The Australian Dream is every bit as much about becoming a property investor these days as it is owning your own home. And one often leads to the other, whether you build to live first and are now looking to add an investment property to the mix, or you’re considering rentvesting – building an investment property first while you rent elsewhere.
There are a lot of things to consider when becoming a first-time landlord. It’s a big step, but don’t worry. We have plenty of advice to keep you right.
Renting property is a business
The first thing to wrap your head around is that becoming a landlord is like starting a small business. Cash flow and profit margins matter.
Don’t forget to factor in outgoing costs likes property maintenance, insurance, body corporate and council rates that will all eat into your profits. Would you be able to cover mortgage repayments during periods without tenants? Will you be negative gearing or positive gearing your investment?
Pick your spot well
It’s not just about looking at rental rates wherever you choose to build. Check vacancy rates too, and make sure you go back a few years when you do. You want to be sure that there’s good demand in the local area.
Get the look right
Your property must stand out from the crowd for prospective renters. You might not opt for every option you’d get if building for yourself, but you still want it to be appealing. Simple things like painting, replacing carpets and getting a professional clean done go a long way without forking out too much.
Cross the Ts and dot the Is
You need to be across laws governing rights and responsibilities for both tenants and landlords. Read the Residential Tenancies Act. Your state Consumer Affairs website will offer a wealth of information. Make sure you have a signed rental contract before anyone moves in. Ensure you invest in landlord insurance.
Decide if you’re engaging a property manager or going it alone
As a first-timer, it makes a lot of sense to tap into the expertise of a professional property manager to look after your investment property for you. Indeed, they can help maximise your return, but it is another expense. If you decide to engage someone, ask around first. Good agents will have great word of mouth.
Choose the right tenant
Any landlord you talk to will tell you that a good tenant is worth their weight in gold. While it can be tempting to get someone in quick, failure to vet applicants properly can cause real headaches down the line. If they don’t look after your property that will incur more costs, and if they don’t stay long, you’ll have to start all over. The ideal tenant looks after the property like it’s their own home, pays rent on time every month and stays put for years.
Talk to their employers and previous landlords. You can also check their social media footprint to get a sense of how they conduct themselves.
Think about pets
Some states, including Victoria, protect the right to pet ownership. Advertising your rental property as pet-friendly can attract more applicants, though it might also put some people off. If pets are invited in with their owners, it makes sense to build a home that will hold up to increased wear and tear from our furry friends.
Take stock before you start
Before anyone moves in, walk around your property room-by-room and write up a condition report backed up by photographic evidence. This will help when it comes to looking at bond repayment when tenants do move out. Keep in mind that a basic level of wear and tear is to be expected over time. Do this yourself even if you choose a property manager. You must register bonds with the appropriate state body.
Respect is mutual
Be a responsive landlord. If you get a great tenant in, then do everything you can to keep them. When things do need fixing, it’s worth getting it done in a timely fashion and not cutting costs too much. Keep them happy, and you'll have a secure income. Inspections aren’t just about making sure the tenant is looking after the place. They are also about identifying necessary maintenance work. The more you put things off, the more expensive they become to fix later.
Stay safe
It is vitally important you protect the health and safety of your tenants. You need to make sure you have working smoke alarms and carbon monoxide detectors. Make sure things like vents are kept free and clear.
At the end of the day, you must remember this a business. And that means you might be entitled to deductions on certain expenses. It pays to get professional advice when it comes to tax time, and always keep the receipts.
