5 things every new landlord needs to know
Are you considering a property investment with real estate in Australia?
Provided you purchase wisely, rental properties can be a great source of income, as your tenants pay off your home loan while you benefit from capital gains.
According to the Australian Bureau of Statistics, the total value of lending to investors intending to purchase residential property in June was almost $14billion.
It’s clear to see that being a landlord is a popular form of investment. However, what does the undertaking involve?
Here are 5 things that every landlord needs to know before buying rental properties.
Make sure you buy the right property for sale
If you want to make money from your investment, it’s vital that you spend time cramming in research to ensure you’re making the right decision.
The best way of doing this is to study market reports and blogs to get an idea of what areas are producing the greatest rental yields.
If you’ve managed to find a profitable location with homes for sale that you can afford, go back to your analysis. How has the area performed in the past and in relation to nearby suburbs? Are there any scheduled developments that could be beneficial, such as schools or improved public transport?
Don’t feel rushed to find tenants
Good tenants in rental properties are worth their weight in gold, as they will take care of your home and constantly pay their rent on time.
The important thing is to not rush in and accept the first prospective tenants you see, as they could be wannabe rock stars who take pride in destroying your property.
Take the time to sit down with them, and review their application. You should request that they include:
- Photo identification such as a drivers license or passport
- Any reference letters, which can be from previous landlords and employers
- Pay slips to show proof of a steady and sufficient income
- A deposit ledger, which shows a history of their rental payments (only available if they’ve rented before with a real estate agent)
As a final check before accepting the application, landlords and real estate agents can pay a membership fee to access a database which lists tenants that property owners have had trouble with in the past.
Collect a bond
You’ve invested in real estate in Australia, you’re satisfied with your tenants, now what? It’s important that you request a bond as this acts as your insurance against any damage to your property.
The generally accepted amount is one months rent from each tenant. This must then be forwarded on to your states residential tenancies bond authority, as they will hold it for the duration of the renting period.
Typical instances for you requiring access to the bond can include:
- Damage to your property caused by tenants
- Cleaning expenses due to mess from your tenant
- Unpaid rent
- A tenant deserting your property
- Unpaid bills left for to you to manage
Organise any necessary repairs promptly
While your tenants are responsible for keeping the property clean and tidy, what’s important to note is that you can’t make a claim on the bond for general wear and tear.
Essentially, it’s any problems that are outside of your tenants’ influence or control like electrical, plumbing and structural mishaps.
Upon being notified, it’s important that you act quickly. Besides the potential costs mounting, it could become a safety risk or you could find yourself in front of a disputes tribunal.
Use a property manager
This is perhaps one of the most important factors, especially for those new to the world of rental properties.
Most real estate agencies offer a property management service. There is a cost (generally a small percentage of the weekly rent) but the expense is justified by the benefits you receive.
Essentially a property manager can take care of all of the above! This includes:
- Helping find a suitable property
- Advertising for and vetting tenants
- Collecting bond and rent payments
- Communicating with tenants and arranging repairs
- Conducting inspections
Similar to selecting tenants, when it comes to choosing a property manager for rental properties, take the time to ensure they’re properly qualified and have good references.