s important to collect a bond, which generally speaking is a 4-6 weeks worth of rent, as this will act as insurance towards any damage to your property by the tenants. This must be forwarded onto the state’s residential tenancies bond authority, and they will hold it for the duration of the tenancy. This will protect you against things such as:
- Unpaid rent, or a tenant abruptly deserting your property
- Damage to your property caused by the tenants
- Cleaning expenses for undue mess left by the tenants
- Unpaid bills that were the responsibility of the tenant
7. Collect rent payments online
Online is more convenient and more secure. Millennials are reported to pay 61% of their bills online, and older generations pay 42% of their bills online. The easier it is to pay rent, the more likely your tenant will continue to be up to date. Tenants can schedule payments so their rent is automatically taken out of their account and you can immediately know when a tenant schedules a payment, what day it withdraws from his or her account, and when it will be deposited in your account. Personal information is encrypted in online transactions. With added convenience and security, paying rent online is the best way to make sure you get paid every month on time. And don’t allow your tenants to ever get more than 5-7 days behind as catching up can be a nightmare for those under financial stress.
8. Know your rights and tenants rights
It’s never a good idea to break the law, even unknowingly, so be sure to know the state legislation in advance so you can solve any altercations quickly. While the states as a whole generally have similar rules, it’s a good idea to check if you are investing in a property in another part of Australia, as there are some minor differences. Make sure your tenants also know their rights, so they know what they are responsible for and this will make it easier for both of you in the long term. Hand out an information sheet that covers all of these things.
9. Be aware of your tax benefits
As a property investor you are entitled to specific tax benefits under the law. However, in order to receive them you need to have adequate proof of your expenses and income for your property, so collect and store these details, such as bills and receipts and note any changes to your property. If you have any questions about what you can and can’t claim, speak to an accountant or financial advisor who can walk you through the steps. Also don’t forget to enquire about a depreciation schedule to help get a return on anything possible.
10. Enforce and follow the lease inclusions
You need to enforce the rules that are created at the beginning of the tenant-landlord contract/lease, otherwise the agreement loses its importance and the tenant could take advantage of your leniency. The most important rule to enforce is the late rent fee, however a grace period is often a good way to start off with. Tenants are more likely to follow the lease inclusions if you do too, so by giving them appropriate notice before every entry of the property, passing on appropriate expenses and respecting their privacy then they will learn to also respect you and the property.
11. Keep records of everything
It is imperative that you keep records in relation to everything you do both in the property or for the property and in relation to your tenant. This means not only of a financial nature but also noting dates, times, conversations and emails relating to engagement about all things to do with your investment property. Nobody likes to have a miscommunication that can turn into world war 3 so ensure you are clear and concise in your documentation and communication. Keep a file on your computer where you save all things relating to the property or tenant engagement.
12. Appoint an experienced property manager
Sourcing a property manager can be an easy way to streamline the process for you and your tenants, reducing your workload and thus the stress and hassle of managing a property. This is especially true if you live far away from your property or have multiple properties being leased at once. A fee is charged, usually a fixed fee or percentage of the rent, however the benefits justify this value and it is a tax deduction. Similarly to selecting tenants, make sure to take the time to ensure they’re properly qualified and have good reviews or references. At Jim’s Real Estate we can chat with you to see if our offering is suitable for you.
13. Keep on top of maintenance to avoid headaches
Maintenance in the “thorn in the side” of any landlord. Costly trades bills eventuate when things are not caught early. Don’t ignore the little things that need doing and check your property regularly. If you can’t visit to do this then send someone in who has experience to investigate what needs doing immediately or what can be done at the next routine inspection. It’s for this reason that we include an upfront “Health Inspection” in our package because being part of such a great and expansive team of the Jim’s Group we can catch things before they happen.
14. Insurance – Don’t assume you are covered for everything!
Oh my this is one area where many landlords leave themselves open to financial losses. Ensure not only that your insurance is appropriate for the property setup but that you are also covered for things such as loss of rent, damage, death or accidental breakages. We highly recommend talking to a specialist in Landlord and tenant insurance especially given so many recent changes in the industry due to Covid. If you don’t have anyone that you use at the moment then we recommend talking to our friends at EBM or Terri Scheer.
15. Get Advice from someone who knows what they are doing.
Just remember not all landlords are created equal so ensure that if you are a first time landlord that you talk with not only your accountant, broker or financial adviser but that you talk with others who have “Been there and done that” so you get get tips and tricks on how to make it as smooth as possible.
In summary, while this is a lot of information to take in, remember this is a business and increasing your wealth is the primary goal. It is said 30% or more of the investing population self manages their property so if that is the path you choose just check off the list above and you should be on the way to getting most things right and adding to your portfolio.