You’re a nervous first-time landlord or you’re a pro investor to whom rentals are old hat. Either way, it never hurts to learn more about landlord ups and downs.
Something you may never have considered is whether you have the right personality to be a landlord. It sounds strange but as a landlord – even one with a great property manager – you’re going to have to be smart and tough sometimes. You’ll encounter tricky tenants, rent increases, damaged property and more. Personality is particularly important if you’re renting your house to a friend, next-door neighbour or employee. There may be tax breaks for you in the latter situation but it could also mean working with this person every day while dealing with their bond claim or lease break. So, as with any real estate situation, be prepared to use your head not your heart.
While you’re prepping your confidence, dig deep into landlord legalities, remembering these can differ between states. Read up on relevant tenancy acts and if unsure, talk to your property manager, local tenancies authority, or state real estate institute. Educate yourself on your rights and responsibilities as a landlord, before, during and after the tenancy ends. This includes potential maintenance issues and who is responsible for them especially when it comes to emergency repairs. And without wanting to burst your bubble, be prepared for things to slide downhill at least one point in your landlord career. This slide may not be yours or your tenant’s fault but simply bad luck or unexpected issues such as we’ve seen in 2020 with COVID-19.
Let’s face it: the main reason why people buy an investment is to enjoy a strong return. This is where setting your rent level will come into play. Your property manager should be able to advise you about this point. But the basic rules for pricing a home for sale apply in this situation too. You want to rent at a price which will attract tenants while still maximising your rental return. Or in other words, you want your bank account and your tenant to be happy!
Think about points such as the home’s size, location and condition as well as similar rates in the area. Does it come with furnishings? Is outdoor maintenance included in the rental rate? Then there’s the all-important bond. Usually equal to four weeks’ rent and if all goes well, returned to the tenant when they leave, this security deposit protects you and your house, whether this is in the form of unpaid rent or damages. Don’t forget potential rental increases as well. Again, your property manager can help you with this but you should aim to keep rent in line with local market conditions.
With luck, you’ll have tenants flocking to your investment but whether you have 100 or one application, don’t rush when it comes to accepting one. No matter how great a person looks on paper, reality can bite! Ensure you undertake thorough background and credit checks, including employment, and check with tenants’ former property managers and other references. That extra day or phone call could save you thousands in stress and dollars.
Facts and figures
Document every point about your rental and the tenant. This doesn’t just mean having a copy of the lease agreement but also updated photographs of the house – especially if you live interstate – plus documents for your tax return and similar. Your property manager should send you regular statements of all transactions plus an End of Financial Year statement with every expense and all revenue clearly laid out.
Yes, it’s the point of big disagreement and recent constant change: pets! It’s highly important to ask potential tenants if they own a furry or feathered creature. Also, consider getting landlord insurance and have a smart marketing plan ready to go to reduce any vacancy periods.