5 Things You Need to Know when Starting Out as a Landlord

Being a landlord and managing your own property can be a time-consuming and often difficult task if you’re not properly prepared. It’s always a good idea to educate yourself a little beforehand and find out exactly what the job requires. This gives you the best chance of being able to manage the requirements that come with being a landlord. This article will go through a few of the most important considerations and things you need to keep in mind as you go through the process.

Legal requirements

It is absolutely imperative that you understand the legal responsibilities of yourself as landlord and that of your tenant. Common law dictates that landlords have a duty to guarantee the safety of rented property and its contents and there are also laws and regulations specific to rental properties that must be followed to the letter.  To make matters more complicated, each State in Australia has its’ own specific requirements.

Information is available from each state’s relevant body along with forms and guides to assist you to be in a better position to protect your interests and fulfil your obligations as a landlord.

Screening your tenant

There is nothing that makes a property owner’s life simpler than having great tenants and no greater nightmare than bad ones,  so here are some screening tactics that have been proven to work;

1. The screening process starts when you meet the applicants at the property.  How they respect the property provides a fair indication of how they will continue, but always trust your gut and bypass them if you feel they are not genuine.

2. Use a comprehensive Tenancy Application form that requires the tenant to provide 100 points of Identification, Proof of Income (3 x recent payslips & bank statement), Employer & Personal references, and details of their current Property manager and their rent ledger if they are current renters. Once you have all the information, screen it ruthlessly.

3. Asking the right questions is key to getting the information you need, some useful questions are; Current Agent: Did they look after the place, was rent paid on time, did you refund their bond, would you rent to them again?  

• Work Reference:  Verify income with Payroll and ask to speak with the applicant's supervisor.  Good employees generally make great tenants so you want to know if they are they reliable and if they have job security
• Personal References:  You will usually get a glowing reference here, but the question to ask is “If you had a rental property would you rent to them?’ If there is no hesitation in saying yes, its’ a good sign. Finally, we recommend the use of a Tenancy Database such as TICA to check that the applicant has no previous history of rent default and/or damage.

Choosing the right tenant can save you a lot of unnecessary heartache and stress, so it’s definitely worthwhile spending some time on getting this right.

Property maintenance

There are certain legal requirements on the part of the landlord to ensure the property is well maintained. So as a landlord you need to be aware of potential problem areas in the home and have an idea of how and when they will need to be dealt with. 

Landlord responsibilities include: Maintaining the structure and exterior of the house; ensuring all 'installations' are working, such as gas, electricity and heating; Installation and appliance maintenance and safety. Please note: only applies to landlord-owned appliances; Treat potentially health-threatening issues such as rising damp; anything else that's stipulated in the tenancy agreement

Not to mention, future maintenance considerations need to be made if you want to be sure of your future income and the profitability of your rental property. Quite often it is overlooked by new landlords, however, maintenance costs should absolutely be factored into the equation.

Taxes

Tax is a tricky subject at the best of times, and managing a rental property will certainly complicate your tax situation. Broadly speaking, the income you earn from renting out your property is added to your income tax, but you also need to consider the expenses that you can claim as deductions and possibly capital gains taxes when you sell your property.  

It is also worthwhile to consider having a Depreciation Schedule prepared which enables you to claim against the reduction in value of items such as carpets, curtains, stove cooktops, some light fixtures, shower heads and so on.  Landlords can claim between 10 percent and 40 percent off a variety of depreciable items, and in many cases, up to 2.5 percent of the building cost of the investment home on an annual basis.

Have a chat to your accountant about way you can maximise your tax benefits of your investment property.

Landlord Insurance

Ensuring that you have an appropriate insurance policy in place for your property is of vital importance and you need to carefully choose a policy that offers you the right coverage with respect to the type of property and its value. Remember that landlord insurance is quite different than standard property insurance, and generally offers more coverage to protect your interests, especially when it comes to your legal liability.  Keep in mind that when you’re collecting property insurance quotes, make sure you’re comparing apples to apples, especially when it comes to levels of cover and the excesses applicable if you make a claim.  Take the time to fully understand what you are covered for and more importantly, what you are not covered for before deciding to go ahead with your policy.

We’d highly recommend doing further research on these topics, educating yourself is the best way to ensure you’re prepared. If you have any queries about landlord insurance or you’d like to chat to a professional, contact St George Underwriting Agency today.

General Disclaimer

The information contained in this article is general information only and does not constitute legal, financial or compliance advice. We recommend that you obtain your own independent legal advice about all matters relating to the ownership of investment property.

Common Landlord Mistakes You Need to Avoid

Like a lot of things in the business world, being a good landlord both for your tenants and in terms of managing your own investment, is something that you often learn with experience. First-time landlords will often make simple mistakes and in some regards, this is to be expected given that this can be a demanding role to take on in many cases. In your position as a landlord, you are essentially managing people, risk and finances too, so it can certainly be a challenge for a lot of people. This article goes through a few of the common errors that landlords can make, with some suggestions on how to avoid them.

Not Understanding Your Insurance Policy

Taking out landlord insurance is an absolute must whether you’re renting out your property, flat or holiday home, and a general knowledge of what you’re covered for is essential.

Working with an insurance company that explains things clearly and works closely with you is always a big help. They can present you with your options and make a suggestion or recommendation that best suits your financial situation, the size of your investment and other factors. But it’s also up to you to make sure you read the fine print and know exactly what it is your covered for; do your homework, understand your policy and you’re in a better position to keep yourself protected and understand your rights as a landlord too.

Not Giving Proper Consideration to the Circumstances of Tenants

More often than not, having to deal with and manage an unreliable tenant or someone with money issues can be a massive headache. Without the proper insurance, this situation can be a strain on your finances and cause a great deal of stress.

It’s mandatory to check your tenant’s ability to pay; just make sure you don’t overlook this and write it off as nothing to worry about. If you see any red flags, it’s important to think carefully about your decision. Ask previous landlords how they were to deal with and check out all the references provided - in short, do your homework. Choosing the right tenant can make all the difference so take the process of selecting your tenant seriously.

Underestimating the Effect of Maintenance Expenses to Profitability

If you want to be successful in this, renting out property should be approached as you would approach the running of a business, rather than a side project. Figuring your expected revenue and costs etc. is very important if you want to be profitable in the long run. There is a tendency on the part of first-time landlords - and often inexperienced business managers in a number of industries - to underestimate how costly maintenance can be over the years.

When it comes to your property, failing to properly predict this can be an unexpected and unwelcome strain on your finances; getting it right can help you make better investment decisions in the future. Whether it be damage from water, pests or general wear and tear, the costs can be quite high, so make sure you account for them.

Also, remember that it’s very important to be prompt of any repairs that are required. Failing to do so and neglecting things that need to be done can result in big problems if the tenant is put at risk as a result.

Not Having a Lawyer

Quality landlord home insurance for your rental property can help protect your interests and ensures that you have professionals in your corner. However, it makes sense to have an ongoing relationship with a lawyer to ensure that you're looking after if things between you and your tenant do happen to take a bad turn. Have a lawyer draft up the legal contract from the outset so they are aware of the circumstances and have some idea of the case if problems do arise down the track. It can save you a lot of stress, time and money if you already are prepared from a legal standpoint and have protected your legal interests with the help of an attorney.

If you are a new landlord, keep these considerations in mind. Ultimately being a good landlord comes down to preparation and organisation, doing what’s necessary not only to protect your interests but to ensure you are profiting in the long term. For more information in regards to the best landlord insurance in Australia, speak to the team at St. George Underwriting Agency today for a discussion about your needs.