10 tips for first time landlords
Being a landlord is a big achievement in Australia with only 7.9% of Australians owning an investment property.
As daunting as it is for first time property investors, there are certain things you need to know about property investing that will set you up for great returns and stress free tenancies well into the future.
With over 10 years experience working closely with property investors and owning an investment property myself, there are a number of lessons I’ve learned.
Here are 10 tips to help set yourself up as an expert landlord from day one.
1. Maximise your rental return
Owning an investment property is like owning a business and your rent is your revenue. Focus on increasing your rental returns and ensuring your rents are paid on time. You will have expenses (mortgage repayments, council rates, insurance, maintenance etc.) so it’s important to make sure that sloppy rental payments don’t get in the way of your investment property cash flow.
Most tenants will do the right thing and pay their rent on time but you need to be on top of the when they don’t and be willing to start the eviction process if the behaviour continues.
2. Thorough tenancy checks
Your tenant can either make or break your investment. A good tenant will ensure a smooth, stress free tenancy but a bad one can be extremely costly and time consuming.
Take the time to check each applicant’s rental history, employment history and don’t be afraid to get online and check social media for any extra clues into who you’re about to let live in your property.
A history of poor rental payments or damaging property is unlikely to change so be vary weary when that’s the feedback you get from previous agents.
Also be careful of tenants using friends or family members as their agent or employer.
3. Consider the Pro’s and Con’s of accepting pets
Is your property pet friendly? I have some clients who are totally against leasing to pet owners and those who are happy to. There is no right or wrong and definitely pro’s and con’s to each.
Demand for pet friendly properties is quite high
Pet owners tend to stay at properties for longer
Most leases will include specific clauses to include any damage caused by pets
You’re opening the pool of prospective tenants up significantly which can reduce your vacancy periods.
Pets can cause damage to properties – especially to flooring and gardens
Pet friendly accommodation could turn off applicants with pet allergies
Some pet odours can be very difficult to remove
4. Look at other income opportunities
Most landlords will offer their property up for a long term lease once purchasing and then forget about the property for the length of the lease. Depending on how hands on you want to be, there are some other options:
Short term lease – AirBNB
Long term furnished property
These options may not suit all investors or all properties for that matter but they’re worth investigating or speaking to your agent about.
5. Know the Law
Understanding your rights and responsibilities as a landlord are essential to ensure you don’t land yourself in a very costly and potentially embarrassing situation. Consumer Affairs provides a great breakdown of the responsibilities of tenants, landlords and agents and is a great starting place for first time landlords.
If you’re going to manage the property yourself, it’s important to know what you can and can’t do and more importantly what to do when things go bad.
6. Present your property to attract the tenant you want
Good properties will attract good tenants. I don’t mean good as in expensive but well maintained, clean and well presented.
If you want to attract tenants who’ll keep your property clean and well maintained then it should be presented as clean and well maintained. Touching up paint, giving the property a good clean and removing and odours will go a long way in finding good quality tenants. Not only will you attract a better calibre of tenant but your property will stand out in a competitive market.
7. Don’t over-capitalise
I’ve seen this happen so often, I even named it – “The Block Effect”.
It’s so easy over spend when renovating your investment property but it’s important to make sure you renovate with your return in mind. Finding the balance between not skimping and not over spending is difficult. The trick is to skimp where you can but spend your money where you’ll get the greatest return.
My strategy with my clients is to look at what’s currently leasing in the suburb around the rental price they’d like to achieve after the renovation. This helps identify how much they need to spend and what parts of the house require the attention to get the returns they want. This lets us weigh up the cost vs return pretty easily and justify every dollar being spent.
8. Have a great team
“If you think it’s expensive to hire a professional to do the job, wait until you hire an amateur”
Spend the time on finding a good mortgage broker, accountant and property manager. A good team will add value to you instantly with hints, tips and professional advice.
9. Good marketing is essential
You can’t lease your property if nobody knows about it – so having a good marketing plan for your property will stop you from having long and costly vacancy periods and also help you attract lots of good tenants.
Invest in high resolution professional photos and good advertising packages on real estate portals to give yourself the best chance of leasing your property quickly.
10. Regular inspections are a must
Most landlords who manage their own properties feel uncomfortable with conducting a routine inspection of their property. It can feel like you’re entering someone’s private place and intruding but it’s essential to ensure your investment property is being looked after and no maintenance is going unnoticed.
Make sure you inspect the property every 6 months and keep an eye out for any building damage (cracks in walls, squeaky floorboards, building movement), excessive wear and tear or tenants who aren’t looking after your property.
You should keep the condition of the property in mind when considering extending the tenants lease or increasing their rent in the future.