Tips for the first time landlord
Know your numbers
There can be several different motives behind property investment and each investor’s own financial position and market outlook will be specific for their needs. There’s no set formula or ‘one-size-fits-all’ approach to property investment, but regardless, it’s important to understand a rental property’s income and expenses to establish profitability.
We offer a free rental appraisal for your property, which offers an estimate of the market rental based on what other properties are achieving in your area. This in simple terms is your potential gross income before expenditure.
There is a long list of fixed and floating expenses which affect residential rental property. Some of the more common expenses include the following:
Mortgage Repayments
This will be specific to your own personal situation.
Rates
Accessible via your local council website and after mortgage repayments can often be one of your biggest expenses.
Water Rates
These are recoverable in most instances from the tenant in addition to the rent.
Insurance
This will vary depending on the extent of cover and level of excess. Please consult your advisor.
Repairs & Maintenance
It is a good idea to put away between 5-15% of the annual rental income as a ‘rainy-day’ fund. This is a guide only and will be relative to the age, size, quality, and condition of your property. Some older houses for instance will have a much greater potential of incurring cost, as opposed to new build properties.
Property Management Fee
Standard Fee of 8.0% plus GST.
Letting Fee
Equivalent to one (1) weeks rent plus GST.
Vacancy
While we work to keep your property fully occupied, there is every chance of vacancy. Unforeseen circumstances such as changes in the property market, a slowdown in demand from tenants, increase in competition of available properties, or getting caught up in delays from tenants moving between properties, among other possibilities. We suggest allowing for an expectation of between 2-4 weeks annually, to be on the safe side.
Accountant fees
This will be case by case but is a consideration for most investors.
Methamphetamine Testing
We would encourage testing prior to and in-between tenancies. The cost of this service is approximately $200 plus GST per test, and we can arrange this on your behalf. It’s also important to check if this is a requirement of your insurance policy.
Healthy Homes Report
These cost approximately $200 plus GST and should be completed on every rental property. We can arrange this on your behalf prior to or during a tenancy.
Get landlord insurance
In our opinion, this should be a non-negotiable
Accidents and damage can and often will happen, also there’s every possibility of tenant default and loss of rental income. By having appropriate cover in place, you will minimise your risk exposure and alleviate the stress should the worst happen.
Your insurance policy will often set out landlord obligations which will help you protect your investment and reduce the risk of something untoward happening.
If you’re about to purchase a rental, then do your due diligence and ask the owner or the agent if the property has been tested for drug contamination and ask to see the results.
Finally, make sure you have the right insurance for your circumstances. Review your policy and consider, am I covered for things such as loss of rent, natural disasters, if a tenant vacates without notice, is evicted, or contaminates your rental property through the use, consumption, storage or manufacturing of illegal drugs.
We are not qualified insurance advisors, so suggest talking with your providers to make sure you have adequate cover in place.
Healthy Homes
Ensure your property is compliant!
The Healthy Homes Standards and the RTA Amendments are not a guideline, they are law. Failure to comply will result in punishment. Ignorance is not an excuse.
A Healthy Homes Report costs approximately $200 plus GST and should be completed on every rental property regardless of its age or condition. Ideally completed prior to the start of the tenancy so that any upgrading or repairs might be sorted promptly and with little disturbance to tenants.
The Landlords Collective have been given the ‘special rate’ above from our preferred supplier and we can arrange a report to be completed on your behalf.