Top Tips for First-Time Landlords
You may have just purchased your investment property or are renting out your property for the first time. Getting on the property ladder is an achievement, but it is a long and tricky ladder. As a first-time landlord, you must learn your legal obligations, conduct tenant screening, manage rental funds, and more.
However, if you are successful, you can make the most out of your rental property. After all, it has the potential to help you achieve your financial and lifestyle goals!
Take a Long-Term View With Your Investment
As with any financial investment, you need to take a long-term view when investing in property as holding onto your property is a proven wealth-creation strategy. The value of property appreciates in the long term, which is why it is the preferred collateral by banks.
Taking a long-term view with property investing also smooths out market volatility or fluctuations that occur in any market regularly and provides more time for the capital to appreciate.
It’s evident that most landlords focus on the long-term performance view of their portfolios. They do not fixate on short-term profit or sell their properties at the first hike in real estate prices, and you should do the same.
Take a Holistic and Proactive Approach
Most tenants appreciate a landlord who is proactive when it comes to their rental property. Instead of waiting until a lease contract is about to expire, a proactive measure is to set calendar events two-three months beforehand. Then, assess the market; up-to-date information will help you make the right decisions, capitalising on hidden opportunities. Additionally, being proactive helps you retain good tenants.
Therefore, always conduct proactive and routine maintenance measures rather than merely making urgent repairs. A holistic approach involves not only increasing cash flow but also reducing expenditure, which can be accomplished via budget-friendly, medium-term maintenance plans
Taking a holistic approach also means also factoring in the right debt instruments and ensuring the right investment property finance solutions are in place to achieve long-term objectives.
Focus On Maximising Rental Return
An investment property has the potential to bring in excellent earnings, but how do you maximise it?
For one, you should be aware of any expenses you can claim through the Australian Taxation Office (ATO), such as water service charges, council rates, and capital improvements against tax. Also, decide on the right rental price, as it is the main cash flow you’ll get from your investment property.
Think of rent as your revenue. You should always keep an eye on market rent prices in the area. After all, overcharging means vacancies, and undercharging means lost earnings. See below for why regular rental appraisals are so important. Also, be strict about when tenants pay rent to protect your investment.
Understand the Relevant Tenancy Laws and Regulations in Western Australia
As a private landlord, you should understand tenancy laws in Western Australia, acquainting yourself with your rights and responsibilities towards tenants. They concern property advertising, rent arrears, rental agreement terms, rent increases, security bonds, routine inspections, notices, privacy and security, maintenance obligations, health measures, and more.
An excellent source is the Residential Tenancy Act 1987 (RTA). Administered by the Western Australia Department of Consumer and Employment Protection and a Magistrates Court, the state-specific act will prevent you from breaking laws.
Pro Tip: If you hire a property manager, they should similarly fully understand the relevant residential tenancies regulations.
Always Make Sure There Is a Rental Agreement
To professionally manage a rental property, you need to have a written lease agreement with the signatures of both parties and the tenant agreements documented.
Documentation helps you communicate your expectations and protect yourself with proof of its terms if needed. Not to mention, a solid tenancy agreement promotes a good landlord-tenant relationship.
Make sure that the rental agreement follows state-specific regulations. Also, it should be detailed, including policies about landlord availability hours, strata scheme by-laws, parking rules, rent fees, pet ownership, security deposits, special conditions to protect your asset, and more.
Pro Tip: If you hire a property manager, they will look after agreements and documentation for you.
Make Sure You Don’t Overcapitalise
New landlords tend to overspend when renovating rental properties and struggle to balance skimping and overcapitalisation. The key to not falling trap to this dilemma is to ask yourself if a particular renovation will translate into a return.
This way, you will know where to invest and where to skip renovations. Then, determine your budget for renovations, spend money on renovations that will increase the property value, and get the best return on your investment.
Pro Tip: If you hire a property manager, they guide you through the best improvements for return, as part of their service.
Consider Protecting Your Investment With Landlord Insurance
Landlord insurance can help protect your investment property and rental income by covering events that may evoke a loss to the investor/landlord. That may include rent loss, rent default, accidental and intentional damage by tenants, damage due to natural events (including floods and storms), theft of household items, and tenant lawsuits.
Typically, a standard building insurance or tenancy bond does not cover those risks, which is why you will benefit from specialist landlord insurance.
Choose the appropriate landlord insurance policy for your own properties, whether you have furnished or unfurnished houses/apartments. The coverage type also depends on the lease term (short-term or fixed-term). Naturally, the involved risks in each case are different, and the landlord insurance should cover them.
Understand the Importance of Finding the Right Tenants
If you attract good tenants, they will pay rent on time and in full and keep the property in the same state they found. Accordingly, you will enjoy stress-free tenancies without wasting time or money.
To attract them, make sure to keep responsible tenants happy by addressing their concerns about the property quickly and being reasonable about rent increases.
The key to finding responsible tenants is conducting a thorough tenant screening process to evaluate their rental application. The applicant’s rental history, employment history, lack of criminal history, and credit report will tell you if they would make a good tenant. You can even check social media to better understand your prospective tenants.
Pro Tip: If you hire the right property manager for you and your circumstances, they will ensure the leasing strategy builds tenant prospect interest on volume to secure the right tenants for your investment property.
Ensure You Have Regular Inspections
Most landlords, especially new ones, dread conducting routine inspections as they do not want to be overbearing or invasive. However, these inspections ensure that your tenants are taking care of the premise and uncover any maintenance required.
Refer to your local legislation to understand its regulations and inspect your property every three to six months.
Look for building damage (such as peeling paint, water ingress, creaking floorboards, and so on), premature wear and tear, and damage due to misuse. This information will help you decide if you want to extend these tenants’ leases and budget for maintenance.
Pro Tip: Your property manager will ensure your investment property is regularly and proactively inspected.
Consider the Pros and Cons of Allowing Pets
One of our tips for landlords includes deciding whether pets are allowed or not in tenancy agreements, so you will need to weigh the pros and cons.
On the one hand, having a pet-friendly rental property opens you up to many prospective tenants with pets, which means fewer vacancies. Did you know that 60% of Australian households have cats or dogs? Furthermore, an Animal Medicines Australia report states that 31% of pet owners are willing to pay higher rents and fees. Additionally, they tend to rent properties for longer periods than other tenants.
On the other hand, admitting pet owners might mean losing a prospective tenant with pet allergies. There are also pet smells, which are difficult to remove. Not to mention, pets may cause damage to gardens and floors. So, if you decide to allow them, include clauses about damage caused by pets in your rental agreement, such as a pet security deposit.
Keep Your Records Organised
A landlord should keep records of deposit receipts, maintenance receipts, rent receipts, compliant inspection reports and landlord-tenant communication records. This way, they will have the needed documents to support their claims or debunk the claims of their tenants in any legal issue. Another advantage is having the required documents for their taxes.
Part of property management is ensuring that these documents are organised. Storing records digitally is more effective than creating paper clutter. As for handwritten paperwork, type it out to be able to easily restore it later.
Pro Tip: Your property manager will securely store all documentation, a dynamic/proactive property manager will have management software to provide transparent landlord access to this documentation.
Get a Regular Appraisal
A rental appraisal is a procedure where an expert analyses your property, its location, and the market to calculate how much rent you should charge. With the rapid changes in the West Australian real estate market, landlords need regular appraisals more than ever.
Appraisals help new landlords decide on the rent value, and other landlords decide on the needed changes before a lease renewal. This way, you can get the most value out of your investment property.
In other words, get an appraisal now! Professional appraisers should conduct this process as a complementary service with no cost or obligation to purchase other services.
Team Up With Perth Property Specialists
Successful property investors surround themselves with a team of specialists.
If you are new to the market or have multiple rental properties, hiring a property manager is a good idea. But, how do you choose a good property manager? Property managers need to take a proactive approach, customising their offerings to your needs.
They should be interested in your financial goals, using your rented property to achieve them. Also, they should give you a schedule of all the due fees (including security deposits and late-rent penalties). This way, you are aware of your expenses. They will also help you find tenants, screen them, and provide professional advice when needed.
There is more to a professional property manager, so discover the full checklist to make your choice.
Do You Feel Stuck With an Existing Property Manager?
If you have realised that your current property manager is not performing their duties, you might want to hire a new one. Maybe they have injured your trust, do not give you enough value for their services, have limited offerings, are not easy to work with, or else.
You might be reluctant to do it, but switching property managers is surprisingly easy.
In fact, it has barely any administrative impact and is not time-consuming. You can even switch mid-lease, and your tenants will not be inconvenienced. They will simply need to update their bank account details before paying rent. The switch may even help you retain your tenant longer!
Ready to Take a Proactive and Holistic Approach to Your First Property Investment?
If you’ve decided you need tailored and knowledgeable support from a property manager that knows how to accelerate your return on investment, then we need to talk.
HERE Property offers over 40 years of experience in the Perth market. Our expert team is 100% focused on simple, smart, and proactive property solutions.
To discuss how we can help you take a holistic approach to your property investments in 2023 and beyond, contact us today.