Sell Buy Rent

Landlord's Book of FAQ's


Being a landlord can be very financially rewarding.  As with any investment, it is important to know everything there is to know about the day-to-day management of your investment.  

This webbook is designed to answer all of those questions you need to know before you become a landlord, or part of the investment team at sellbuyrent.

We have filled this webbook with important information and data to give you the confidence that the management of your investment is in experienced and capable hands.


When is the best time of year to advertise my property for rent?


When is the best time of year to advertise my property for rent?

The time of the year in which you put your property on the market will have a considerable impact upon how long it will take to lease the property and what kind of tenants you will attract. 

November to February 

This is the time of year when tenant's are more likely to be on the move. There are a few reasons for this, but mainly tenants want to be settled into a new home well before Christmas and New Years and also before the new school year starts. This time frame is also when we see an influx of Defence personell move to the region to begin training.   

Key Concepts 

It is definitely possible to find the right tenant at any time of the year, however, this peak season provides investors with a larger selection of suitable applicants, more demand, higher quality applications, and more potential for the optimum rent amount to be reached.

A common misconception about tenancy agreements is that they have to be for 6 or 12 months.  As a landlord you should consider aligning your tenancy to end in any of the peak seasons to increase your pool of prospective purchasers and minimise the weeks of vacancy.


How can we best prepare our property for rent?


How can we best prepare our property for rent?

Presentation, functionality and cleanliness are the three most important factors in ensuring your property is prepared for tenants - but they are not the only important factors.  If there are any inconveniences to a tenant these may turn into a dispute throughout the tenancy.  The below list outlines a number of common issues that arise in residential tenancies that could potentially blow up into disputes with the tenant.  Providing the basic comforts as listed below will add significant value and appeal to your property, and may be the difference between gaining an outstanding tenant or an average tenant.

  • Phone lines to the property,
  • TV antenna points,
  • TV aerial reliability,
  • Location of electrical outlets around the property,
  • Flyscreens/security screens ,
  • Airconditioning and heating,
  • Fenced yard,
  • Ceiling fans,
  • Dishwasher,
  • Permission for pets.

While some of these may not have been a consideration for you or your previous tenants in the past, it is important to consider the long-term goal of attracting the very best tenants possible to ensure a long and successful tenancy.

You don't need to provide all of these features, but you need to be prepared that an otherwise great tenant may request some items as means of them applying or staying.  Phone lines, television points and aerial reliability are critical to include right from the start of the tenancy. 

Key Concepts 

Provide as much value as possible to the tenant, within your budget.  It is important to remember that tenants are spoilt for choice and the attractiveness of your property may be the deciding factor in who you attract, how long they stay, how much rent you achieve, and the experience you have as a landlord.


How much will my property rent for?


How much will my property rent for?

An important question that every investor wants to know.

You may find it useful to search through comparable properties online and see how much they are renting for.  However, it should be noted that this is not the only factor considered when your property is priced when going to market.

The agency you appoint to manage your property will do a full rental appraisal and take into consideration a number of factors, including:

  • Age of the property,
  • Location,
  • Number of bedroom, bathroom, and garage,
  • Size of rooms,
  • Heating and cooling,
  • Size of backyard and size of land,
  • Age and condition of appliances (oven, dishwasher etc),
  • Quality of fixtures,
  • If pets are considered,
  • The amount the property has previously been leased for.

Your agency will also have access to property data software that allows them to produce a Comparative Rental Analysis prior to advertising your property for rent.  This will show exactly how much similar properties rented for and how long they took to rent.

Key Concepts 

While current rental listings provide a view on competing properties to yours, they should not be the only source of data to influence how you price your property for rent.  The advertised price for rent is not always equivalent to the price the property actually rents for, sometimes this gap can be quite significant.  It is important to consider how long comparable properties are on the market to rent, especially if your property is vacant.

The key to pricing your property right is to combine the data from a Comparative Rental Analysis with intel from current rental listings.


How long will it take for my property to rent?


How long will it take for my property to rent?

The time frame a property is on the market for will reflect its pricing, its presentation and the current demand of the market.  If your property is vacant it may require a different strategy than that of a property with a tenant already in place, to ensure the property is vacant for the shortest period of time possible.

Your property manager will advise you of the current figures for how many days on the market similar properties are spending, as well as these figures for their clients.  You can then discuss the best approach to pricing your property in order to secure the right tenant as quickly as possible.

Key Concepts 

With a proactive property manager on your side, the price and demand for properties similar to yours are a good indication of how long it takes to secure a suitable tenancy application for your property.


How will we attract the right tenant?


How will we attract the right tenant?

To ensure the success of your investment, it is crucial to find the right tenant.  The right tenant will pay their rent on time and take care of your property to a high standard, as if it is their own property.  

To attract the right tenant, it is important to remember that the features a tenant may value in a rental may not be the same that you value as a landlord.  You must also consider that the features that appeal to a tenant may not be the same as you would look for yourself, as a tenant.  

Identifying the type of tenant the property is going to attract and marketing to this group is a very important step acting the right tenant.

Factors that could contribute to the type of tenant who may be interested in your property include (but are not limited to):

  • time of the year
  • presentation of the property
  • advertised price
  • systems in place to handle enquiries

Once you have secured a suitable application it is important to conduct a thorough tenant screening process.  This screening process should include a full rental history, references, rental payment history, tenancy database checks, and the condition of previous rental properties.  A common database used by real estate agents is TICA.

Key Concepts 

When it comes to applications from prospective tenants, quality is always better than quantity, but both are certainly achievable with all factors above.


What happens when a tenant applies for my property?


What happens when a tenant applies for my property?

When a prospecting tenant hands in an application for your property there is an extensive and thorough application process that is taken before they are accepted to move into the property.

If they have supplied all of the required documentation with their application form, the property manager will complete a thorough background check of previous rental history, tenancy database and reference checks.  

Tenancy databases such as TICA may hold records of tenant breaches for up to seven years.  When presenting an application to you, your property manager should inform you of the results from their database search along with all details found in reference checks and rental histories.

Key Concepts 

Even if your property is vacant and you require a tenant in the property as soon as possible, it is still very important to take the time to follow the application process and find the right tenant to ensure a successful tenancy.  


Fixed agreement or periodic agreement?


Fixed agreement or periodic agreement?

The main difference between the two tenancy agreement types is in a fixed term agreement, you have specified start and end dates for a fixed amount of time (e.g. six months, twelve months), whereas a periodic agreement dates are more flexible and go month-to-month with no end date specified.  

We have outlined the pros and cons for both agreement types as this is a decision all landlords must consider

Fixed-term Agreement

  • Ensures a fixed income for the period of the agreement, providing security
  • A steady income enables you to budget efficiently and forecast for any expenses or refurbishment required.
  • Rent increases can be written into the tenancy agreement.
  • You can manipulate the tenancy agreement to end at a time when the market is at its premium.
  • Tenant must provide a notice to vacate 28 days in advance in Victoria, and 14 days in advance in New South Wales.


Periodic Agreement

  • The tenant controls when the tenancy agreement ends.
  • Tenant has no commitment to any period of tenancy other than the period required to give notice to vacate.
  • The option to increase the rent can often be missed.
  • As the tenant is in control, they may end the tenancy at a slow time for renting in the area, and thus could increase the amount of time the property is vacant.
  • The agent must provide a notice to vacate to the tenant if they wish to have the property vacant.

Key Concepts 

Consider your objectives for your investment property before choosing a fixed-term or periodic agreement.  While a periodic agreement may provide you with more flexibility, a fixed-term agreement will provide you with more security and control.

 


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When will rent be paid into our account?


When will rent be paid into our account?

At sellbuyrent, you can elect to have your payments in the middle of the month, end of the month, or both.

Tenants are required to always be in advance with their rental payments.  However, the frequency with which they pay their rent will vary.  It is often likely that a tenant will pay rent on the day their employment wages are paid to them, which varies for each person.

Your property manager will suggest to any new tenant who is making their initial rent payment to include additional rent up to and including their next pay day.  This will align their pay day with the day they pay rent, thus ensuring a consistent calendar of rent payments is set up right from the start.

Key Concepts 

Your tenants rent payments may not always align with your mortgage repayments.  To budget effectively, discuss with your property manager the frequency and estimated dates of each rental payment based on their discussions with the tenant.


What happens if my tenant doesn't pay their rent?


What happens if my tenant doesn't pay their rent?

If not managed correctly, rent arrears can impact on both the performance of your investment property and your emotional wellbeing. Should your tenant find themselves in financial struggle or stop paying their rent for any reason, your property manager should have a system in place to ensure that you as the landlord are not out of pocket. This system will include checking rent payments daily and issuing the appropriate notices as permitted by legislation.

The software your property manager uses should provide a daily report of any rental arrears. There is clear legislation regarding when the formal notices can be issued, however your property manager should be working proactively with the tenant to resolve any rent arrears from day one.

It is important to remember that some tenants may genuinely forget to pay their rent if they don’t have an automatic payment set up.  If your property manager is not following up rental arrears until when a notice is issued and the tenant is blindsided, the relationship with the tenant can become quite negative.

Key Concepts 

Having a daily monitoring system and proactive communication with the tenant is key to effectively managing rental arrears. If the situation is handled with negativity, the tenant may end up causing more headaches for you than just rental arrears. It is important that the correct notices are issued in line with the legislative requirements, otherwise insurance payouts or court orders may be affected.


What happens during the lease renewal process?


What happens during the lease renewal process?

Should you decide to offer a lease renewal, your property manager should begin the process 1-3 months prior to the end of the tenancy agreement.  Your property manager will first prepare a Comparative Rental Analysis (CRA) which will identify how much similar properties are rented for.  Your property manager will use this information combined with the consideration of time of year and market demand to justify their recommendations of the new rent being offered to your tenant and how long the new lease should be.

When you are happy with the new lease on offer, your property manager will arrange the paperwork and present this to the tenant prior to the end of their fixed term lease agreement.  Your property manager should also provide strict deadlines in which the tenant must sign the lease renewal to ensure plenty of time to advertise the property on the market should the current tenant decline the new lease.  Should they accept the offer, the paperwork will be signed and you will be notified by your property manager.

Key Concepts 

There are strict timelines that relate to providing notice to end a tenancy.  Should you consider offering a lease renewal to your current tenant, it is important that you and your property manager commence the process in advance of these notice periods.  If your tenant decides to vacate at the end of their fixed-term tenancy, your proactive approach will provide you with plenty of time to advertise the property and secure a suitable new tenant for the property, ultimately minimising the period of time the property is vacant.


What happens if my property is vacant?


What happens if my property is vacant?

A vacant investment property does not produce any income.  Unless the property is vacant for a specific reason (such as renovations) there is an urgent need to secure a tenant and start to generate income as soon as possible.  If you are in the situation when your property has become vacant, there are strategies available to help you find a suitable tenant as quickly as possible to minimise the loss of income.

If your property has been vacant for a long period of time, you may want to consider the advertised price for rent and whether this could be reduced on the basis that a shorter lease period is offered to a suitable applicant.  When your property is not producing any income for you, this will help you secure a suitable tenant.  You can then review the rent at the end of their fixed-term tenancy, rather than prolong the vacancy in the hope more rent will be achieved.

 

Here are a few scenarios to consider:

Example 1

It is the month of August. John and Wendy have an investment property that has been vacant for four weeks. Their property manager has it advertised at $450 a week and has been recommending to the client that it be reduced to $430 a week in order to be competitive in the current market. John and Wendy aren’t budging and ask their property manager to keep trying for $450 a week. The property remains vacant for another two weeks until John and Wendy finally agree to reduce the rent to $430 a week. The property is leased the following week bringing the total vacancy to seven weeks. The new lease period is for six months up to February next year.  The total loss of rent in this scenario is $3,010 (7 weeks x $430 rent p/w).

Example 2

Roger and Simone have a similar investment property in the same marketplace that is about to become vacant next week. Their property manager suggests that they do not have much time to find a tenant before it is vacant, therefore they should price it competitively at $430 a week. The property manager also suggests that a six-month lease period be offered so the lease will end in a busy period, allowing the rent to be reviewed and an optimal rent achieved down the track as opposed to trying for the higher rent now and risk the property being vacant. Roger and Simone agree and the property is listed at $430 a week and a suitable tenant is found the next weekend before the property becomes vacant.  The total loss of rent in this scenario is only $184 (3 days).

 

 

Summary

If John and Wendy had taken the advice of their property manager to reduce the advertised price of their vacant property, they would have been $3010 better off. If they did finally achieve the higher rent of $450, an additional $20 above what their property manager had advised, it would have taken them 150.5 weeks to recover the money they lost by holding out for more rent.

Roger and Simone, on the other hand, didn’t take that risk and secured a new tenant before the property became vacant, locking in their income until a more appropriate time to review the rent amount.

Key Concepts 

A property rented slightly below market value is better than a property with no rent.  It takes a long time to recover the loss from a vacant property so consider adjusting the price and lease period to attract more prospective tenants.  It is also a good idea to adjust the lease period to align the next potential vacant period with busy market conditions.


What happens if we decide to sell during the tenancy?


What happens if we decide to sell during the tenancy?

The rights and obligations regarding notice periods of both tenants and landlords will differ based on whether it is a periodic or fixed-term tenancy.  A tenant cannot be forced to vacate the property just because you have a buyer.  There are legal obligations that must be met whether it is a fixed-term or periodic tenancy.

According to legislation, tenants have the right to "quiet enjoyment" during their tenancy, and the sale process will most likely impact upon this.  This can often result in an unhappy tenant who may become unco-operative during the time the property is for sale.

If you are aware of intention to sell the property prior to a tenant moving in to the property, you must advise your property manager as there are legal requirements relating to notices that must be issued prior to the tenant signing their agreement.

Key Concepts 

Selling your property when it is currently tenanted is a delicate and sometimes unpredictable situation.  Working closely with your property manager throughout this time will ensure the process is handled with utmost care.  They can also be very beneficial to potential buyers, as they can provide many beneficial documents such as copies of the maintenance history, rental appraisals, etc.

Open and honest communication is critical to ensure that everyone's best interests are in favour.

 


Who is responsible for repairs and maintenance?


Who is responsible for repairs and maintenance?

As a landlord it is important that you are comfortable with the fact that things are going to need fixing or replacing, and you will need to budget accordingly.  Of course, any damages from the tenant will be at their own expense, however there are two types of repairs as described in legislation that are the sole responsibility of the landlord: urgent repairs and routine repairs.

Urgent Repairs

Urgent repairs are those that require immediate action by both the managing agent and the landlord, and include:

  • Water pipes have broken or burst,
  • Blocked or broken toilet (if a second toilet is not available),
  • Serious roof leak or gas leak,
  • Dangerous electrical fault, dangerous power point, loose live wire etc,
  • Flooding, rainwater inundation inside the property, or serious flood damage,
  • Serious storm, fire or impact damage (ie impact by a motor vehicle),
  • Failure or breakdown of the gas, electricity or water supply to the premises,
  • Failure or breakdown of an essential service or appliance on the premises for water or cooking,
  • Hot water service failure on a weekend, or long weekend (this would not be considered an after hours emergency if this occurs on a week night),
  • Fault or damage that makes premises unsafe or unsecure,
  • Fault likely to injure a person, cause damage or extreme inconvenience.

Failing to attend to urgent repairs in the appropriate time as deemed by legislation can result in significant compensation being awarded to the tenant in court that may well exceed the cost of the repairs.  As a landlord you need to budget for things to go wrong and act fast if they do.

Routine Repairs

All other repairs other than those listed above are considered by legislation to be routine repairs.  These may include anything from loose fixtures or fittings to faulty airconditioners or garage remotes.  

It is important that routine repairs do not get ignored as compensation can be awarded to tenants in court for amenities that were included in their lease if they are proven to be faulty during a tenancy.

Key Concepts 

When it comes to repairs and maintenance, landlords need to be attentive and must not ignore the situation.  Depending on the type of repair, legislation may permit tenants to arrange for repairs to be carried out and the costs to be invoiced back to you as the property owner.

It is important to remember that delaying and neglecting repairs and maintenance may result in compensation being awarded to the tenant, therefore it is in everyone's best interest to act upon repairs and maintenance as soon as possible.

 


Who is responsible for paying the utility bills?


Who is responsible for paying the utility bills?

The responsibilities of both the tenant and the landlord relating to paying for utilities is one of the most common disputes in a tribunal. These responsibilities will depend on a range of factors including your dwelling type and council laws.  

The way in which your property is set up with relation to metering will also impact on the responsibilities of both the tenants and landlords.  For examples, in New South Wales there are a set of steps that must be taken and fittings installed to have a qualified tradesperson certify your home as water efficient before you can charge your tenant for 100% of water consumption.

Talk to your property manager about your utility bills as the scenario will vary between Victoria and New South Wales properties.

Key Concepts 

There are many deciding factors that will determine who is responsible to pay for utilities at your property.  You should speak with your property manager about your legal obligations.


What is tax depreciation, and what's in it for me?


What is tax depreciation, and what's in it for me?

The short answer is a lot.

Tax depreciation (also known as property depreciation) is a legitimate deduction against assessable taxable income, generated by a residential or commercial investment property.  Experts estimate that between 70-80% of property investors aren't claiming tax depreciation and may be missing out on large amounts of cash that should be back in their pockets.

Most people do not claim for property depreciation for one of two reasons: they do not understand that they are allowed to do so, or they do not realise how much money they are missing out on by failing to claim.

The value of depreciation that can be claimed for a residential property will typically range between $1500 and $15,000 a year.  For someone in the top marginal tax bracket, the effect of tax depreciation is to put back into their pockets between $650 and $6500 a year.

You can claim tax depreciation for most parts of a building that is related to creation of assessable income, however, there are some exclusions (i.e. the cost of landscaping and retaining walls).

Key Concepts 

As a landlord it is very important to know about tax depreication.  Your property manager can put you in contact with an expert to provide you with an estimate of how much money you could put back in your pocket at the end of each financial year.


Who deals with body corporate issues that arise?


Who deals with body corporate issues that arise?

Property managers do not engage in body corporate decision making, however it is their job to report any potential issues that may arise directly to you.  Potential issues could include repairs or maintenance, security concerns, resident complaints and issues surrounding common areas or equipment.  Often the tenants will communicate any of these issues to the property manager.  They will then report these issues to you.

Key Concepts 

Your property manager cannot get involved in resolving specific body corporate matters.  However, they are in charge of managing your property which may include reporting matters of concern to you or the body corporate managers directly to follow up.


What insurance do I need?


What insurance do I need?

It is compulsory for investors to have the appropriate level of cover for public liability insurance for their investment property. Although it is a tenant's responsibility to insure their own personal property, the standard building and contents insurance rules still apply for your dwelling type.

It is optional for you to get landlord insurance, however you should consider whether it is right for you.  Landlord insurance will cover you for tenant-related risks including any loss of rental income and loss or damage to contents and building by tenants.

There are countless affordable policies available.  Your property manager will be able to discuss with you the level of cover that is right for you.

Key Concepts 

Unfortunately bad things can happen with no warning and you don't want to be caught off guard without insurance cover.  The cost of insurance far outweighs the cost of little or no insurance.  If you have just purchased a property, the best time to start is now.  As a landlord, you have a liability exposure from the moment you or your agent begins showing potential tenants through the property.


How much should a property manager cost me?


How much should a property manager cost me?

Fees and charges will vary from one agency to the next.  Below is a list of the common fees that a property manager will charge:

Management Fees:

Management fees are charged on a percentage basis of the total rent monies collected. The amount charged will depend upon the actual rent amount.

The management fees are associated with general management duties including but not limited to:

  • Rent collection and managing rental arrears,
  • Conducting regular rent reviews,
  • Preparing statements for the owner and collating supporting information for the owner’s statement,
  • Organising maintenance repairs and quotes,
  • Liaison and regular follow-up with maintenance contractors,
  • Organising keys for inspections and tradespeople,
  • Copying/scanning of invoices,
  • Attending to the payment of general property expenses such as council rates (if required),
  • Liaising with owners and tenants,
  • Liaising with insurance companies (if required),
  • Attending to daily telephone, email and fax enquiries,
  • Liaising with the strata company if applicable,
  • Processing notices to vacate,
  • Disbursement of the vacated tenant’s bond,
  • Administration of advertising tribunal hearings,
  • Some advertising activities,
  • Disbursement of funds.

 

 

Letting Fee

The letting fee is based on the weekly rent and only charged when a new tenant is found. If a tenant breaks their tenancy agreement early, the letting fee is paid by the outgoing tenant as compensation for ending their agreement early. The amount charged will depend upon the actual rent amount.

The letting fee is associated with, but not limited to:

  • Arranging, placement, recording and administering advertising,
  • Arranging, taking and uploading photographs of your property,
  • Arranging and conducting viewing appointments with prospective tenants,
  • Administrating and processing applications for tenancy,
  • Processing the application for tenancy, including checking of all references,
  • Negotiating the terms of the lease with both owner and tenant,
  • Attending to the preparation, execution and processing of lease documentation including the bond lodgement form, general information for tenants, photocopying keys and the emergency plan for tenants,
  • Compiling ingoing photographs.

Other Fees

Other fees may be charged for important additional tasks relating to the management of your investment property. This will also vary from one agency to another. These additional fees may include:

  • Administration fee,
  • Advertising fee,
  • Lease renewal fee,
  • Tribunal representation fee.

Key Concepts 

While cheaper property management companies may appear to be an ideal option to maximise your income by saving on expenditure, this can end up costing you far more. Property management teams with the systems and technology in place to maximise your return and minimise your exposure to risk must charge accordingly for their investment in such technologies. These offices also tend to have a better staff culture and less turnover of staff, which means a much more enjoyable and profitable client experience.

"Discounting fees to win business simply means you lack in other ways to provide any real value to the client."


Disclaimer


Please note that much of this publication is based on personal experience and anecdotal evidence. Although the authors and publishers have made every reasonable attempt to achieve complete accuracy of the content in this e-book, they assume no responsibility for errors or omissions and the views expressed herein do not necessarily reflect the opinion of the publisher.

It is intended to provide general news and information only.The content does not take into account your personal objectives, financial situation or needs.

Any trademarks, service marks, product names or named features are assumed to be the property of their respective owners, and are used only for reference.There is no implied endorsement if we use one of these terms.

Readers are advised to contact their financial adviser, broker or accountant before making any investment decisions and should not rely on this e-book as a substitute for professional advice. All information is current as at publication release and the publishers take no responsibility for any factors that may change thereafter.


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