The easiest way to manage all these issues is to appoint a good property manager. We recommend working with a property manager who is a specialist – meaning they are strictly dedicated to property management. A property manager can take the stress out of managing a property whilst simultaneously helping you learn the ins and outs of working with tenants.
Being a landlord is a huge achievement in Australia – with only 7.9% of Australians owning an investment property.
Managing an investment property for the first time is equal parts exciting and daunting. It is very important to seek out advice and information to ensure that you can set yourself up for great returns and stress-free tenancies well into the future.
Whether or not you hire a property manager, here are some tips to help set yourself up as an expert landlord from day one.
Understanding the tenancy laws in your State
A great starting place to educate yourself with the rights and responsibilities as a landlord is through reading The Residential Tenancy Act in state and territory where your property is based. This is essential to ensure that you don’t get into any serious trouble by breaking the rules.
Focus on the rental income
Owning an investment property is like owning a business – the rental income is your revenue, it is what helps you to survive and thrive. It is important to set the rent at a level where you will be able to attract and retain the tenant, but also maximise your rental return.
You can decide on the rental amount by taking into consideration the size, location, amenities and competitive rental rates in your local area, as well as whether the property is furnished, whether garden or pool maintenance is included, and who will pay for the utilities eg. water.
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 tip the scale and create a very negative experience.
An important thing to keep in mind, especially for first time landlords is to not rush and accept the first potential tenant you meet. Ensure you undertake detailed background and credit checks. This is all the more necessary if you are settling abroad and will not be able to manage or follow up on each and every issue related to your property. In these situations, you can save a lot of back-and-forth by hiring a property manager who CAN handle these day to day issues.
Pets – Yay or Nay
It’s time to decide…. are you pet-friendly? We have some clients who are totally against leasing to pet owners, and others who are happy to bring them on board. Like with every property decision, you need to consider the pros and cons. There is no “right” or “wrong.”
Pet-friendly properties are always in demand and tenants who have pets tend to stay a bit longer than others. You can find more information about allowing pets in our recent blog post “Do pets mean more rental income?” If you do decide to accept a tenant with pets, you may wish to include additional special clauses in your rental agreement e.g. a pet agreement.
Collect a Bond
Be sure to collect a bond and first rental payment before handing over the keys to your property. The maximum bond amount is dictated by the relevant State government legislation, usually it is equivalent to 4 weeks rent. Properties at the upper end of the market may be able to collect a higher bond amount.
Get landlord insurance
Don’t ever assume that your building insurance covers you for damage or loss of rent during a tenancy. You can take out an additional landlord insurance policy to cover you for events such as malicious and accidental damage, rent default, loss of rent or the house becoming uninhabitable due to things such as flood or storm damage.
Your existing insurer may be able to convert your existing insurance policy, otherwise, if you have a property manager, you can often purchase landlords insurance through them.
Market your property effectively
Having a good marketing plan is the best way to reduce long and costly vacancy periods. 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.
The most popular ones in Australia are www.realestate.com.au and www.domain.com.au. At present, these websites are only accessible to registered real estate agents so if you are managing the property yourself you will need to use alternative media channels.
Don’t over-capitalise – “The Block Effect”
It’s so easy to over spend when renovating your investment property but it is essential to always keep “return” in mind. Many landlords run into issues when they complete renovations that don’t necessarily translate into a rental rate that justifies the expense.
Finding the balance between not skimping and not over spending is difficult. The trick is to skimp where you can but spend your money where you’ll get the greatest return.
The strategy we recommend is to research properties that are currently leasing in the area and the achievable rental price after the renovation. This helps identify how much to spend and which part of the house require the attention to get the returns you desire. Weigh up the cost vs return and make choices based on the information you have gathered.
Find an Excellent Property Manager
Unless you have lots of free time to understand and execute your obligations as a landlord, finding a property manager should be one of your top priorities. As mentioned above, this is particularly important if you are not going to be living close to your property (e.g. overseas or interstate).
A good property manager will understand the relevant tenancy laws, be able to market the property most effectively to maximise your rent and minimise vacancies, respond in a timely manner to any maintenance issues, conduct thorough checks on prospective tenants, follow up tenants for late payment of rent etc
A property manager also provides a buffer between you and the tenant should any difficult situations arise during the tenancy agreement (eg. the need to evict the tenant etc).
Read more in our post about what to look out for in a good property manager.
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 you need to remember that this is YOUR property and YOUR investment, and you have a right to make sure it is being looked after and no maintenance is going unnoticed.
Make sure you inspect the property every 6 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 respecting your property.
You can also use your observations about the condition of the property to help you make decisions about extending the lease or rent rises in the future.
