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Why should I use an agent to manage my rental property?

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Sit BackLots of property investors like to manage their own rental property.  After all, once you’ve found a tenant you can just sit back, relax and collect the rent, right?  Actually, there’s a fair bit more to it.

If you’re thinking of managing your rental property yourself, here are some things to consider first.

How are you going to market the property?

Property managers advertise rental properties all the time.  They know where to advertise, what property features to highlight and most importantly, how to put it all together as an attractive advertisement to gain maximum attention.

Property managers also have a good understanding of the current market and what price your property should rent for.  They may also have prospective tenants suitable for your property already (i.e. tenants moving out of a rental property currently under management, or someone they’ve met at another open home).

How familiar are you with the residential tenancy legislation?

You need to be completely familiar with the current legislation surrounding residential tenancies.

First, you need to ensure your tenancy agreement is compliant with the legislation to avoid any issues later on in the event of a dispute.

Second, the legislation dictates what you can and cannot do in terms of managing the tenancy.

For example, in Canberra did you know that you can only conduct a certain number of routine inspections per year and that you need to give sufficient written notice to the tenant before conducting the inspections?

Do you know what to do if things go wrong?

Sometimes things don’t always go to plan.  Whilst the majority of tenants will do the right thing and look after your property like it’s their own, you may come across some who make it more stressful than it needs to be.   Rent may be paid late (or not at all), a tenant refuses to provide access to conduct a routine inspection, or could be demanding when it comes to repairs and maintenance.

Do you know how you will handle these situations?

Do you have the time to arrange emergency repairs when you get a call on a weekend to advise the hot water unit is no longer working?

Do you know what insurances and other arrangements you need to have in place?

A good property manager can provide some guidance around lots of aspects of managing your property properly.

For example, aside from the normal landlords insurance you should have in place, did you know that you should have a quantity surveyor inspect your property?  This will allow you to properly claim all depreciation benefits at tax time.

In the ACT, you also need to notify the ACT Revenue Office that your property has become rented, so that land tax can be appropriately charged.  This is something that investment property owners can sometimes forget to do.

In fact, The ACT Revenue Office is currently offering a “Land Tax Amnesty” for rental properties managed by real estate agents.  This means that if your residential rental property is managed by an agent and you’re not currently paying land tax on the property, the ACT Revenue Office will waive any penalty tax payable (interest will still apply) if your agent provides information to the ACT Revenue Office regarding its rental status prior to 31 July 2015.  Please contact your managing agent or the ACT Revenue Office for more information.

Property Management fees are tax deductible

Being an expense you have incurred to derive investment income, your property management fees should be an expense you can claim at tax time.

Whilst you will not incur these fees if you manage the property yourself, you have to weigh it up against the benefits and time you will save by letting a property manager handle it all for you.

It’s nearly tax time

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With the end of the financial year approaching, now is the time to start getting your records in order to maximise your investment property related deductions.

So, what are YOU able to claim as a property investor?

The ATO advises the following are expenses you may be entitled to claim as deductions. Make sure you speak to your accountant and/ or make your own enquiries to ascertain what may be applicable to your individual situation.

– Advertising Costs

– Body Corporate Fees – these are commonly paid quarterly and cover the running costs of the building

– Cleaning and Gardening costs

– Insurances – building, landlords

– Interest expenses – interest on a loan to purchase, build, improve or repair an investment property may be deductible

– Land tax, Rates and Water costs

– Legal Expenses

– Property Agent’s fees

– Repairs and Maintenance costs – repairs are deductible when ‘repairing’ means to restore (or replace) the item to the condition it was in before it deteriorated.

You may also be able to include depreciation, which is essentially a deduction for the cost of assets itemised in the Depreciation Schedule. It’s something frequently overlooked by property investors, but can provide significant tax deductions particularly if your property is new or has been recently renovated. If you don’t have a Depreciation Schedule for your rental property, arrange it now! There’s still time before the end of the financial year.

At the beginning of July, your property manager should provide you with a summary of all rental income received and any expenses that have been paid through the agency.

However, if you pay some of the expenses yourself, or you self-manage your properties, start getting your records in order now. That way, you’ll be in a good position to lodge your return as soon as the financial year is over, and hopefully(!) receive your tax refund sooner.

*Please note The Landlords’ Club is not providing tax or financial advice and you should not act solely on the basis of the information presented here. The information is provided as a helpful guide to investors for their private information only. Every effort is made to ensure the contents are accurate at the time of publication. The Landlords’ Club takes no responsibility for any subsequent action that may arise from the use of this information. For specific information on deductions that may, or may not, apply to your personal situation, please see www.ato.gov.au or speak to your accountant.

A ‘Day in the Life’ of a Property Manager

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Why would you pay for a property manager to take care of your properties?

 

Here are just a few of the jobs we do on a daily basis – that you might not want to do yourself!

– Get another set of keys cut for new tenants about to move into an Apartment

– Conduct research on properties owned by potential new Landlords wanting rental appraisals

– Meet prospective new Landlords at their rental properties

– Conduct inspection for existing tenants, prepare the report then issue it to the Landlord

– Prepare paperwork for new tenants to sign

– Meet with new tenants to sign all the legal paperwork

– Team meeting to discuss new properties coming up and properties just rented

– Prepare advertising material for a property where tenants are about to move out of

– Follow up OSR to ensure they acknowledge the property we’re managing is now rented

– Arrange for Rates, Water and Strata bills to be paid on properties we manage

– Follow up a noise complaint about tenants of a property we manage

– Conduct an open home for a home that is about to become vacant

– Provide feedback to Landlord on attendance at the open home

– Review rental applications and make calls to applicant’s referees

– Call Landlord to discuss potential new tenants

– Call a tenant to seek clarification about the maintenance request they have just submitted

– Investigate maintenance issues and discuss plan of attack with the Landlord

– Arrange for tradespeople to attend to the oven that doesn’t work

– Follow up tradespeople and tenants to ensure maintenance issue is now complete

– Visit the bank to deposit the banking

– Submit bonds to the Rental Bond Office

– Check all tenants are up to date with their rent

– Issue formal notice to the tenants to advise them we are coming out to inspect the property

– Review lease expiry of properties under management

– Conduct Rent Review of exiting properties and discuss with Landlords

 

And all in a typical day’s work.

How will you make sure a tenant looks after my property?

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We have all heard the stories of walls getting damaged and carpets being ruined by nasty tenants.  Thankfully, they are rare occurrences – especially if you have a professional manage your property for you.

Here are some of things we do here at The Landlords’ Club to minimise the chances of your rental property being damaged –

1. Insist that rental applicants provide rental and employment references as well as supporting documentation to verify their personal character.

2. We spend significant time properly screening the applicants – we will call all references, meet face to face and do our research to ensure this person is the right candidate for your property.

3. We insist that all tenants have provided appropriate documentation to us before they sign the lease.  We also insist that all people living in the property sign the lease (this includes partners that move into the property at a later date as a result of a delayed move for example)

4. We ensure our tenancy agreements comply with legislation.  We also insist on meeting prospective tenants face to face to sign all the paperwork – to ensure everything is signed correctly and there can be no misunderstanding of what is being signed.

5. We conduct an initial inspection shortly after the new tenants have moved in.

6. We conduct the maximum amount of routine inspections allowed – to check for any early signs of damage or lack of care.

What can I do to help rent my property sooner?

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OpenWith the warmer weather, we often see an increase in the number of people attending open homes.  But how do you convert those who are ‘just looking’ into actual tenants of your property?

Be flexible

Sometimes as the Landlord you might need to be a bit flexible, particularly when the supply of rental properties exceeds demand.  This might mean negotiating with a tenant in terms of price, or their lease start date.  Or it may just mean being flexible in terms of allowing someone to keep their small dog Barry at the property.

In terms of showing the property to prospective tenants, we’re completely flexible too!  Saturday opens are always popular, but in order to find a tenant as soon as possible, we’ll schedule private viewings as well – anything to find that tenant sooner.

Know the market & the area

Make sure you know what price other properties are renting for because these are the properties you’re competing against.  It’s also a good to know how long it’s taking other properties to be rented, as it helps to set your expectations around any vacancy period.

We like to have a good grasp of the rental market in your area, but also know what’s nearby in terms of schools, major shopping centres and public transport. People new to Canberra are sometimes looking for an added reason to rent your property and if we can give it to them, it might be what they need to sign on the dotted line!

Make the property appealing

If it’s an older property that is looking a little tired, perhaps a bit of paint and a garden tidy will make all the difference.  If a property looks clean and fresh and is ‘easy-to-care-for,’ chances are it will be rented first.  Tenants want to move into somewhere appealing, that is low maintenance.  After all, they want to find somewhere they can make into their home with little effort.

The Top Features a Tenant looks for in a Rental Property

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shutterstock_304971164So you are thinking about buying an investment property, but you want to make sure you find one that will be easily rented.  Based on the thousands of conversations we’ve had with prospective tenants over the years, here are some of the things that tenants most look for when they’re out inspecting rental properties.

Good location

We all know about this one.  It helps to have a rental property that is close to public transport and major shopping centres.  If your property has a few bedrooms and is more suited towards a family, it will also help if your rental property is nearby to schools and local parks.

Air Conditioning & Heating

This is a big one in Canberra.  Air conditioning is generally a top priority for prospective tenants, but at this time of year it’s heating that is critical.  Installing central heating and cooling systems will not generally increase the value of your investment property, but you do need to have adequate systems in place to make it attractive to tenants.

Pet Friendly

We’ve mentioned this before, in terms of doing things to rent your property faster.  Being flexible when it comes to allowing pets can open up the range of prospective tenants.  Generally when a Landlord allows a pet to be kept at the property, there will be additional conditions that the tenant agrees to meet.  Some tenants even have rental references mentioning their pet, showing they’ve been responsible ‘pet owning tenants’ in the past.

Parking

Secure parking is always a benefit, particular in an apartment development.  Tenants don’t want to be worried about the safety of their car, or where their visitors are going to park.

Outdoor Space

We’re not talking about a large patch of lawn or expansive gardens.  Sometimes tenants just want a small courtyard or balcony where they can get some fresh air and enjoy a coffee on a lazy Sunday morning.

Modern kitchen

Tenants tend to focus a lot on kitchens, favouring rental properties that have modern kitchens, or at least have an updated feel to them.  Dishwashers don’t go unappreciated either.

Security of the tenancy

It’s not just Landlords who want stability with their rental property tenancies.  Tenants don’t like moving that often either, particularly those who have children in the local school.

We meet lots of tenants looking for a place to rent, simply because there last rental property is about to be sold, or the owner is moving back in.  If you’re a property investor with the intention of renting a property long term, it can be very appealing for a prospective tenant.

Security of the property

You don’t have to go overboard on security, but not surprisingly tenants like to feel safe in their rental property.  A home that has lockable windows and doors is the bare minimum.

Should I sell my investment property?

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shutterstock_304201820This is a question we are often asked as property managers and something that most property owners will consider at some point.  The answer will obviously depend on what your longer term objectives, but here are some things to consider when making your decision.

Is cash flow an issue?

Some investors decide to sell an investment property because it’s a drain on cash flow.  Perhaps you’re in a period of receiving low rent, you’re locked into a higher fixed rate and expenses (like rates and body corporate fees) have increased.  It’s getting harder to meet the monthly out-of-pocket costs associated with your property.

If you are keen to hold on to the property, some things you might be able to do to improve cash flow include –

1. See if there is any possibility of increasing your rent (this might be something you can’t do anything about right now, but something to keep in mind)

2. Talk to a mortgage professional to see if there is anything you can do to reduce your interest costs. There are lots of things that can be done, but you might need some help to make sure you’re taking advantage of all the options available

3. Talk to your accountant about getting a PAYG Withholding Variation in place with your employer.  It can help you to pay less tax each fortnight (which assists with cash flow) instead of receiving a lump sum tax return at the end of the year.

4. Talk to your accountant to check that you are claiming everything you can, in order to boost your tax benefits.

5. See if you can reduce your insurance costs. You should periodically review your Landlords Insurance premiums to ensure you are still getting the best deal.

Are you focusing on the right things?

Unfortunately, investors sometimes end up selling a good investment property at the wrong time, simply because they’ve had a bad run with particular tenants or a string of maintenance expenses.  This can happen with an investment property from time to time and it’s important to keep sight of the bigger picture, rather than get bogged down with day-to-day issues.

It’s also where a property manager can help.  If you’re not personally dealing with the issues on a daily basis, it’s might be easier to focus on your long term reasons for holding investment property – i.e. rental income, capital growth, the tax advantages.

What do you intend to do with the proceeds?

Once the sale costs have been considered as well as any capital gains tax implications, what do you plan to do with the proceeds from the sale?

Some investors decide to sell a property without any clear idea of what they will do with the resulting cash.  Whilst there is absolutely nothing wrong with this, if a large amount of cash is going to sit in a low interest earning account for a year until you know what to do with it, you might have been better off to delay the sale while the property *hopefully* increases in price.

Of course, if we knew in advance what property prices were going to do, we’d always be able to sell at exactly ‘the right time.’

Is the time right?

Unfortunately you won’t know if it was the right time to sell until after the sale has happened.  You can arm yourself with lots of property market research and talk to as many different experts as possible, but it’s more important that the time is right for YOU.  For example, you feel you’ve made sufficient gain from holding onto the property up until now and you have a clear reason for selling.

The Importance of Routine Inspections

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shutterstock_105580274One of the best ways to ensure you receive maximum rent from your investment property is to keep it well maintained.  A well maintained property is more appealing to prospective tenants, it often rents more quickly and can attract better quality tenants.

So, how do you ensure your tenant is holding up their end of the deal and actually looking after your property?

It’s easy! Conduct a routine inspection.

Routine inspections are an extremely important part of managing a rental property. They are the only way you can adequately assess the condition of the property.

Thorough routine inspections should be conducted as regularly as allowed under the legislation to ensure that your asset is well maintained.   But, what do you look at during a routine inspection?

Check the property is well maintained

You need to check that the property is clean and tidy and if necessary, suggest areas where the tenant needs to improve.

Check the garden is well maintained

Inspect the garden to ensure it’s kept nice and tidy and the tenant is staying on top of any pruning or trimming as required.  Overgrown bushes can damage fences and sheds over time, resulting in preventable maintenance costs for the landlord.

Check exterior structures

It’s important to regularly check for emerging cracks, the condition of awnings, window trims and condition of decking boards for any signs of damage or deterioration. Significant deterioration may pose a potential hazard to the tenant and could result in a damages claim for the landlord if the tenant was to injure themselves.

Check interior structures

Check for signs of any cracking in walls, check sinks and toilets for any signs of leakage. It’s also important to check for any signs of water damage or appearance of mould (particularly in wet areas) as these could indicate an underlying issue that could be extremely costly to the owner should it go undetected for a long period of time.

For investors managing property themselves, often the routine inspections don’t happen as often as they should (or not as thoroughly), due to feeling uncomfortable about going into their tenant’s home.

An agency specialising in property management doesn’t have this issue, as it’s part of what we do every day!

If you need any help in this area, just give us a call on (02) 6162 2322.

You’ve just purchased an investment property in Canberra, now what?

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shutterstock_163961147So you have just bought an investment property in Canberra.  Congratulations!  Now what?

There are lots of little things that need to be arranged and for a first time investor, it can be quite overwhelming.  Start your property investment career on the right foot, by following the steps below.

Speak to mortgage professionals.

You want to speak to people who understand investment property finance. There are many ways to structure loans for investment properties and you want to ensure you do it right the first time. You don’t want to be locked in to a lender or loan that won’t help you achieve your future investment goals.

Ensure you have adequate insurance in place.

Once you have exchanged on the property, you should have insurance to cover the building. Once the property has settled and is available for lease, you will also need to arrange Landlords insurance to minimize your risk.

Select a property manager (hopefully it will be us, The Landlords’ Club!)

It’s a good idea to have a property manager lined up before your property settles. That way, as soon as you have the keys, your property can be advertised and rented. In some cases, the property manager can get the keys directly from your solicitor on settlement day. This not only saves you time, but also means they can let potential tenants see the property right away.

Notify the ACT Revenue Office of your property’s rental status.

Once a property is leased, it will incur land tax from the ACT Revenue Office. If you fail to notify them of the rental status, if goes unnoticed for some time, you may end up with a sizeable retrospective land tax bill.  The Landlords’ Club can assist with this and even pay the bills for you (from rental income we receive from your tenants). We can also pay your Rates, Strata Management and Insurance bills in the same way.

Plan to maximize your tax deductions.

One of the ways you can do this is to arrange for a Quantity Surveyor to prepare a depreciation report for your property. This will allow you to claim depreciation deductions relating to the property. It is particularly beneficial if it is a newly build property or there’s been renovations completed recently.

There are many elements to growing and maintaining a property portfolio and we’re here to assist you.  For those things that fall outside our expertise as property managers, we’ll put you in touch with trusted specialists who you can rely on.  Just let us know how we can help.

Dealing with a Drop in Rent

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shutterstock_244873261ResizedYou may have noticed some weakness in the Canberra rental market lately.

Not only are vacant properties renting for lower prices, but some tenants are insisting on lower rents when renewing their lease.

If you are looking at a drop in your rental income, here are some things to think about to help put it into perspective.

The market determines what the rent should be.

It’s all a matter of supply and demand and unfortunately rental prices do not consider how much rent you as the Landlord, need (or want) to cover your investment holding costs.  Whilst the market will ultimately determine the price, getting an experienced property manager to handle rent negotiations for you is beneficial.  Their knowledge of the current market and expert negotiation skills will ensure you receive the best rent possible for your property.

Less rent is still more than zero rent.

Sometimes lowering your rent to attract/ retain a tenant is a smart move.

For example, let’s say your property is available for rent at $320/ week. You decide not to accept an offer of $310/ week from a tenant who will move in right away. If your property is vacant for two weeks, you’re actually worse off in terms of annual rental income received, than if you’d accepted the lower rent straight away.

There’s also a tendency to advertise at a higher rent, with the intention to ‘wait and see’ before lowering it.  If you’ve already come to terms with idea that you may receive less rent this time, you might as well lower the rent now.  It can help to differentiate your property and minimize any vacancy.

The Landlord’s Club is doing exactly that, with the average time from being listed to rented for properties under management sitting at about half the current Canberra average of 40 days (Allhomes Property Market Index for Nov 2014).

It’s all ‘swings and roundabouts.’

Things go up and then they go down. And then they go back up again. Rent on your property may have fallen recently, but if you’ve had your property for a while, chances are you’ve received good rent in the past.  And chances are, those times will return.

Property investment is a long-term game.

This one can be hard to remember, particularly if holding costs have recently risen or you’ve had maintenance issues to deal with making cash flow tight.

It’s important to remember your underlying investment strategy, or why you purchased investment property in the first place.  We all need the regular rental income, but is it this, or capital growth in the property over time that you are after?