Johnson Real Estate Landlord Tips.
Property can be an outstanding investment, but as with any investment it is not without risk. This booklet contains useful tips for Landlords at all levels of experience. They are presented in no particular order.
Remember, you are exchanging accommodation for money. Don’t get caught up in tearful tenant stories. When tenants stop paying rent, it’s hard to get it back.
Never trust a guaranteed rent. $650 a week for twelve months quickly becomes $500 a week in month thirteen, when the guarantee expires – the original seller having made up the difference. Tenants will only pay market rent.
A good property manager may cost 1% more (less than $5 a week), but it’s worth every cent when a bad agent may cost you thousands.
A cheap agent is often a poor agent. Chances are the cheap agency is understaffed. Even with modern technology, understaffed agencies provide poor service to both landlords and tenants.
Professionally clean your investment property for the initial lease. Future tenants are obligated to return it in the same condition upon exit.
Have professional pest control completed the first time you rent out a property.
Smoke alarms are required by law. Use a smoke alarm contractor to ensure you meet current legislation. If there is a fire, you will be forever thankful you did.
Check your agent is not loading maintenance costs. What the job costs is what you should pay. Check your invoices against your agent’s statement.
Make sure you have landlord protection insurance.
Real estate businesses often sell their rent rolls. If this happens to you, the first you will know about it is the letter from your new agency. It is perfectly legal and acceptable; the same terms and conditions apply to your new agent as to the old. Hold them to it.
Allow for two weeks of vacancy per year when doing the numbers on a potential property.
Price your property to the market and get the pick of tenants. Although it may seem counterintuitive, a higher rent attracts poor tenants. A market priced property always attracts the pick of tenants.
Have your agent use professional photography. It’s usually as little as $120 and worth every cent.
Do regular maintenance. A well-kept property costs less in the long run.
When hiring an agent, ask for the staff-toproperty ratio. A ratio much over 80 properties per staff member indicates the agency is understaffed, regardless of technological improvements. Understaffing leads to poor service and financial loss.
Before hiring an agent, speak to several of their current landlords. Pick them yourself randomly from the agent’s client list.
Ensure your agent regularly inspects your property. A lot can happen in a short time. Many agents let their routine inspections lapse; this is asking for trouble.
Accompany your agent on at least one inspection. You should see your investment property every year.
When looking for a tenant, don’t pay any costs for marketing. With online marketing, a good tenant can be found with minimal cost, a cost the agent should bear.
Keys should never be handed out to potential tenants. Potential tenants should always be accompanied by an agent.
Pick an agent who promptly returns your calls. A same-day call-back is a minimum standard to expect.
Have your gutters cleaned and trees trimmed annually.
Don’t allow tenants to smoke inside. The smell of smoke can only be removed by repainting and re-carpeting.
If there is a pool, have it regularly serviced. Add a few dollars to the rent to help cover the cost.
Possibly the worst way to choose an agent is by giving it to multiple agents and promising management to the first who finds a tenant. This encourages an agent to overlook potential problems with tenants to win the business. Disaster looms.
Your property management agreement with an agent is an asset to their business. Make sure you are receiving the service that reflects the asset.
Remember, people judge properties the same as they judge people. First impressions count.
‘Negative gearing’ –careful, there’s a clue in the name.
Remember the underestimate / overestimate theory. Always underestimate your income and overestimate your outgoings. Instead of bill shock, you’ll get a pleasant surprise when the accounts are done.
Check your landlord protection insurance includes accidental damage – not just malicious damage.
After purchasing a new investment, allow surplus funds for go-wrongs. It’s amazing how many owners need new hot water systems within months. Houses seem to know they have a new owner!
Trust is imperative with your property manager. Do you instinctively trust yours to do the right thing?
If your property is vacant after 7 days, reduce the rental price. Instant feedback on price is now available via online marketing.
If your property is not renting, reduce the rent by $20 a week. One vacant week at $500 is equivalent to renting the property at $480 per week for 6 months.
It doesn’t pay to keep your property vacant for longer than is necessary.
When considering selling an investment property, current legislation regarding notice periods should be considered.
Over the long term, it’s nice to have an investment in bricks and mortar.
Homes are difficult to sell with bad tenants in place. If possible, wait, move the tenant on and then spend a small amount and some elbow grease cleaning up. It will help your sale greatly.
Be careful when taking advice from financial planners. They often have products to sell and receive trailing commissions.
Ensure your agent includes photos in their routine reports.
If you decide to rent to friends or relatives, consider using an agent. If something goes wrong, it’s nice to have a middle person to deal with. Good friends don’t always make good tenants.
Focus on the long term when investing in property.
Before purchasing an investment property, get good accounting advice regarding ownership structures. It can be expensive to change.
A good property is an investment, not a speculation. Beware the booming market – invest for the long term.
When you start investing in property, ensure your will is up to date.
Noel Whittaker says, “The golden rule is that you always invest on the strength of the investment alone –any tax benefits that go with it should be regarded as the icing on the cake.”
After you have chosen an agent, let them do their job. If you are uncomfortable with that, then you have chosen the wrong agent.
Remember, the agent works for you, the owner. They should always represent your best interests. After all, you’re the one paying them.
Beware of hidden costs in an agency’s agreement. The percentage for management may be cheaper, but overall they may be dearer.
Check out the agent’s office. Does it seem organised and efficient? Good real estate offices hum, they don’t appear hectic.
If you select the wrong agent, you may not know it for years. Poor agents don’t reveal their true colours until a poor tenant tests them.
Tenants get lots of free advice and information. Make sure you also get good advice and information from the agent you are paying.
Got a good tenant? Then take it easy on the rent increases. Long-run returns are far better with stable, long-term tenants looking after your property.
If you are selling with a tenant in place, offer them compensation to keep the property neat and tidy and to ensure they allow easy access for inspections.
Don’t sign a management agreement with an agency that has a termination period of longer than 30 days.
Make sure the agent puts up a sign at the property to market for tenants. It is a silent salesperson, on duty 24 hours a day. Neighbours may know of someone. Many prospective tenants still drive around the area.
Have a tax depreciation schedule done. This often makes a significant difference to your tax obligations at the end of the year.
Get a building inspection on every property you purchase. Look for maintenance issues and structural defects.
Pest inspections are essential on every property you buy. If a property has termites, it’s not the end of the world. Many areas have active termite populations. Termites can usually be killed off and repairs done at an affordable price. Put a barrier treatment in place, and you will have the safest house on the street. Negotiate with the current owner to help.
After buying an investment property, don’t automatically give management to the agent you buy from. Check their credentials thoroughly. If in doubt, shop around.
Understand why you are buying an investment property: for capital growth, return, or development.
Buying an investment property for short term capital growth? It’s more like a speculation than an investment. Be careful.
Don’t be afraid to offer full price for a property if the numbers stack up. If the market is moving quickly, wanting to be the best negotiator may cost you the property.
Change agents if your property manager doesn’t return calls.
Get everything in writing with your property manager. Email is sufficient.
Take the time to select the right tenant, not the first tenant.
Potential tenants should always be checked on one of the tenant databases: For example - TICA.
Got a great tenant? Buy them a Christmas hamper and have it delivered. Everyone likes to be appreciated.
When employing an agent to manage a property, do your best to meet them in person.
Ask your agent to check out the car a potential tenant drives. It doesn’t have to be expensive, just well maintained.
Bad tenants cost landlords thousands of dollars in lost rent and repairs every day. Select a tenant with care.
Never buy an investment property based on current government legislation. Governments change and so do the rules. Buy an investment property because it’s the right deal for you.
Don’t spend money advertising for a tenant in the newspaper. The Internet will do the job.
As Noel Whittaker says, ‘Buy in gloom, sell in boom’.
When selling an investment property, remember, it can’t think. The property doesn’t know what you paid or what you need. It is worth market value. Market value is simply the price where there are buyers for the property.
Be careful of a previous agent’s references for tenants. There is a chance they want to move them on. All applications should have multiple checkpoints that are cross-referenced.
Before hiring an agent, confirm you won’t be held to the management agreement if they can’t rent the property. Simple rule –no tenant, no notice required.
There are lots of property management agencies, just not many good ones.
If you discover your property manager has lied to you, terminate their services immediately.
Check your monthly statement carefully. Ask your agent for clarification if needed. Investments can look attractive with a high gross return. It’s best to check that the numbers work on the net return also.
What’s the difference between a maintenance expense and a capital expense? Maintenance expenses can be immediately claimed against income. Capital expenses may be depreciated over time. Make the decision WHEN you want to sell an investment property. Don’t leave it until you HAVE to sell.
Choose a good agency to manage your property, not a good individual. Even good property managers shift jobs. If you choose an individual, there is no guarantee they will be looking after your property over the long term. Choose an excellent agency and there will be continuity for you and the tenant.
Investigate thoroughly all body corporate information and costs if buying in a strata title complex. Also, check for pending legal matters.
Buying off the plan? Make sure the numbers stack up on current valuations. If the deal relies on capital growth, the purchase becomes a speculation rather than an investment. That’s fine, as long as you know the difference.
When selling, don’t automatically give the listing to the managing agent. The best property managers often make poor sales teams.
Organise your own insurance.
Don’t believe the myth of house prices doubling every seven years. The average house price in Brisbane in 1973 was $17,500. If prices had doubled every seven years, in 2022 the average price would have been $2,240,000, whereas in reality, it is around $950,000.
Every cent counts when investing. One of the hidden advantages of an agent is that all expenses and outgoings are automatically recorded for your tax purposes.
Residential property management is governed by various state government acts and regulations. The benefit of a good agent is that they know and understand the legislation and will advise you accordingly.
Remember, all the agency’s costs are tax deductible.
The more you learn, the more you earn. Keep studying and learning the skills of property investment. As with any endeavour, you will become better at it. Knowledge is power in property investment. You can never do too much research.
Johnson Real Estate
phone: (07) 3007 7777
reception@johnsonre.com.au
www.johnsonre.com.au