Exciting but challenging – that’s how most Property Owners feel when they acquire a new property, either for the first time or adding onto their portfolio.
Essential knowledge on how to find and screen tenants, what legal obligations are, how to ensure that the property is taken care of, rental agreements, landlord insurance – needless to say, the list on being informed can be daunting.
And that’s why we are here. With 70 years of real estate service and extensive experience in Property Management in Perth, we have compiled this list of 10 MUST KNOW tips for new landlords. And for experienced property owners, this is a great time to double-check that you have your bases covered.
1. Treat your rental property like a business – NOT your home
Emotional attachments may ring high especially for first-time landlords. Remember, make your decisions as if you were managing a business to ensure that it provides the income that is required. Keep a professional front and ensure that your cash flow requirements are taken care of.
As with any business, compliance to legislation is essential – so make sure that your property is insured and that you have public liability insurance in place. See our article on Minimum Compliance Required in WA Properties.
2. Insure your asset
Furthermore, in order to protect your property (business asset) from risks such as accidents, liability claims or negligent tenants, it may be wise to purchase landlord insurance. It could save you from thousands of dollars if you end up in court.
Preventive management is important. Property managers, being professionals in their field, are able to know where general risks are, which could potentially balloon into huge problems if not addressed quickly. Routine inspections are important to ensure that the property is a safe place for renters.
3. Ensure that you have met the Minimum Compliance Required in WA Properties
Double-check on smoke detectors, that your pool fences are safe, safety lights are property installed, the window fittings are up to standard etc. To find out more, please read our article here: Minimum Compliance Required in WA Properties.
4. Have reliable tradespersons on call
Before renting, it would be handy to have reliable tradespeople that can be on-call if anything breaks down. At times, there are pressing repairs which would require the urgent attention of a plumber or electrician, or even locksmith – so make sure that you have good relationship with your tradespeople.
5. Attracting the right type of tenants
Today, online search has proven to be the most popular tool that tenants are using to search for a home. Create an online listing that will attract the right type of tenants and promote them through social media platforms. Some popular Perth-based real estate online sites include realestate.com.au, reiwa.com.au and domain.com.au.
The key in attracting the right tenants it to create an online rental listing that informs tenants what they want to know as well as what might interest them. Your property’s best and unique features should be highlighted here. It is highly recommended that you procure a professional photographer to ensure that your property is captured in the best light possible – and know that the photographs can be used every time that a tenant vacates.
6. Screening the Tenant
There should be a method in ensuring that all the tenants are screened in a consistent way. Setting this process up from the start would help you ensure fair and equitable treatment and a better outcome.
The main goal for tenant screening is to find a tenant who will pay on time and look after your property as if it were their own. This is often done through references and background checks – property managers have access to a tenancy database where further checks can be performed.
You should look for a tenant with a solid financial history, doesn’t have a criminal history, and has a good rental background. A rental application will be a helpful first-step however thorough checks are critical.
7. Setting the right price
A tricky component to the mix – how do you ensure that your property is not priced too high nor too low so you can make optimal returns on your investment. Bear in mind that property prices can be very local to the suburb and sometimes even to a particular street. Research tools available include reiwa.com.au and information from CoreLogic for price indication. Investigate the median price of the suburb and the recent rental prices on your stret for similar facilities home features.
As you set your rent price, be mindful of how this will impact your cashflow. As rental income is the main source of income on your asset, you should draw up a budget estimate for fixed costs (e.g. mortgage repayments, property taxes, council rates, insurance fees, etc) and variable costs (e.g. property improvements, maintenance, repairs, utilities etc) that you may incur. It is also highly recommended that you have a cash flow buffer in the event that your property is vacant for several months so that you will not have to sell your asset at a loss due to cash flow pressure.
8. Have a written rental agreement: Lease
A clearly written rental agreement, or lease, will specify all the conditions of the property and the expectations required in order to form a good relationship over time. Conditions stipulated in the lease should be specific and conform to local legislation. We would recommend checking with an experienced residential property management in Perth, like us, if you need more help writing a rental agreement.
In Western Australia, there is a REIWA prescribed lease agreement in accordance with the Residential Tenancies regulations. The form is called “Form 1AA” and is broken down into 3 parts – Part A, B and C.
The wordings of Parts A and B cannot be altered or deleted.
Part A addresses the following:
- The identity of the tenant, owner and the property.
- The type of tenancy (fixed or periodic).
- The amount of the rent, when and how it will be paid.
- How many people are permitted to occupy the premises.
- If pets are permitted.
- Who is to pay for water consumption.
- The amount of the security bond.
Part B addresses the general rights and obligations under the lease.
Part C allows the Landlord and Tenant to specify other terms which are not covered in Parts A and B and have to comply with legislation (Residential Tenancies Act and Fair Trading Act).
9. Automate rental collection
Ensure that you collect your rent on time and enforce any late payment charges due. It is advisable that automated online payments are set up by tenants to ensure that there is no penalty incurred if it is overdue. The added advantage of online payments is that the cheque would never get lost in the mail!
10. Keep a record of everything
This can be a painstaking task but it is critical that you should keep a record of everything – this includes all communications, deposits, forms, rent receipts, maintenance invoices and receipts etc. Organise your digital records to avoid paper clutter where possible.
In the event of a legal proceeding, having a clear record of transactions and communications would help substantiate the case and provide helpful evidence to support any claims made.
Given that there are tax deductions available for properties in WA, this is a good practice to help your tax claims.
Finally, appreciate good tenants. When you find yourself a good tenant, ensure that you keep them happy by attending quickly to repairs and maintenance issues as well as responding to their communications on time. Give them sufficient time to renew their leases so that you can avoid vacancies and save time and money in searching for new tenants.
Keeping in mind that Property Owners have the responsibility of ensuring habitable space for tenants, there are serious legal liabilities involved if the property is not managed up to standard. So, consider hiring a professional property manager – it is worth the investment. Not only will you save time and hassle involved in owning a rental property in Perth, a good and time-proven Property Manager, can add value by:
- using their experience in interviewing and selecting the right tenants
- collecting rental payments, managing rent defaults
- managing vacancies, lease renewals, house inspections and advertising
- dealing with tenant issues
- ensuring that the administration and the records are well kept (a humongous help during tax time)
- ensuring that your asset is well maintained through regular inspections
- recommending experienced tradespersons to resolve any issues
- ensuring legislative compliance
- dealing with lease renewals
- assisting with any legal disputes
Feel free to give us a call if you would like to know more about residential property management and we would be pleased to help guide you through the process.