Article 1:
How to manage your investment property
Purchasing your rental property is just the start. Next, you need to think about managing the property and making improvements.
Self-managed or agent managed?
If you’ve bought a property you intend to rent out, you might be wondering if it’s worth the investment of contracting a property manager or whether you should run a private rental.
Going the private rental route has some advantages, including saving costs, being able to pick your own tenants and being able to keep a constant eye on your investment.
It also makes you solely responsible for the serious legal requirements of being a landlord, including the complexities of tenancy laws.
Engaging a property manager can save you time and money in the long run. It’s the most common way owners in Australia manage their tenanted properties.
Property managers look after the day-to-day requirements of the rental and are well versed in all the legal requirements relating to tenancies. They also can make the process of finding tenants smoother for you.
How to find tenants
Finding the right tenants for your rental property is a vital step in ensuring your investment is a success.
For many property owners, the first step is to find a reputable, skilled real estate property manager.
Property managers can take the leg work out of finding the best tenants for your investment home and can give you the peace of mind of knowing someone is managing the tenancy at all times.
One way you can attract the right sort of tenant is to present the property well. Properties that are well maintained, uncluttered and not in obvious need of repairs will mean you should end up with a large number of people wanting to live there. This goes for both private rentals and managed properties.
If you’re privately renting and holding the inspections yourself, keep note of the people who attended, their behavior, and read applications carefully.
Tenant and landlord rights
If you’re becoming a landlord for the first time, it’s important you keep abreast of landlords’ and tenants’ rights — even if you’re using a property manager.
Remember, you’re entering a legal agreement if you become a landlord, so it’s vital to know what your legal parameters are. This became especially important during the COVID-19 pandemic, as all states and territories introduced temporary exemptions and changes to tenancy laws to offset the economic effects of the crisis and to comply with health directives.
Tenants’ rights vary according to which state or territory the lease is in. One of the biggest differences is the notice period required to evict a tenant. Some states require just a few days, while others will require up to 120.
In most states, tenancy laws will generally cover such areas as how much bond is required, limits on advance rent, frequency and size of rental increases, eviction notice periods and causes and when an owner or agent can enter a property. Entry to rental properties will require some notice period.
Remember, too, that the tenancy law that exists in the state where the property lies are the ones that apply. If you live interstate, the regulations of your home state do not apply elsewhere.
You’ll be able to find all the laws that apply to your property on the internet, via either government websites or tenancy groups. You can also discuss them with your property manager, who will be well versed in them.
Landlord insurance
Landlord insurance bundles the cover usually found in home insurance with extras that relate specifically to owning a rental property.
What these insurance covers vary between providers and price range, but it can include such items as theft; malicious damage and vandalism; loss of rent due to tenant default; and legal expenses required to evict a tenant.
While some landlord’s insurance offerings will cover repair for building damage and any rent lost while the property is uninhabitable, if the property is strata title, the body corporate fees may cover building insurance.
Contents belonging to a landlord, like carpets, blinds, dishwashers and removable air conditioning units, may also be covered.
There are a number of landlord insurance products available, so ensure you shop around for the deal that best suits your situation. Remember, you can also negotiate on premium prices and exclusions. Landlord insurance premiums are also tax-deductible.
Renovating an investment property
If done wisely, renovating your property can be a great way to increase your investment returns.
Before reaching for the tools, ensure the amount you have budgeted will be recouped, whether through increased rental yield or improved capital growth.
One exercise could be to look at the projected improved value, then find out if other similar properties in your area are selling for that price. You might like the improvements you have made, but will they add the value you were looking for?
If you’re on a budget, target the bathroom and kitchen first. These are the most used areas of any home and are real attractions if done well.
Next in line would be adding an extra bedroom, adding an outdoor area, off-street parking and built-in storage space.
Consider the color palette you use. While you might like the bold colors you have chosen, some buyers will be put off by the need to change what they don’t like. Choose soft or muted colors first to improve your resale potential by appealing to a wider audience.
Common investment property mistakes
With so much to consider when investing in property, it’s only natural you can overlook things or make the odd mistake.
Here are some things you should remember:
Some debt comes with benefits
Investment experts advise that if you’re looking to use any spare cash to reduce your debts faster, repay your non-tax-deductible debt first before moving on to your tax-deductible debt. Examples of non-tax-deductible debt include mortgages on a primary residence and personal loans. Other types of debt, including mortgages on investment properties, can be used to reduce your taxable income, so ensure you pay off the debt that doesn’t help you first and maximise the benefits of the debt that does.
Utilise depreciation
Many investors forget to utilise the tax breaks property depreciation can bring them. Basically, depreciation allows investors to offset their investment property’s deterioration from their taxable income. Investors can claim deductions on both the decline in value of the building’s structure and items considered permanently fixed to the property, as well as the decline in value of plant and equipment assets found within it (for example ovens, dishwashers, carpets, blinds and so on). To start working out what depreciation benefits you might be able to claim, contact a quantity surveyor who will prepare a depreciation report for your accountant.
Keep your rent in line with the market
You could be missing out on income by letting your rents lag behind the market value. Remember to keep tabs on rental prices and adjust accordingly. Delaying a necessary rental increase can have negative consequences on keeping good tenants.
If your rent is too high, you’ll be missing out on tenants and income. By making a small reduction, you may be able to attract the people you need and avoid unwanted vacancies.
Article 2:
5 top tips for landlords in the current property market
Have you recently purchased a property but aren’t sure how to navigate your new status as a landlord? Do you already have properties but are not sure if you’re bringing your landlord A-game to the table?
But first, why is nailing the landlord role so important?
“As a landlord, you’re basically running a business, which is investing in property,” says Michelle Valentic of Advantage Property Consulting. “You need to treat it like that.”
Here are Valentic’s top tips for surviving landlord-hood in the current property climate.
1. Find an expert property manager
Firstly, invest in a professional property manager who is experienced and has a good track record.
“Look for one that has experience in the legislation but also has experience in that suburb and understands the rental market,” Valentic says.
“Make sure they can accurately price your property – not under-price it or over-price it – and find good quality tenants that have been vetted correctly.”
You’ll want to make sure that the property manager you choose is able to look after the property well on an ongoing basis and that they have a good, professional manner in all communications with the tenants during the lease.
2. Opt for professional photos
Marketing matters! Getting professional photos taken, taking the time to write a good property description and showing the floor plan upfront will help attract more tenants.
Furthermore, don’t neglect a ‘mobile view’.
“More tenants now are using mobile devices when they’re searching online so that first photo is the most important,” Valentic shares. “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 a good 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 as well. Ensure it is clean and well-maintained, and also a safe and comfortable place for your tenants to live long-term.
“Look at putting in heating and cooling systems,” Valentic begins. “Heating especially is essential in Melbourne [where Valentic is based].
“Put in good quality blinds, repaint, make sure the floors are in good nick, install a dishwasher – these are all investments that will help you attract and keep good quality tenants over the long term.”
4. Maintain your property
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.”
5. 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,” Valentic notes. “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 a good long-term strategy. And then having an insurance policy backing you as well just evens that out.”