How to manage your investment property
Purchasing your rental property is just the start. Next, you need to think about managing the property and making improvements.
Going the private rental route has some advantages, including saving costs, being able to pick your own tenants and being able to keep a constant eye on your investment.
It also makes you solely responsible for the serious legal requirements of being a landlord, including the complexities of tenancy laws.
Engaging a property manager can save you time and money in the long run. It’s the most common way owners in Australia manage their tenanted properties.
Property managers look after the day-to-day requirements of the rental and are well versed in all the legal requirements relating to tenancies. They also can make the process of finding tenants smoother for you.
For many property owners, the first step is to find a reputable, skilled real estate property manager.
Property managers can take the leg work out of finding the best tenants for your investment home and can give you the peace of mind of knowing someone is managing the tenancy at all times.
One way you can attract the right sort of tenant is to present the property well. Properties that are well maintained, uncluttered and not in obvious need of repairs will mean you should end up with a large number of people wanting to live there. This goes for both private rentals and managed properties.
If you’re privately renting and holding the inspections yourself, keep note of the people who attended, their behaviour and read applications carefully.
Remember, you’re entering a legal agreement if you become a landlord, so it’s vital to know what your legal parameters are. This became especially important during the COVID-19 pandemic, as all states and territories introduced temporary exemptions and changes to tenancy laws to offset the economic effects of the crisis and to comply with health directives.
Tenants’ rights vary according to which state or territory the lease is in. One of the biggest differences is the notice period required to evict a tenant. Some states require just a few days, while others will require up to 120.
In most states, tenancy laws will generally cover such areas as how much bond is required, limits on advance rent, frequency and size of rental increases, eviction notice periods and causes and when an owner or agent can enter a property. Entry to rental properties will require some notice period.
Remember, too, that the tenancy law that exists in the state where the property lies are the ones that apply. If you live interstate, the regulations of your home state do not apply elsewhere.
You’ll be able to find all the laws that apply to your property on the internet, via either government websites or tenancy groups. You can also discuss them with your property manager, who will be well versed in them.
What this insurance covers varies between providers and price range, but it can include such items as theft; malicious damage and vandalism; loss of rent due to tenant default; and legal expenses required to evict a tenant.
While some landlord’s insurance offerings will cover repair for building damage and any rent lost while the property is uninhabitable, if the property is strata title, the body corporate fees may cover building insurance.
Contents belonging to a landlord, like carpets, blinds, dishwashers and removable air conditioning units, may also be covered.
There are a number of landlord insurance products available, so ensure you shop around for the deal that best suits your situation. Remember, you can also negotiate on premium prices and exclusions. Landlord insurance premiums are also tax deductible.
Before reaching for the tools, ensure the amount you have budgeted will be recouped, whether through increased rental yield or improved capital growth.
One exercise could be to look at the projected improved value, then find out if other similar properties in your area are selling for that price. You might like the improvements you have made, but will they add the value you were looking for?
If you’re on a budget, target the bathroom and kitchen first. These are the most used areas of any home and are real attractions if done well.
Next in line would be adding an extra bedroom, adding an outdoor area, off-street parking and built-in storage space.
Consider the colour palette you use. While you might like the bold colours you have chosen, some buyers will be put off by the need to change what they don’t like. Choose soft or muted colours first to improve your resale potential by appealing to a wider audience.
Here’s some things you should remember.
Some debt comes with benefits
Investment experts advise that if you’re looking to use any spare cash to reduce your debts faster, repay your non-tax-deductible debt first before moving on to your tax-deductible debt. Examples of non-tax-deductible debt include mortgages on a primary residence and personal loans. Other types of debt, including mortgages on investment properties, can be used to reduce your taxable income, so ensure you pay off the debt that doesn’t help you first and maximise the benefits of the debt that does.
Utilise depreciation
Many investors forget to utilise the tax breaks property depreciation can bring them. Basically, depreciation allows investors to offset their investment property’s deterioration from their taxable income. Investors can claim deductions on both the decline in value of the building’s structure and items considered permanently fixed to the property, as well as the decline in value of plant and equipment assets found within it (for example ovens, dishwashers, carpets, blinds and so on). To start working out what depreciation benefits you might be able to claim, contact a quantity surveyor who will prepare a depreciation report for your accountant.
Keep your rent in line with the market
You could be missing out on income by letting your rents lag behind the market value. Remember to keep tabs on rental prices and adjust accordingly. Delaying a necessary rental increase can have negative consequences on keeping good tenants.
If your rent is too high, you’ll be missing out on tenants and income. By making a small reduction, you may be able to attract the people you need and avoid unwanted vacancies.
Plug your property’s data into the tracker, then www.realestate.com.au will monitor its estimated value and what other properties in your area have been selling for. Information from the tracker can be tailored to either owners or tenants.