1. Fixed term vs periodic term
The only difference between a fixed term and a periodic agreement is the ending of the tenancy agreement time frames. A tenant on a periodic tenancy can provide two weeks written notice at any time and vacate the property in two weeks’ time. The lessor is required to provide 2 months written notice on a periodic or fixed term tenancy.
For you, as the investor, fixed term agreements are preferable so you have more control of when a tenant may be vacating and provides more time to be able to find a new prospective tenant for your property before the property is vacant.
If the tenant decides to break their fixed term agreement, the tenant pays for the letting commission plus has to pay rent until the new tenant is accepted and the new lease commences.
2. Landlord insurance
Landlord Protection Insurance is strongly recommended by Calibre Real Estate. Whilst every action is taken to secure suitable tenants for your investment; life changes such as job loss and marriage breakdown can sometimes lead to people acting outside their usual character. To protect your investment, and for a relatively low cost that may be a tax deduction; landlord insurance is a must for today’s investor. The key things to consider whilst selecting landlord insurance is check to see if the policy includes cover for accidental damage by tenant, loss of rent, contents cover, Clean up costs associated with illegal drug production flood and legal cover.
3. Repairs and maintenance
Dealing with repairs promptly is a vital component of maintaining the value of your property and achieving the best rental return. Prompt attention to legitimate repairs and maintenance can also be the difference between a disgruntled and happy tenant.
It is recommended that monies where possible be kept aside for maintenance and general upkeep of the property. This will ensure your property is maintained in accordance with legislative obligations and sound risk management. Well maintained properties generally attract quality tenants and commonly long term tenants also.
4. Marketing for a new tenant
Brisbane’s high rental demand season is generally January to February, this is when agencies are usually able to put a property on the internet and have applications within a week. For more unique properties or during the “off-season” periods it is imperative to make sure that your Property Manager is doing more than just placing an internet ad. To be able to attract more tenants in the shortest time frame, your agent needs to consider not only price and presentation, but also marketing. Marketing involves making sure you have quality photos that enhance your properties attributes, accompanied by good copywriting. When there is more supply than demand you also need to consider upgrading your internet advertising listing to a feature property to maximise exposure. Prospective tenants want information instantly, they want to know when they can inspect the property and all of the properties details. This is why interactive signboards at the property are beneficial. Interactive signboards can include QR Codes or “SMS keywords” that allow the tenant to access information and booking times from their mobile device instantaneously.
5. Water charges
If your investment property does not have an individual water meter, water charges cannot be passed onto to the tenant.
If your property has an individual water meter and is not water efficient, the lessor must pay for a reasonable amount of water. The Property Manager can obtain quotes from licensed plumbers to arrange for the property to become water efficient. Quotes generally range from $200 to $900 depending on the style of toilets and fixtures.
If your property has an individual water meter and is deemed water efficient, the lessor may pass on total water consumption charges to the tenant. It is strongly recommended that a plumber certificate or sufficient evidence is kept on file in the event the tenant disputes that the property is water efficient in compliance with the relevant legislation.
The process for water charging will depend on which criterion above your property fits.
At the start of the tenancy agreement, the lessor/agent and tenant should negotiate arrangements for water charging. The presence of water efficient devices should be noted on the Entry Condition Report (Form 1a).
6. Property management structure
Most agencies work Portfolio Management Structure which means there is only one point agent who is able to assistant at any given time.
As an investor, pod or team based Property Management allows maintain a single point of contact with a senior property manager knowing there is a team of qualified proeprty professionals working beside the Senior Property Manager to manage your investment.
Accountable relationships and constant support and advice available from our team of property professionals allows landlords to reap the benefits of our comprehensive knowledge, products and services which are adjustable to their desires and timeframes. It is for this reason, Calibre Real Estate has implemented this structure and have seen both landlords and tenants reap the benefits.
7. Routine inspections
Your agency should undertake a minimum 3 routine inspections a year. An agent will use their best judgment when undertaking a visual inspection of the property. The inspection reports will highlight any obvious or reported defects or maintenance and provide commentary as to how the tenant is maintaining the property. If any action is required, your agency should request your written instruction or act according to the management agreement instructions. For example if there is routine maintenance to be carried out such as built in roller doors not rolling properly, kitchen hinges need replacing due to age, doors getting jammed etc., the agency should carry out the required works on your behalf and appoint a suitable contractor to attend and advise you that this has occurred. If the tenant is required to undertake certain matters such as cleaning or yard maintenance, this should be actioned and followed up then reported to the lessor. Your Property Manager cannot instruct the tenant on how to live as such; they can however direct the tenant to carry out certain tasks if the situation is causing damage to the property.
8. Rent arrears procedure
Your Property manager should ensure all tenants sign a rental payment agreement form at the beginning of their lease and understand their rental payment obligations. Should your tenant fall into arrears, under the RTRA Act, action can only be taken against a tenant when they are seven clear days behind in their rent payments. Best practice for an agency is that they contact the tenant prior to this time and advise them of the rent payment being overdue. Section 280 allows your agent, on your behalf, to serve a breach notice to the tenant on the 8th day of arrears. Under legislation the tenant is then given the allowed remedy period of 7 days to pay the rent owing. They should then advise you promptly if rent defaults occur and keep you informed of the developments until there is an outcome.
Debbie Palmer of Leased magazine states:
“It is your [property manager’s] duty of care to monitor arrears and issue notices promptly every day. Failure to issue notices promptly can cause the owner financial loss if the tenant does not pay.”
Below is a table demonstrating the recommended action taken over a 30 day period.
9. Adding value
There are things you can do to increase the value of the property while also increasing the yield. Whether you are targeting a niche market or are throwing in a few extras, there are many creative ways landlords can boost their rental yields. These bonus trimmings like adding a car space, dishwasher or air-conditioning can often be a make or break for potential tenants. Although there is a cost to implement these additions means you are able to charge a up to $95 more each week, adding up to almost $5000 a year in extra rental yield.
In terms of a mid-term investment to increase your rental return a 5kW solar panel system that generates enough power to the property and a little more to go back into the grid can be installed for around $5000. Solar panels can allow you to charge an extra $20 a week rent as the tenant won’t be paying any power bills. The best part is you usually have your money back with-in a five period from the installation date.
Presentation can also be an efficient way to achieve the best possible price, so adding value to a property can be as simple as replacing blinds/ curtains, new carpet, paint touch up or even spending a little time tiding up the yard.
10. Property tax depreciation
“As a building gets older and items within in deteriorate they depreciate in value. The ATO allows property investors to claim deductions relating to the wear and tear on the building and its fixtures and fittings. Such deductions can be claimed by any owner of an income producing property; including residential properties. In short, depreciation reduces the amount of tax investors pay.
Maximising a depreciation claim on any building requires a distinctive combination of construction costing skills and experience, combined with an intimate knowledge of the Income Tax Assessment Act 1997. Quantity Surveyors are recognised by the ATO under TR 97/25 as appropriately qualified to estimate the construction costs of a building for tax purposes.
Beer, B. (2013, Spring ). Help to Educate Property Investors About Depreciation. Leased1, 12-14.