Monday, August 1, 2016

How To Avoid The Loss Of Rental Income

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One of the most important factors in being a landlord is doing everything possible to ensure that your tenants do not fall behind on their rent. For many new landlords, losing rental income can mean the loss of mortgage payments and possibly more. Luckily, there are ways you can protect yourself and ensure that your chance of having to deal with the loss of rental income is kept at a minimum. 

Ensuring that your tenants are financially sound is a great place to start, and there are a few ways to confirm that the people renting your property to are able to keep up with payments. First, as a private landlord, you can try a credit check with your tenants’ permission to see how well a possible tenant deals with repayments over long periods of time. While a credit check may not tell you the whole story, it will alert you to any unusual activity that you can talk over with your tenant which may also give an idea about what type of landlord insurance policy you require for your safety.

Knowing If Your tenants Can Afford The Rent

Asking for proof of income is the first step in seeing if the tenant can afford to rent the property. Requesting the tenant to note down their regular payments and bills will give you an insight into how well the landlord and tenant relationship will span out financially.

Always check the day that your rent payment is due on your bank account, and set up an alert with your bank to notify you of any payments being made on that day. Check throughout the day to ensure that a payment hasn’t simply just been delayed due to unforeseen circumstances, and allow the tenant the full business day to make the payment. 

If a payment hasn’t been made, first check with your bank that there are no delays for payments, or that the payment is currently processing, and simply notify your tenant that the rent due date has passed. A simple text might be all it takes to alert the tenant of the due date. 

If this is a regular occurrence, where your tenant is often late with a payment, talk to the tenant about arranging with their bank an automatic payment to leave their bank on a specified date.

Employ A Property Manager To Engage With Your Tenants


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If you own a number of properties, it may be worth your while to hire a property manager who specialises in tenant liaison and will deal directly with the tenants and notify you of any issues that need to be dealt with.

If a tenant has not made payment by an agreed time frame then as a landlord you have a number of options to speed up the process and mitigate any losses you may encounter if the tenant refuses or is unable to pay. 

You should issue a notice of non-payment of rent and rent arrears if the tenant has not paid rent after 7 days (or 5 days for a caravan property). This notice is a “Notice to remedy breach” which gives the tenants 7 days to pay the arrears (or 5 days in a caravan park). If the tenant pays the arrears within this time frame, the tenant is able to continue the original tenancy agreement as normal.

Issuing Official Notices

If the tenant doesn’t pay the due monies within the allotted time frame, the landlord can then send the tenant a “Notice to leave”, which gives the tenant a minimum of 7 days to vacate the property (or 5 days in a caravan park).

If the tenant then pays the arrears within this 7 day period, the tenant can apply in writing and request that they remain at the property, which is up to the discretion of the landlord to allow the tenancy to continue, and accept in writing.

Get Help From Your Local Authority

If the tenant doesn’t pay the monies due and doesn’t leave the property, then the landlord can lodge an “urgent application” with the local authority, such as VCAT in Victoria, for a warrant of possession to enforce the tenant to vacate the property. Similarly, you can also opt for rental property insurance to protect yourself from tenant’s arrears.

Staying on good terms with your tenant is the best way to ensure rent is paid in full and on time, but if things go wrong, and rent arrears start to accrue, following these steps will allow you to deal professionally with your tenants, whilst keeping you on the right side of the law, and hopefully recuperating your rental income in full with minimal losses.

Speak to the expert team at SGUA for more information.

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