Newsletter_Unlock Potential

Unlocking Potential in your Investment Property

You may have owned an investment property for some time, but have you made sure that you have maximised the potential of your investment? This means not only achieving a market rent and consistent income flow by securing an excellent tenant but also other factors that you may not have considered.

The sooner you efficiently manage your investment property, the sooner you’ll be in a position to buy your next investment property.

Did you know that any property built after 18 July 1985 is eligible for depreciation benefits on its historic construction costs? No matter whether your investment is new or old, it will have depreciable assets that can be claimed such as air-conditioners, whitegoods, floor and window treatments, renovations and furniture, just to mention a few items.

80% of Australian property investors do not claim these legitimate taxation benefits which is a bit like not claiming the weekly rent from your investment property. This can equate to thousands of dollars in unclaimed benefits each year.

Claiming depreciation tax benefits can assist your cash flow to; pay off your principal place of residence; increase equity in your investment property; increase your cash flow or to buy another investment property.

You may not be aware that the Australian Tax Office allows you to amend your previous four taxation returns to claim depreciation benefits so if you have been missing out, it’s not too late to do something about it.

The fee for a Depreciation Schedule is fully tax deductible. Simply call our office and we can make the arrangements for the tax depreciation inspection and report to be undertaken.

Building your property investment portfolio can be made easier by claiming legitimate tax deductions that you may be presently missing out on.


Servicing heaters and appliances

When renting a property, appliances like air-conditioners, gas heaters, dishwashers and sometimes fridges can be made available for use by tenants. Should these appliances be supplied, some simple rules need to be understood as to avoid any surprises later on.

Repairing/Replacing the appliance
If an appliance breaks down, it will need to be repaired or replaced as soon as possible. Failing to do so can result in compensation being owed to the tenant.

Sometimes a property is supplied with an appliance that may not be in the best of repair (like a dishwasher). The owner might instruct that the tenants can use it but if it breaks down, it won’t be replaced. This statement does come across as generous or as a bonus to the tenant, however whatever is supplied for tenancy must be repaired or replaced should it break down! Therefore if it is supplied, it must be there as a permanent appliance.

Also ensure that you have arranged a Tax Depreciation report to ensure you get not only the best tax depreciation deductions on your appliances, but also on the rest of the property and fixtures.

Gas appliances need regular servicing
It is very important that gas appliances are regularly serviced to minimise risk of fires and break down of appliances. Some of the reasons for this are:

• Burners in water heaters or space heaters can become blocked with dust or lint and then soot up the heat exchanger and flue passageways,
• Air filters, air ways and fans can become blocked by lint and dust, leading to overheating and burner problems, and
• Safety controls can wear out and fail.

NB: We recommend you follow the manufacturer’s service plan and keep a record of the date of service.


Buying safe electrical appliances

All prescribed electrical appliances and equipment must be approved prior to being made available for supply. Approved electrical appliances display a regulatory compliance mark (RCM) or a unique safety approval number. What to look for when buying an electrical appliance:

• Approval markings can vary between states. Typically they are an alphanumeric code, comprising the first letter of the state that issued the approval followed by between one and six digits. Two examples are shown below.

• If you have purchased or plan to purchase second-hand electrical equipment, ensure the appliance has been approved as safe for use in Australia, that it is not damaged and have it ‘tagged and tested’ by a qualified repairman or a licensed electrician.

• Beware of purchasing second-hand electrical items on social media. A so-called bargain could be an expensive and dangerous mistake.

• Never use electrical equipment that is damaged or ageing. Throw away old extension cords, powerboards or any electrical product with a frayed cord.

• Take the time to check the cords at your home and throw away any with exposed wires or damage.

These are just a few suggestions to ensure you minimise the chances of a faulty electrical appliance becoming a hazard.


Refurbish to increase your rental returns

If your property is presently vacant or is about to become vacant, now is the perfect time to refurbish and maintain your property. Not only to take advantage of tax concessions but also to increase the rent achieved and minimise your vacancy periods.

Why not see the advice of your property manager or better still, inspect the property yourself to ascertain any works that may be necessary.

Things to take into consideration are:
• Repaint inside and out
• Minor kitchen updates like changing cupboard door handles, or replacing the stove, installing a dishwasher
• Install built in wardrobes
• Install dead locks and window locks as additional security features
• Install new light shades
• Replace old curtains and blinds

From our experience, we find that these are the initial appeal points that potential tenants are looking for in a competitive rental market.

By completing the above, you are not only putting your property at the top of the rental shopping list, you are also reaping some tax advantages and can seek an increased rent and reduce the days that your property remains vacant.

Beware of Discrimination

People often say they do not discriminate, but the reality is that often they do without realising it. Discrimination is an issue within the property management industry that must be considered. As a Property Manager or Landlord we must be aware that we cannot discriminate. It is human nature that you may have preferences of who you would like to reside in your property. There may have been previous experiences that have shaped your judgement on what tenant you may choose.

When selecting tenants it’s important to focus on what is important:

1. Can the prospective tenant prove that they can afford the property?

2. Is the number of people suitable to reside in the property?

3. Can they maintain the property and grounds?

4. Can you verify the information that they have given you in their application?

5. Do you have references that check out positively?

By law you must not discriminate against, colour or race, the unemployed, children, sexuality or religion. Care must be taken when declining a tenant’s application and often it is better not to provide any further information. It is important to remember that it is not the status of a person that will determine if they will be a suitable tenant, but rather the strength of their application & reference checks.


Finding the right Tenant

Securing a suitable tenant for your investment property is not as simple as opening the door and letting people see inside, handing out an application form and getting a lease signed!

We require all prospective tenants to inspect your property. This allows us to conduct an initial interview with the tenant and ask them some qualifying questions so that we can ascertain their suitability and find out why they are moving and how soon they can move in.

During this process we also listen to what the prospective tenant tells us about themselves. We do find that in some instances what people tell us at the inspection is different to what their tenancy application tells us. We proceed with caution with processing this type of application.

We require all prospective tenants to fill in a detailed tenancy application form which must be fully completed. The application is to be accompanied with 100 points of identification, employment confirmation and rental history & references.

We then call the tenancy and employment referees to verify the information provided and to ask a series of questions that enables us to make an informed decision as to the applicant’s suitability to your property.

We then cross check the information provided through a tenancy default database to confirm the details provided to us.

We will then contact you to discuss the applicant’s profile, our reference check findings and the terms that the applicant wishes to lease the property.

Although the final decision to approve or decline an application is yours, we will base our recommendations to you upon our first inspection interview and the information contained in the application and the reference check findings.


Selecting the right Tradesperson

It seems to be accepted that when appointing a contractor to do work on an investment property that the cheapest quote is always the best. This accepted rule of thumb couldn’t be further from the truth.

We have found that the cheapest quote is not necessarily the best quote at all.

When appointing a contractor to do work on your investment property we take into consideration a host of factors determining contractor’s suitability to do the work.

Other than price the following must also be taken into consideration:

– Is the contractor licensed to complete work for that trade?

– Is the contractor insured? If the contractor is not insured you carry the risk.

– Can the contractor provide references for similar work that he has completed?

– On work such as refurbishments, have you been given a start and completion timetable?

– Is the contractor going to complete the work himself, sub contact the job or oversee other employees to complete the work?

– Have you confirmed the materials used and any warranty periods applicable?

The above may seem a little over the top, but all too often we have seen investors appoint a contractor on price alone and ignore the host of variables to be taken into consideration when appointing a contractor most suitably qualified to do the work.

We always suggest to investors to take the time and care in appointing a contractor as you would appointing a contractor in your own home.

Although we may present a quote to you for work that may seem a little high in comparison to some, the above must be taken into account in order to protect your interests, the dollars invested and your property.


Steps to releasing a bond

There is more to the vacating process than a final inspection and releasing the bond. Below is a checklist to follow to ensure that all of the bases are covered before you release the tenants’ bond.

1. Tenant responsibilities: Has the tenant given the correct notice in writing? Are they breaking their lease? Are they responsible for a portion of re-letting expenses, such as advertising?

2. Will the property be re-let? Will it be for a long or short term tenancy?

3. Review the rent. Does the market allow for an increase or is it necessary to reduce the rent to give the best chance of finding a tenant in a timely manner.

4. Start the advertising process as soon as possible to give maximum advertising time.

5. Confirm in writing to the tenant their vacate date, monies owed and the expectation in relation to the final inspection regarding what needs to be cleaned, removed, etc.

6. Book a final inspection. When conducting the inspection, be thorough. The property needs to be handed back in the same condition as it was offered to the tenant. Is the property clean, gardening done, all furniture removed, rubbish removed, damaged caused by the tenant repaired?

7. Verify that all keys are returned by the tenant including any copies that may have been produced.

8. Review the condition of the property – is it ready for the next tenant, or will maintenance, repairs or improvements need to be carried out?

9. Organise any cleaners, gardeners, tradespeople…, while the property is vacant.

10. Do not release the bond before all expenses are covered where applicable, including rent to vacate or required notice period, cleaning, gardening, rubbish removal, outstanding charges for water, break lease costs, damage caused by the tenant repaired, etc.

11. Does the outgoing tenant need to be listed on a default database?

Remember: Never begin a new tenancy too close to the end of the previous one. Always allow ample time so the property is presented to the ingoing tenant in the best condition.

The above will help protect your investment and ensure you are compensated fairly where applicable.


Why some properties remain vacant for longer than expected

Renting a property quickly to the right tenant is essentially the most important task any agent can do for their client, however we find there are factors that can cause a property to remain vacant for longer than desired.

With these factors in mind, we can improve the chances of renting a property quicker and for the right market rent by being aware. Let’s take a look at some of these factors:

The market rent is too high: With easy internet search functions allowing prospective tenants to become quickly aware of comparable properties for rent in the area, tenants are more educated on market rents than ever before. For every week it is vacant it costs 2% of your annual rental income, therefore getting it priced right, and renting it quickly is everybody’s goal!

Presentation problems: First impressions are everything and poor garden presentation, ‘tired’ rental properties with poor paintwork, old carpets and out-dated décor can deter good tenants who want to make a home out of the property and judge what they see first. If it looks unattractive and neglected they will drive right on by, unless it is the only property available in the area.

Oversupply: Sometimes there are more properties available than prospective tenants. This could occur for seasonal reasons or as a result of a