Finally, you’ve closed on your investment property. You’ve overcome the long process of visiting a property, offering a minimum offer, negotiating with sellers, agents, and solicitors/conveyancers, getting it accepted by the seller, getting a right-priced mortgage, completing legal processes, and getting ownership. So, what’s next? Closing on a rental property is exciting as it is an additional source of regular rental income, and it strengthens your real estate portfolio with property price appreciation. On the other hand, you need to be a conscious landlord to protect your financial and ownership interests. Wouldn’t you like to know the costly mistakes that a number of Australian investors commit unknowingly? In this blog, I will share my experience-based eleven tips to help you secure and maximize the return on investment in rental property besides having the ultimate experience of being the owner of a new property.
- Get Updates About Local Housing Regulations: Local bodies keep changing the housing regulations; you must be familiar with the latest relevant housing regulations and building codes to ensure that your property is compliant. For example, a particular building code may require your property to have certain features like smoke detectors, carbon monoxide detectors, wider doorways, designated parking spaces, or ramps. You should also be familiar with local landlord-tenant laws. Pro-tip: A legal professional practicing in the area may help you in this context.
- Have An Analytical Tour of Property: The objective of an analytical tour of the property is to verify the property’s condition before leaving it to new tenants. Conduct property analytics to check the current rental, potential for rental increment, requirements of appliances, need for furniture upgrade, condition of different parts, and inventory of other goods. Take photos or create videos of each room; these visual assets help you sell property.
- Resolve Identified Maintenance Issues: List the upgrading and maintenance requirements related to miscellaneous functionalities and facilities like drainage, gutters, plumbing, landscaping, garden décor, gas connection, fixtures, doors, electricity, heaters, aesthetic appeal, etc. If you address all such issues before letting it, you are more likely to get higher rent. Before letting tenants move in, address any needed repairs or maintenance issues.
- Prioritize the Repairs. You might come across many repair needs; set a priority for each need. As a landlord, you are responsible for ensuring that the property is up to code.
- Replace the Locks: Just after closing on your property, change all the locks because of security reasons. If the building has access control, you need to be familiar with maintenance clauses as well as you should change the codes for each task. Pro-tip: Re-keying the existing locks is a cost-saving option rather than replacing locks. Ensure to get copies of the new keys.
- Transfer Documents of Utilities to Your Name: Landlords pay for some of their rental property’s utilities like water, garbage disposal, gas, electricity, etc. Make sure the correct utilities transfer into your name and define it in the agreement. Pro-tip: You may need to set up a new schedule for meter readings and set up a new account. If there are outstanding utility bills, they must be settled by the seller.
- Prepare a Lease Agreement: It is a must to have a lease agreement for both you and the tenant. This binding document defines the rights and responsibilities of both. Pro-tip: Hire a professional buyers’ agent or ask your mortgage broker to arrange an experienced and dependable legal professional with knowledge of the latest norms and practices.
- Introduce Yourself to Existing Tenant: If your new rental property comes with an existing tenant, it’s important to develop a positive relationship with the existing tenant. You can introduce yourself in person to extend a warm welcome. Or, you can do this online by dispatching welcome letter, contact information, instructions, security deposit, etc. Pro-tip: It is important to resolve any issue reported by the tenant.
- Have Custom Property Management & Accounting Software: Bespoke property management software simplifies the management of real estate investment, rent collection, maintenance, follow-ups, etc. It helps you track property management expenses like upkeep, taxes, and repairs.
- Get a Landlord Insurance: Landlord insurance protects you from liabilities associated with rental property ownership. Its coverage scope is wider than a standard homeowner’s insurance policy. It provides protection against damage from natural disasters, malicious damage done by tenants, loss of income because of a coverable event, liability for injury that a tenant or a visitor suffers on the property, and more. Pro-tip: Always choose a reliable, reputed, and registered insurance agency that offers the desired protection under your permissible budget.
- Build a Network of Real Estate Professionals: Managing a rental property needs help from different real estate professionals and various contractors having different specializations. Pro-tip: In case you can’t manage the property personally, hire a property manager with a good reputation in the area.
By following all of the above mentioned steps, you’re less likely to face issues like financial loss, legal trouble, maintenance, delayed rent payment, etc. However, you can make your investment more secure and better growing by understanding the possibilities and risks.
➤Understanding The Possibilities & Risks That May Impact Your Rental Income: Make It Secure & Growing
●Volatility of the Australian rental market: The Australian rental market goes through periods of low and high demand. Sometimes, it becomes harder to find a quality tenant. If don’t get a tenant of your choice, your investment property may sit vacant for several weeks. Each day your property is vacant impacts cash flow, rental income, and ability to repay loans.
●Solution: Properties near high-demand locations like office complexes, hospitals, schools, and commercial areas hardly remain vacant. Prefer to offer longer contracts and reduced rates as an incentive. Consider the personal, professional, and financial profiles of tenants.
●Risk of having a bad tenant: Having no tenant is stressful for rental property investors but having bad tenants who damage your property, pay the rent late, stop paying rent without informing, or stop communication impacts your financial plans besides creating mental stress.
●Solution: Hire a real estate agent or property manager active in your locality; these professionals screen potential tenants by collecting personal, professional, and financial references. You may consider applying six monthly inspection clause. You may take out landlord insurance to cover property damage by the tenant or the financial losses because of default on rental payment.
Consumer Protection helps both landlords and tenants to resolve issues. Consumer Protection is aimed at resolving issues within 30 days. The common breaches for tenants are-
- Not paying rent on time
- Having a pet without permission
- Damaging the property
- Causing a nuisance
- Conducting illegal activity at the property
If you find this article useful then you can check out our in-depth articles on our website.Want to know how you could save thousands on your mortgage? Book a free chat with ASK Financials today!
