As the one paying the mortgage on a property worth hundreds of thousands of dollars, you want a tenant with some speciﬁc but simple qualities: they pay the rent, maintain the home, and stick around for a long time.
But tenants have a list of requirements too, and as the landlord entrusting one of your biggest assets to them, it’s in your best interests to meet their needs. That way you’re giving yourself the best chance of attracting brilliant tenants who consider your property home.
A tenant’s list of requirements generally looks like this:
•Proximity to major amenities, like schools, highways, train stations and shopping centres
•A clean, well-presented, well-maintained property that is comfortable to live in
•Appropriate rent and fair rent increases
•A property manager or landlord who communicates and listens to requests
Rather than crossing your fingers and popping a ‘for rent’ ad in the local paper, put some time, thought and money into attracting your ideal, happy tenants – and keeping them that way.
Choosing a location that attracts great people
Where your property is located will largely dictate who wants to live there, so it’s important to do your research on the rental market and speak to real estate agents about the types of renters in the area before you buy.
Buying on well-maintained streets or in complexes with access to infrastructure, and steering clear of trouble spots will boost your property’s attractiveness to quality tenants.
Keep in mind that different amenities are important to different demographics. For instance, suburban homes and duplexes near schools will entice families, who often make excellent long-term tenants because they’ll avoid pulling up roots too often. Dwellings near universities may draw students, which could mean a high turnover of tenants and long vacancies during holiday periods.
Real estate agent Kirsten Braun, from Tessa Residential in Brisbane, says fully furnished city apartments attract “corporate tenants, professional singles, and ﬂy-in ﬂy-out renters”, all of whom make excellent tenants.
“[It’s] the desirable lifestyle that these tenants are searching for: walking distance to CBD business districts, restaurants, public transport, amenities, shopping centres, universities and parks,” Braun says.
Before you sign any agreements, be sure to screen your potential tenants thoroughly first. Check their references, income streams and debt and ask why they are moving and how many people will be moving in. Rigorous screening is a crucial step to securing quality tenants.
Property management: the cornerstone of a happy tenant
The person you put in charge of your property plays a pivotal role, because the way they maintain the property and treat its tenants determines whether your property thrives or busts. To that end, you’ll need to decide whether to appoint a property manager, or become a landlord and manage the property yourself.
Ultimately, you’ll need to weigh up whether the cost savings of being a DIY landlord are worth the time you will spend maintaining the property, communicating with tenants and keeping up with rent increases, tenancy laws and insurances.
According to NSW Fair Trading, the average property manager will charge a letting fee (generally one week’s rent) and an ongoing percentage of the gross rent, which can be between 5% and 12%. They may also charge advertising costs and fees for tenancy agreements. Most property management expenses are tax deductible.
If you’re considering taking on the landlord duties, think carefully about whether you have the right temperament for the job. Sometimes you may have to be confrontational or say no to tenants, hold money from their deposit to cover damages, or even evict them. If that doesn’t sound like your cup of tea, appoint a property manager to handle it for you.
Keeping your tenants happy should be your first priority, since a high tenant turnover due to poor landlord skills can cost you far more than management fees in the long run.
Finding a skilled property manager
The property manager’s role as mediator between tenant and landlord is crucial, which is why you’ll need to invest some time in finding the right one.
An experienced manager can minimise problems and advise you when issues arise, and assist in finding an amenable solution for you and your tenant.
Veteran investor Ash Oz, director of Oz Property Portfolio and owner of 13 residential and commercial properties, has utilised property managers since buying her first asset in 1998.
“Ideally, it’s good if a property manager is an investor themselves,” says Oz. “Look for a manager who communicates well and keeps you in the loop. They should give you updates on the market and maximise the rent when it’s time for increases.”
It’s a good idea to look into the management agency’s marketing strategies and fees too, and measure them against competitors’ rates
When it comes time to find a new tenant, Oz says you should expect your property manager to put in the hard yards.
“They should make an effort to ring quality potential tenants to invite them to an inspection, and keep you in the loop with applications, open inspections and how many people attended.”
When it’s time to drop your property manager
If a property manager isn’t performing it can have disastrous repercussions, including loss of income from frequent vacancies and even court action by the tenants.
“I had managers who set open inspection times for two weeks after the property was vacated, and once I wasn’t even notified of a tenant vacating,” says Oz. She’s also had managers leave the front door unlocked after inspections and pay rent into someone else’s account.
There were warning signs, she explains, including a high turnover of tenants, which indicates ongoing tenant dissatisfaction.
“It might be time to shop around if your manager doesn’t update you on your property, doesn’t answer calls, and if you need to ask if there is potential for a rent increase,” Oz advises.
“They should be proactively coming to you with this information, rather than you chasing them.”
How to attract five-star tenants
Maintaining tenant happiness – and therefore tenants who stick around – is about a good relationship and communication between landlord, property manager and tenant, says property manager Mary Couros, director of Abode Property and Rentals Pty Ltd in Adelaide
The elements are simple, she explains. “Keep the property in shape and safe, be responsive, be accommodating – especially to
long-term tenants that have always been good to the property – show appreciation, and be respectful.”
Read on for some helpful hints for ensuring you land a tenant who ticks all the boxes, and then some.
WHEN TO RAISE THE RENT
1. Present a property tenants want to live in
•Stay up to date on the market. Jacinta Vear from Vear Property Management says a property manager should advise the owner of the current market conditions annually. “This will determine the amount of the increase, or whether to review again in six or 12 months,” says Vear. “On average, we increase rents $5 to $10 per week annually. However, occasionally $15 to $20 can be achieved.”
•Don’t risk losing tenants for an increase. Vear warns that issuing tenants with notice of a rental increase will likely cause them to look at comparison properties on the market, and they will move if they feel their rent is too high. “We advise owners that keeping a good tenant is preferred, rather than having them vacate for a small rental increase.”
•Raising the rent could cost you more. Owners with long-term tenants often tend to review the rent every second year, says Vear. If an increase in rent causes a tenant to vacate, “that means extra charges for the landlord for leasing fees, advertising and vacancy period between tenants”, explains Vear. “The cost of re-leasing the property can be far more than a $5 to $10 per week increase in the yearly income.”
Like attracts like, so if you want to fill your property with good tenants, make it a good property. A shabby yard, broken doors and threadbare carpet will not only affect your rental return, it will also deter the quality tenants you want.
“Advertising your property to a high standard is key for attracting the right tenants,” says Jacinta Vear, licensed estate agent and director of Vear Property Management in Melbourne.
“Consider addressing any DIY jobs you have been meaning to get done, add a fresh coat of paint where necessary, and try to declutter to make rooms appear larger.”
Bringing the property up to its highest standard makes maintenance easier, and means it looks fantastic in photos when it’s advertised. This brings in more tenant applications, which gives you a bigger pool of potential tenants to choose from.
2. Make your tenants long-term, happy ones
Rent increases are necessary, accidents will happen, and your tenants may request additional items in the house. Handling these situations is two-pronged: you need to keep tenants happy while weighing up the costs involved.
Couros says tenant requests generally fall into one of two categories: repairs or enhancements.
Repairs are not negotiable; if something in the property is broken, ﬁx it. In her experience, Couros says the most common repairs requested by tenants include plumbing and electrical issues, with requests for air conditioning coming in third. If you choose not to unblock a drain or repair a broken hot water system, you’ll have some frustrated tenants on your hands, who probably won’t stick around to sign the lease renewal.
HAPPY TENANTS WON’T STAY HAPPY IF YOU...
•Raise the rent too much or too often
•Take too long to make repairs
•Don’t listen to their requests
•Show up unannounced
•Schedule too many inspections
•Hire an inept property manager
•Are dishonest in your dealings
•Don’t maintain the property so it remains pleasant to live in
•Restrict their decisions on furniture, artwork and layout
•Become so friendly that the line between landlord and tenant becomes blurred
However, when requests are of a cosmetic nature, landlords will need to consider the cost. For example, a tenant may suddenly decide to request a front door screen, in which case the decision to provide it is the owner’s, says Couros.
“That also applies to landscaping, upgrading blinds and curtains because they are outdated, or changing the carpet due to the decor not being appealing, painting, or adding a roller door.”
If tenants choose to move on because you won’t fulfill cosmetic requests, they risk breaking their lease and are required to pay rent until a new tenant moves in.
“If the tenant breaks a lease because the landlord won’t change, repair or upgrade items in the property that inhibits their use, then depending on the severity, the tenant would only pay some break-lease costs or none at all,” Couros adds.
3. Keep your facilities and amenities modern
You may find that some additions are worth the expense, such as installing air conditioning. While this is not a maintenance issue, the cost to install a unit will likely be far less than the expense of replacing your tenant, and you’ll increase the desirability of your property.
Think of it this way: in addition to covering the mortgage during the vacancy period, a landlord who has to foot the bill for finding a new tenant also has to pay advertising costs and agency fees.
Fitting a new air conditioner might cost around $1,500 for the unit and installation. Assuming $400 rent, a vacancy period of four weeks, one week’s rent for agent fees and $200 in advertising costs, losing your tenants could put you out of pocket by $2,200. It’s important to respect a tenant’s wishes and carefully weigh up
each request, from both a practical perspective and with your return on investment in mind.
Can you afford to buy in this suburb? Find out how much you can borrow