Property Management 101 – 6 Tips for new landlords.
An investment property is a business, so managing it properly is very important to your financial success. One of the first decisions you’ll need to make is whether to manage the investment property yourself, or to employ the services of a property manager.
If you’re thinking of managing your investment property yourself, it may not be as straightforward as you think, so here are 6 tips to help you discover what’s involved.
Tip 1: Familiarise yourself with the law
Each state and territory have legislation in place to protect both tenants and landlords. As a DIY landlord, it’s important to familiarise yourself with these laws and have a solid grasp of the rights and responsibilities of both you and your tenant – even if you do decide to employ a property manager. You can find useful information on landlord responsibilities for each state and territory here.
Tip 2: Prepare the necessary documentation
Before you start looking for tenants, it’s a good idea to organise all the documentation required up front. These essential documents will include:
The lease: usually a fixed-term for six or 12 months. Once the initial lease expires, you can use a periodic lease, which is a month-by-month agreement that kicks in once the fixed term lease expires.
The bond: an upfront payment by the tenant (often one month’s rent) to the landlord as security for rent owed or damage. This is usually paid in advance and held by the governing authority in your state. Find out more here.
The condition report: a document which notes the condition of the property prior to the tenant taking up residence. This is an important document, as it can be used as evidence if the tenant damages the property. You complete a condition report, and the tenant is also given the opportunity to submit a condition report once they get the keys. Taking photos is usually a good idea.
Many of these standard agreement forms are available online. For example, in Victoria, standard lease forms and condition report forms can be accessed through the Consumer Affairs Victoria website, and you can generate and lodge a bond form through the Residential Tenancies Bond Authority (available here).
Tip 3: Attract quality tenants
Before you advertise for tenants, you’ll need to investigate the correct rent for your property. Check out websites like www.realestate.com.au, or ask your local real estate agent for advice.
Once you’ve set your rental price, you can go ahead and advertise your property. Be sure to use quality photos (you may like to use a professional photographer). Most renters go through websites like www.domain.com.au and www.realestate.com.au nowadays, so be sure to put your ad online.
Tip 4: Screen and secure tenants
Once you receive applications from prospective tenants, you can begin the screening process. Think about what you’re looking for in a prospective tenant and create a list of relevant questions to ask them. For example: if the body corporate for your investment property limits the number of pets, you’ll need to ensure your tenant does not have too many.
Be sure to request several references, including a reference from their employer, as well as previous landlords. Another tip is to check tenant databases in your state or territory to see if the prospective tenants have been blacklisted by previous landlords or real estate agents. Information about these databases (which are run by private companies) and your obligations as a landlord is available here.
Tip 5: Fill out the documentation, lodge the bond and collect the rent
Once you find a tenant, be sure to follow the paperwork required by your state to the letter. Keep in mind that each state or territory may have different requirements, so make the effort to find out what they may be.
There are landlord software platforms available that can help with everything from rent tracking and expense management to end-of-financial-year tax reports and documentation (here’s an example). You could also use an app like RentRight, for example.
Tip 6: Retain and maintain
Once you’ve secured a quality tenant, it’s in your best interests to keep them for as long as possible. Respond to requests for repairs and maintenance quickly and efficiently.
Organising regular inspections is also important, to keep tabs on how your property is faring. State or territory rules may differ in terms of the frequency of inspections, how you notify the tenant and entry procedures, so check with your local authority. Often inspections are held three months after the move in day and every six to 12 months thereafter. Another tip is to be meticulous about your record keeping and document everything – phone calls, messages, the lot – as this will help protect you should issues arise.
Remember, as your mortgage broker, we’re here to help. In addition to making sure your investment loan is right for you, we can also offer referrals to professionals for your team (it’s always a good idea to get professional legal and tax advice). So, if you’re thinking about becoming a landlord, please give us a call today!