Choosing a good Rental Property

Doing your research on the area in which you’re planning to invest is paramount to maximising your rental return.

Some of the questions you might ask include:

1. What type of property has the highest rental demand in the market
2. Which properties see the lowest turnover of tenants
3. Which times of year see the highest inquiry rates
4. What is the demographic of the majority of tenant inquiries
5. What are the key property attributes people are looking for

It’s important to know this information when either investing or considering renovations so you can make better decisions as to where you invest your money and when.

For example, 2 bedroom units might have the highest demand and lease the quickest, however they might also have the highest turnover of tenants, which in turn creates more vacancies and potentially wear & tear on your property.

If you’re planning to purchase a property or do a renovation, have a chat with our property manager, who can give you the best tips on what features local tenants value most, the best yielding properties, average tenancy tenures and the best time to bring your property to market.

Paying off your home loan quicker

Is paying off your home or investment loan quickly a high priority for you? It seems there are new loans and investment strategies birthed daily. Although this may be an exaggeration, it does make sense to be educated in this regard.

By restructuring how you use your current bank account/s, credit card/s and home loan/s, you could possibly save yourself thousands of dollars, while reducing the term of your loan at the same time. Choosing to pay your mortgage payments weekly or fortnightly as opposed to monthly could have a dramatic impact on your loan. When was the last time you spoke with your bank manager, accountant or financial advisor? Staying in touch with them regularly to discuss your options could help save you time and money off your loan.

You may be looking to expand your property portfolio. It may be a surprise for you to learn that you have equity in your current home and/or investment property that can be used as leverage to purchase another investment property and increase your property portfolio? If this is the case, you may not be required to pay any out-of-pocket costs to purchase another should the equity amount be sufficient enough. When was the last time you had an appraisal on your property? You may be excited to learn that the value has increased.

Please get advice from your accountant/financial adviser before moving forward.

Zero Tolerance To Rental Arrears

Despite our zero tolerance arrears policy and encouragement of our Tenants to set up direct debits, unfortunately some Tenants will not pay on time. In the event, our tenant’s rent payment falls into arrears we take immediate action. We will call the tenant to ascertain the cause of the rent arrears and do all we can to recover the overdue amount.

Our arrears action plan includes daily telephone calls, regular sms and email reminders and formal letters when required. Should payment not be forthcoming, a termination notice is served to the Tenant after 15 days. If it gets to this point, we will contact the Landlord to gain their consent to serve the notice and seek recovery of the monies and or vacant possession.

If we need to contact the Landlord in such instances it is often natural for a Landlord to want to give the tenant a second or third chance to pay. Whilst this is noble and we all know that some tenants do have genuine hardship, swift action is needed to put the tenant on notice and to protect your legal rights. We ask our investor clients to swallow a bitter pill and view the rent arrears action as a business decision that needs to be made and to instruct us to serve a notice of termination upon the tenant. This notice formally advises the tenant that if rent is not paid then we will have no alternative but to take action to end their tenancy and recover all monies due.

This is not a palatable decision to make, however prompt payment of rent is the life-blood of our Landlord’s investment. We will work closely with our Landlords to protect their interests and maintain our zero tolerance policy to rent arrears.

Know your Market!

Unfortunately as Landlords we don’t get to choose the market conditions in which our property becomes vacant. Even long-term tenants move on at some stage. Maybe you have been unfortunate with a string of short-term tenancies. Vacant rental properties affect your overall annual income. For every week that your property is vacant your annual return is affected.

Everyone wants to get the best return they can for their investment. The loss incurred by hanging on for an extra five or ten dollar increase per week may reduce your annual income by more than 2%. For example, you may have a prospective tenant who offers you $360.00 per week, but the vacating tenant was paying $375.00 per week. Declining that applicant and having your property vacant for an extra 3 weeks means you are losing out on not just $15.00 over 3 weeks, but $1080.00 annually. That’s a significant loss!

It is therefore important that you know your current market and let it guide you in your decision. How much are other properties in the area achieving now? How long are they staying on the market before being let? Pricing your property slightly lower than those available, may mean a shorter vacancy period in a tough market.

You may have been fortunate in the past and received higher than average returns. Your property is only worth as much as someone is willing to pay. The market is not your only variable but the circumstances of the applicant themselves. A business couple transferring from a larger city for example may be willing to pay more than average rent, as it is much lower than what they are used to paying. However, a middle-class family moving from within the area may not have the financial capacity to pay more.

Have your property appraised by an experienced property manager who works and knows the market. But most importantly, don’t price yourself out of the market!

Creating a Budget for your Investment Property

Most of us have a household budget, but have you created a budget or financial plan for your investment property?

It is important to take into account that appliances and fixtures will need to be repaired or replaced over time; that rates and body corporate levies will increase and that your property may not be occupied 100% of the time.

These costs should be factored into a financial plan and a set amount each month should be set aside in a sinking fund bank account to cover such contingencies. Failure to have a financial plan or budget for your investment property can have an impact upon your lifestyle or household budget should such an expense occur, finding you with insufficient financial resources at the time to meet the commitment.

We often see landlord clients facing a shortfall when having to fund unexpected repairs. This, in turn upsets the tenant and can even lead to them vacating or making a claim for compensation. All of these things are upsetting for all concerned and could be avoided if an investment property sinking fund was in place.

We suggest that you take the time to create your budget. We can assist in providing you with cost estimates to help you with the creation of your sinking fund.

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Tenant Cooperation goes a long way when selling!

If you are looking at selling an investment property it is important to consider the tenant in the situation and understand that they can often feel their security and enjoyment of the premises has been affected.

Tenants can cause quite a bit of a problem and hinder viewing inspections should we not be able to get their cooperation. Though legislation requires that Tenants allow viewing inspections to potential purchasers, the delays and legal process will cause everyone a lot of inconvenience.

Therefore it is important if you are thinking of selling to discuss this first with your managing agent who can then work with your tenant to grant you the access you require in a diplomatic manner.

Sometimes however it might be necessary to offer the tenant some monetary compensation. Let’s face it, if the sale is going to reap some big monetary rewards it makes good sense to ensure the process is smooth and possibly invest a little to ensure that it does. This can also result in better presented properties as well as cooperation with access.

Selling does require good planning and thinking ahead so be sure to contact us first before listing your property for sale.

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Property Owner’s Duty of Care

We have all heard of tragic deaths resulting from house fires, faulty construction & carbon monoxide poisoning, to name a few. It is vital that property owners are aware of the potential risks and the importance of maintaining the rental property to a safe standard. In this blog we highlight the risks associated with construction of things such as timber decks, balconies and hand railings.

If someone is hurt or suffers a loss in a rental property, they will seek compensation from the property owner.

Our routine inspection reports detail the tenant’s cleanliness and care of the property, as well as suggested maintenance requirements. However, we are not qualified to make an assessment of the risks associated with areas such as decks, balconies, glass, steps, hand rails and safety switches.

Accordingly we suggest that a contractor be appointed to make an assessment of the property and report the risk and state of repair of these areas in order to minimise your risk and minimise the risk of injury to a third party.

In the age of litigation that we are in, it is paramount that property investors have a pro-active approach to reducing their risk by arranging a regular due diligence program on the state of repair of their investment property.

Not only will having a building assessment report reduce the chances of serious injury, it will also assist in mitigating your financial loss should there be a public liability/injury claim lodged against you. Additionally, the report will highlight areas of preventative maintenance that will actually save you money in the long term and will also give you peace of mind and the potential of higher rental returns.

We can arrange for an assessment to be undertaken on your behalf or you can appoint a builder or a qualified contractor to report as to the state of repair and any estimated costs involved in rectifying these areas.

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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.

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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.

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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.