MANY PEOPLE think buying a quality investment property is the hard part of the process when building wealth through real estate – but that’s only the first step. Managing your investment effectively for maximum profits (and with minimal stress!) is phase two, and it requires a strategy and approach all of its own.
Being a landlord is rarely a ‘set and forget’ proposition, even when you have a professional and experienced property manager in place. You still need to monitor the market, keep abreast of changing trends and regulations, and liaise closely with your property manager to ensure they’re performing their duties in the best interests of both you and your tenant.
For the best possible chance of a smooth journey, follow these tips.
BEFORE YOU BUY
1. Call prospective property managers
Actually speaking to local property managers in the area you wish to invest in will help you work out what types of properties are in highest demand so that you can try to tailor your property investment to suit the market.
2. Look at vacancy rates
Check the vacancy rates for the suburb you're investing in, too. A vacancy rate lower than 3% indicates a strong, robust rental market where you won't have to wait too long for a new renter to move in when the previous tenant moves out.
3. Dig deeper
When researching vacancy rates, be sure to look at the data for the last few years, not just the last few months, so you can get an idea of long-term trends. There are online resources that can give you a comparative view of rates across a period of time.
4. Interview as many property managers as you can
Don’t limit yourself to talking to just one or two property managers – try to get as many opinions as you can so that you have a well-rounded perspective of what the market looks like.
Being a landlord is rarely a ‘set and forget’ proposition, even when you have a professional and experienced property manager in place
ONCE YOU'VE BOUGHT THE PROPERTY
5. Screen tenants carefully
Even if you’re hiring a property manager to interview tenants on your behalf, you need to be very stringent with your rental criteria to ensure you place the best-quality people in your property. As well as getting details of their employment history and previous rental experiences, ask questions about their long-term intentions – do they only want to stick around for six months, or are they in it for the long haul?
6. Get landlord insurance
This is one expense you shouldn’t scrimp on, as a good insurance policy will cover you in the event of problems like property damage, burglary and even defaults on rent payments.
7. Don’t overspend onrenovations
On one hand, you want to present the property in its best possible light to draw the attention of high-quality potential tenants who are prepared to pay a premium. But you should remember that property investment is ultimately about the returns you will earn; don’t overcapitalise on expensive upgrades and renovations when cheerful but more affordable alternatives could do the trick.
8. Go online
The best way to find tenants is to go where they’re looking. While there are old-school methods like newspaper ads, the internet is the most common marketplace these days. This is where a good property manager comes in handy, as they can help you get your listing on the more established websites.
9. Market wisely
To market your rental effectively, get to know what a tenant wants to see in a listing. Study other listings to see what information they highlight, like nearby amenities and the most attractive aspects of the location. (Is the home near the beach, a cafe strip or schools?) And of course great pictures are worth thousands of words!
10. Understand the different types of tenant agreements
There are two different types of tenancies: fixed and periodic. Fixed tenancies encompass a set period of time, while periodic tenancies can be adjusted monthly or even weekly. The right type of tenancy will depend on your circumstances and needs.
11. Use tech to your advantage
Technological advancements make property management more convenient and streamlined. Some websites also enable you to save soft copies of important documents and tenant details so you can access them easily.
AS A LANDLORD
12. Collect the rental bond
The rental bond is an amount, generally the equivalent of a month’s rent, that tenants pay when they first rent a property. You’ll collect it before the tenant moves in and lodge it with the relevant authority in your state or territory; it serves as protection in the event of any lease agreement violations.
13. Reward good tenants
Great tenants are not necessarily hard to come by, but they are worth their weight in gold – so do what you can to have them stay on as long as possible. Some ways you can make your renters happy include attending to repairs promptly, giving reasonable notice of any rental increase, and giving them a token of appreciation when they renew their lease, or at Christmas.
14. Respond swiftly to requests
To get (and keep) a good tenant, it’s ideal if you can present a home that runs so smoothly it’s hard for them to imagine living anywhere else. If a tenant reports that something is broken, don’t wait to fix it; by nipping it in the bud early, you’ll keep your tenant happy, and the maintenance will benefit your property in the long run.
Great tenants are not necessarily hard to come by, but they are worth their weight in gold – so do what you can to have them stay on as long as possible
15. Manage your property manager
A property manager’s job is to help you oversee the day-to-day needs of your rental property, but they don’t always do their job attentively. Be proactive by asking for regular reports and requesting updates on market trends if they’re not providing this information already.
16. Keep an eye on the books
Aside from making sure the rent gets paid every month, you should check the rental statements to ensure that all expenses have been taken into account. That way you don’t get an unwelcome shock when these add up in the long run, and you’ll have all of the information you need at tax time.
17. Conduct regular inspections
Aside from getting regular reports from either your property manager or your tenant, you should aim to do your own inspections from time to time. You can join your property manager once or twice a year for an inspection, being mindful that you can’t just pop in on a tenant; legally, you must give them notice before showing up.
18. Make the lease agreement foolproof
Be specific about clauses, especially those that spell out the payment terms, how the tenant is expected to maintain the property at their end, and the consequences for violating the agreement. These will generally be guided by the laws and regulations in your state or territory.
19. Be aware of tax benefits and liabilities
There are many tax deductions you can claim while renting out your property, such as depreciation, maintenance expenses and mortgage interest. It’s a good idea to work with an accountant to ensure you’re maximising your tax benefits and minimising your liabilities.
20. Take a stand on pets
There are positives and negatives to allowing pets in a rental property. This concession can bring a lot of tenants to your door; many of them are responsible and will be looking for long-term leases. However, pets can also cause damage, no matter how careful a tenant is, so this is question you need to weigh up carefully, being sure not to break any relevant laws.
21. Upgrade and update
While you’d like to keep good tenants forever, the truth is that you most likely won’t. So you need to always keep a finger on the pulse – when a tenant moves out, evaluate the property and see where you can improve to bring in more prospective tenants.
22. Keep it professional
It’s good to have a pleasant relationship with your tenant, but friendship should never get in the way of doing business. If your tenant is late in paying rent or reporting damage way too often, you need to be able to put your foot down. This is another reason why property managers are so useful, as they can put space between you as the landlord and your tenant.
23. Increase rent as the market dictates
As the property market shifts, you need to be able to adjust rents accordingly. Keep an eye on what’s happening in your local market so that you can increase rents based on the current trends.
24. Be accessible
Part of owning a property is about being available. While you don’t need to be ‘on call’ 24/7, you do need to be reachable by email and phone, and ready to respond to any requests from your property manager.
25. Get renewal procedures started early
Be mindful of when the tenant lease is about to expire, and get a head start on renewing it, making initial enquiries at least three months before it’s up. That way you have enough time to find a new tenant if your current one vacates.
If your tenant is late in paying rent or reporting damage way too often, you need to be able to put your foot down
IF PROBLEMS ARISE
26. Be prepared for eviction
The possibility of having to evict a tenant is an unfortunate reality landlords face. It’s smart to be aware of what constitutes grounds for eviction, and the steps you need to take, before a situation becomes tricky and emotions come into play.
27. Be fair and reasonable
While eviction is a necessary course of action for tenants that you feel are irredeemable, it’s a very time-consuming and complicated process that requires a lot of paperwork and interaction with authorities. Consult regularly with your property manager if you feel like you’re heading down this path, to see if there are alternative ways to manage the situation.
28. Have a backup
If you’re managing your property yourself, you may not always be able to act at a moment’s notice. It’s a good idea to have a trusted friend or family member who can step in on your behalf should the tenant need your assistance or if issues arise when you’re unavailable.
29. Have an emergency fund
Have a financial Plan B in place to maintain the property and cover the mortgage throughout any periods of vacancy. You might want to set aside some of the rental income you’re receiving towards a reserve fund so you can be proactive about this.
30. Get everything in writing
The rental contract isn’t the only thing that should be inked – documents such as rent receipts, inspection notices and reminders should be in writing so you have proof if a complaint is lodged.
31. Seek advice from experts
If you’re set on managing, your own property, the Real Estate Institutes in each state or territory either offer or recommend courses that can help you prepare for the basics of managing a rental. But no landlord is an island. You’ll still need help from experts such as accountants, lawyers, and others with experience in property management.