Safe house-Protecting your Investment Property

Keeping your investment property secure is not just a matter of feeling your property is protected it’s the law to provide adequate security for your tenant. Below is a range of options for home security that you may consider for your investment property.

First line of defence

While alarms are great, you should think about preventing burglars getting into your home in the first place. Most break-ins occur through a door, so the key to good security is a good lock. A keyed entrance set gives minimal security. A step up is a night latch, but deadlocks and dead latches provide more security. (Better Homes & Gardens, 2012)

Window locks & Screens

In an investment property you need to ensure your windows are secure for a tenant, they do not need to be key locked but they you need to make sure from a shut position they cannot be opened. Window screens are also a great way to secure your property from potential intruders when the window is open. There are many types of windows in various materials, such as timber, aluminium, PVC and steel, and they all work differently and need different locks to secure them.

Security screens

A second line of defence at any entrance is a security screen door. It should comply with the requirements of Australian Standard 5039-2003, while AS 5040 specifies how it should be installed. Security screen doors are ideal for the front and back main doors; they can keep the property safe and can be locked if the main doors are open. A security screen door allows you to safely see out, while stopping unwanted people from getting in. It also provides ventilation and lets cooling breezes into your home. (Better Homes & Gardens, 2012)

Door locks

1. Night latch Night latches are surface-mounted and not lockable on the inside, so you can easily get out of the house in an emergency. But a burglar can also open the door from the inside once they’re in.

2. Deadlatch and deadbolt A deadlatch, such as the Whitco Deadlatch (about $80), is similar to a night latch but is keyed on the inside. This means a thief needs keys to get out of the door. But the key also needs to stay in the lock at night in case of fire, unless the deadlatch has an emergency release. A deadbolt fits inside the door, with the bolt thrown by a key inside and out.

3. Deadlock A deadlock, like the Lockwood 355 Deadlock (about $140), is similar to a deadlatch, but the lock engages with the keeper, so it also works on sliding and double-opening doors. And when locked, the lock and keeper can’t be separated.

Alarms

If you are unfortunate enough to have intruders actually get into your home, your next defence is an alarm (or a hungry Rottweiler). Alarms range from basic beepers to sophisticated multi-thousand-dollar systems that alert a base station. But, you can make a loud noise with an inexpensive system.

Swimming pools

Legal requirements:

Swimming pool safety

As a swimming pool or spa owner you are responsible for safety.
Drowning is the biggest cause of accidental death for young children.  Most occur in private backyard swimming pools. You can reduce the risk of accidents occurring in your swimming pool by adequately fencing your pool and ensuring young children are supervised at all times.
In a life-threatening or urgent situation phone the emergency services on 000.
Fencing

All swimming pools must have a continuous safety barrier maintained by the pool owner that restricts access by young children to the pool.

If you are a property owner and are selling a property with a pool built before July 1993 you must make sure that the safety barrier meets todays standard for new pools.

Fencing must be constructed in such a way to make sure that:

·         the outside of the fence is an effective barrier to young children

·         it is permanent

·         young children can't crawl under or climb over it by using foot and hand holds

·         it is at least 1.2 metres high

·         any boundary fences used as part of the child-safety barrier are at least 1.8 metres high on either side with a 900mm non-climbable zone. The non-climable zone may be located at the top inside of the boundary fence if the fence is at least 1.8 metres high on the inside.

Gates to the pool area must:

·         swing outward from the pool area

·         be self closing from any position

·         be fitted with a latching device out of reach of small children at least 1.5m above ground level.

Hard covers on spas 

Child resistant hard covers cannot be used as safety barriers in place of a fence for above-ground spa pools because:

·         there are no current regulatory standards for spa pool covers

·         when the cover is off the spa pool there is no barrier.

Filtration

In-ground or above-ground swimming pools and spas must have a water recirculation and filtration system that complies with Australian standards  . This is to reduce the risk of a young child being trapped by suction.

(OCBA, 2012)

Salt vs. Chlorine:

Salt Water Pools Cost Less

Salt water pools cost less than chlorine pools. Chlorine pools require the addition of chlorine tablets to the water, and these tablets can cost upwards of $60 or more per bucket. The use of chlorine tablets is essential to the cleanliness of a chlorine pool. While it may seem that chlorine pools would be more sanitary than salt water pools, this is not the case. Salt water pools use an electrical charge to split the salt into sodium and chloride. This electrical system basically creates chlorine by changing the chloride into a gas, which then dissolves into the pool's water. Through this process, the pool is sanitized without the addition of chlorine tablets.

Salt Water is More Comfortable

Chlorine water can be irritating to the skin, especially to those with sensitive skin, and it can also be offensive to the senses because of its strong odour. Furthermore, chlorine can be an ear and respiratory system irritant as well. Because salt water pools do not require the addition of chlorine tablets, the pH of a salt water pool is increased. This translates into water that does not irritate the skin or cause burning, itching, or drying. Swimming in salt water pools Brisbane is more comfortable, and the chlorine odour is reduced dramatically.

Salt Water Pools Require Less Maintenance

Homeowners can spend less time making efforts to maintain their pool and more time enjoying it when they choose a salt water pool versus a chlorine pool. Because the pool's electrical system supplies the water with chlorine, homeowners do not have to worry about routinely adding chlorine tablets to the water. Salt will need to be added to the water from time to time, but the comprehensive care required of a salt water pool is minimal compared to a chlorine pool.

(John Clarkes pools & renovations, 2012)

Keeping it in the family- Should you rent to family or friends?

There seems to also be a lot of controversy around renting to family or friends and everybody has an opinion on whether or not it’s a good idea. There can be benefits and disadvantages to having a close friend or family member as a tenant, regardless if it is through an agent or self managed.     

For most landlords it is the comfort of having someone you know in your property. It really is the best reference and background check you could have to know your tenant personally before putting them in your property, and with friends or family this is possible. 

“Renting to a family member or friend may seem like a good idea at first, but all too often the tenancy ends with one party feeling like they were taken advantage of, or neglected”    (Salvatore Friscia, San Diego Premier Property Management, San Diego, CA, 2011).

Issues:

“In some cases the owner/landlord will typically relax qualification measures and make concessions based on the relationship, including not requiring an application, security deposit or even lease agreement. This may seem like the owner is doing the tenant a favor allowing for an easy rental arrangement, but in actuality both parties are now at risk without contractual agreements in place detailing the tenant’s and owner’s rights and obligations.”  (Salvatore Friscia, San Diego Premier Property Management, San Diego, CA, 2011) So ensure you follow all typical procedures including reference checks, lease agreements and security bond deposits.

Friendship or landlord/tenant relationship:

There is a big difference between a friendship and a landlord/tenant relationship. Understanding this difference can be difficult because suddenly you have wants and needs in relation to your property which may not coincide with your tenant’s wants and needs. For example you may have never had issues with renting your property without air-conditioning but now your friend wants it and expects that you understand why. On your hand you do not want to pay for a cooling system when you could have found a tenant without it. The lines of friendship are blurred because of your personal relationship and want of understanding from the other party.    

Expectations:

Will you be lenient on the tenant? Do they expect that you will? The expectations from each party could differ. There needs to be clear expectations set from the start so you are both aware of what is to happen.  Let them know you want the rent on time and wont accept excuses, conversely the tenant will expect you to respect their privacy, not to show up unannounced or too regularly.

Is your perception of what is clean the same as theirs? Will they look after the garden like you expect they will?

Benefits:

You know the person in your property and trust they will look after your property. There is a certain amount of security you feel knowing the person well and how they live.  The tenant will also feel comfortable dealing with a landlord whom they know and also trust to look after there needs during the tenancy.

Not all situations have a negative outcome however the downside of a negative experience may cause long term consequences that can affect relationships and family ties.

When do you know to let it go?

Income/Maintenance  Costs

Investment properties come in all shapes, sizes and conditions. There may come a point where its time to let it go, as a landlord it’s important to recognize this point. When your property begins to cost you more in maintenance and repairs then the return in rent its time to weigh up your options to get yourself back into an effective business venture.

Your investment property is a business, there are outgoing expenses and incoming funds, this is a balance throughout the time you hold the property however you want to make sure it is worthwhile by producing at least more income then expenses in the long run.

Be objective:

Remember be objective, the significant value you may hold for the property will not be seen by others. Think about the reasons why you invested in the property to start with, was it to make use of a family home you couldn’t part with? Was it to generate some income for you? Are you trying to hold on to it for a strong selling market?

Why not sell?

Selling your investment property could be a good option for you particularly if your property is on a large block of land. Land is often sort after and with the new home owners grant offering the most money for first home owners who choose to build you may find people very interested in purchasing.

Develop & build

How about demolishing the old run down home and developing? It’s very much becoming the norm for homes to be on small blocks. Knocking down and building a few smaller units may offer a larger return then finding a tenant who will want to rent one older house.

Renovate to increase rent return

Reno’s? It all depends on run down your property is. Some are just not worth saving, weigh up the time and money it would cost in comparison to the rent you may receive in the future. Kitchen, bathrooms and flooring are the biggest areas scrutinized by potential tenants so focus on those areas if you are to renovate. You can increase your rental return with inexpensive renovations.

Market Feedback

Ensure you listen to the market, if you are not getting potential tenants through your property or receiving bad feedback from them this could be a prompt for you to do something about it. If people don’t want to live in your property then it is going to make it difficult to receive income from it.

Get advice

Get advice! Sometimes having a second pair of eyes to look at your property may show you more than what you see. Have a professional look over the place or friends tell you what they really think about the condition and whether they would live there.

Know when the investment has started working against you and move onto your next venture.   

No pets allowed!…are you limiting the chances of finding a good tenant?

Owners can often be nervous about allowing tenants to have a pet and there is a level of trust that goes along with it. There are some properties that will never allow pets due to strata regulations but where pets are dependent on the landlord’s wishes don’t necessarily rule pets out completely.

Regularly, good tenants are missing out properties because owners are afraid of damage their pets could cause. However there are also some terrible tenants out there that may cause more damage then a pet.

When considering allowing a pet at your property there are a number of things you can do as a landlord to protect yourself from any damage that may be caused. This includes having references for the pet prior to accepting a tenant, know the type of animal, age, breed etc. Regular inspections can be commenced, as well as having a clause in the lease that states the tenant is responsible for any damage caused by the pet and to rectify any damage prior to vacating.

If you are thinking about becoming pets negotiable consider the following:

Variables:
-How big is your property?
-Does it have a yard?
-Would certain pets suit the property but not others?
-Do you have adequate security for a pet? (Particularly dogs)
 
Pros:
-Not all pets are bad
-You could miss out on good tenants
-Attract a larger range of tenants
-Potentially let your property faster-Longer Tenancy- Pet owners typically stay in a rental longer because it can be harder for them to find other pet friendly options.
-Responsible Pet Owners Are Responsible Tenants- if someone is mature enough to take good care of an animal, there is a good chance they will treat your property with the same respect.

-Charge Higher Rent- look around your area. If there are not a lot of pet friendly properties, tenants will have fewer options, and you may be able to charge slightly higher rents if you allow pets due to the increased demand.

-Happier Tenants- Animals can help reduce stress. Having a pet around can make your property feel more like a home for the tenant.

-If you allow pets, it will decrease the chances of tenants trying to sneak in pets that you have not approved.

Cons:-Property needs to be pet friendly, i.e. fencing needs to be adequate; this is a landlord’s responsibility upon approving a pet.
-Damage that could be caused, scratches, broken items, smells & stains
-Disturbing neighbours
-Landlord insurance will not cover damages however you can use the bond to cover any damage caused should you need to.  

Don’t let the fear of potential future damage stop you from accepting a good tenant for your property, good tenants can be hard to come by.

Here come the waterworks…

The Government of South Australia earlier this year released the latest fact sheet on water pricing from SA Water with increases that became effective as of 1^st July. They are charging us more to invest in critical water security infrastructure ensuring safe, clean and reliable drinking water into the future but right now its just leaving a bigger hole in our pockets!

For landlords it’s the optimal time to review the water charges you can pass onto your tenants to minimize your own hip pocket.

A landlord may by agreement, pass any part or the whole of the charges for the usage of water to

the tenant (including the water supply charge) this is dependent on if there is a shared meter. Please note sewerage charges and the River Murray levy are always the responsibility of the

Landlord.

Water charges that can be passed on to tenants will vary depending on the property. Firstly you need to find out if your property has a separate meter, detached homes will have a separate meter, but typically units and apartments will have shared water meters. “The lack of a separate water meter does not preclude the landlord from passing on water usage charges. However, the lease must clearly stipulate how the water usage charge is to be calculated and this calculation must be seen to be fair and just by the tenant. A percentage of the water usage based on the number of properties and number of tenants may be considered reasonable. If water charges are not clearly written into the agreement or the agreement is seen to be unfair by the tenant then the tenant has the option to apply to the Residential Tenancies Tribunal for an order precluding payment of water usage charges on the grounds that the terms of the lease are harsh and unconscionable. An alternative to passing on water usage charges is to take into account water costs when setting the rental amount.”(Office of Consumer & Business Affairs, 2012)

If you are unsure whether your property has a shared meter check your latest water bill from SA water .

Once you have determined if you can charge for water usage you can decide on what charges if any you want to pass onto the tenant. Some options are charge no water usage, usage over & above annual allowances stipulated RTA 1995, all water usage; all water and supply charges, the supply charge can be added to any of these options or passed on as a quarterly charge.

The Office of Consumer & Business Affairs (OCBA) suggest that when considering what charges to pass onto the tenant to consider the following:

·         How many people live in the premise?

·         Are there gardens or lawns that the landlord wants watered?

·         Is there a pool or other special items that use a lot of water?

·         Is the premise fitted with water saving devices such as dual flush toilets & watering systems?

·         If you want to keep in top condition and it is a big garden, your better off to pay some of the water.

To avoid disputes about water ensure the following:

·         The lease clearly outlines the method by which charges will be forwarded

·         The tenant understands and agrees with  the method of water charging

·         The tenant understands their responsibility to notify the landlord/agent of maintenance issues i.e. leaking taps

·         Water charges are forwarded to the tenant promptly.

The Market

As a  property manager it is our profession to report the market conditions and adjust rental campaigns accordingly which often involves re-aligning price to be competitive with other properties in the market as well as other strategies to ensure your property is let as soon as possible.

The rental market is tough for landlords at the moment. There is a oversupply of properties on the market which is giving tenants the opportunity to apply for multiple properties, finding out which they are approved for and then selecting the one that provides the most value to them. This is the reason for many properties staying on the market for a longer period of time then usual.

Its no wonder that there are more rental properties on the market with sale prices also at a low, it allows more people to afford investments properties. It is also an optimal time for first home owners. Feedback from some property managers is that there are quite a few lease breaks that have been the result of people buying.

With many properties on the market, tenants have the chance to compare; largely price is a factor so to have your property let as soon as possible it’s important to listen to the advice from your property manager on what price to set. Although it may not be the return you are accustomed to we are here to report on the market and unfortunately the market determines where prices are.

A trend that has also been occurring is tenants applying at lower prices, sometimes they have seen that the property has been on the market for a while and feel as though the landlord would settle on a lower price. Other times they may apply at a price they feel appropriate based on the multiple properties they have seen. This supports the fact the market is determining where prices should be even if the properties are not priced accordingly.

Therefore don’t cut corners, even though tenants are withdrawing their applications after deciding on another property, ensure you carry out the appropriate background checks with references. It can be difficult to check references in a quick time frame but it is vital to do so.

The best way to stay competitive in this market is to ensure your property is priced right from the start but also understanding that the price may need to be lowered depending on the interest you receive. Rely on your property manager to have your best interest in mind and trust that they understand the market and are purely relaying to you the current market conditions.

How to Present your Home for Sale/Lease

Presenting your property just right can be the difference between finding the right tenant or in some cases not finding a tenant at all. When leasing out your property the potential tenants are looking for a place they can see as their new home. Using a few styling tips discussed on this weeks Toop TV featuring Ros Brebner from presenting beautiful homes you can enhance the chances of attracting the right tenant for your property.

Ros emphasizes the need to be objective when looking at your property, not to look past those minor maintenance issues you always put up with. Focus on de-cluttering, keeping things bright & fresh as well as looking at those highest valued areas of the property the kitchen & bathroom.

Everything you need to know about Tax Depreciation.

Landlords are you aware of the tax benefits that are associated with your investment property?

“As a building gets older and items within it wear out, they depreciate in value. The ATO allows property investors to claim a rental & investment property depreciation deduction related to the building and plant and equipment items contained within it. It can be claimed by any owner of an income producing property. This deduction essentially reduces the investment property owner's taxable income – they pay less tax!” (BMT Tax Depreciation, 2012)

On Toop TV this week you can see a comprehensive talk with Ryan Martin from BMT Tax Depreciation covering tax depreciation for investment properties including what it is, the benefits and much more.

If you have an investment property then why not get the most out of it? Click the link below to see the full Toop TV interview and jump on the BMT tax depreciation website at http://www.bmtqs.com.au/ to find out more and have one of the experts survey your investment property today.

http://www.youtube.com/watch?v=Ozu2CNmA-30

Spring Cleaning

With the end of winter in sight it’s a good time to spring clean your property particularly if you’re looking for new tenants. A fresh looking property may just be what you need to attract those tenants you want.

First Impressions Count:
Starting with the outside of the property, take a good look at the gardens and lawn. Chop back overgrown areas, keep your garden tidy it’s the first thing people see and first impressions are important. Potential tenants may keep driving if they arrive at a place which is unattractive even from the outside. That is if they can see it at all.

Are the fences or gate broken and looking tatty? Make sure you fix them up maybe even give them a coat of paint for a fresh look. Ensure your gutters are clear of debris and not rusted out.

The inside of the property should have a good wipe over; a potential tenant wants to move into a property that is clean and well presented, this means they have a standard to keep it to. Have a look at the walls, do they need repainting? It is suggested that the house is repainted roughly every 5 years depending on the property due to wear and tear. Make sure you cover up those cracks too, cosmetic cracks through the walls and roof are common in many areas due to natural ground movement.

How is the flooring in the property? Have a good look especially if it’s carpeted, carpet should be replaced approximately every 7 years. Carpet will wear down over time particularly in high traffic areas as well as being assaulted by all kinds of stains so have a think about replacing if its past its use by date. Carpet sellers will often have a recommended selection to be used in rental properties that are harder wearing so ask around to see what is suggested.

Its also a great time to check those appliances, anything you have in a rental property must be in working order so ensure the air conditioner, heating, dishwasher, oven, smoke alarms and any other appliances are good to go for a new tenant.

The better your property presents the more it will benefit you so whether you use a little elbow grease, rope in some family and friends or hire someone to do it for you make sure your properties in tip top shape coming into spring.

Lovely spacious unit...a hidden treasure

Dear Buyer,

PRICE ONLY $299,000 - RENTAL $290 pw

This delightful home unit is ideally positioned, it is nicely tucked away at the rear of the group, you wouldn't even know it's there if looking from the street. Casually walk up the driveway and you will be pleasantly surprised with what awaits you...

Single storey and with lots of appeal it offers a great investment opportunity. It is currently leased to excellent tenants until early February 2013 for $290.00 per week.
It provides a spacious floorplan which comprises of a lovely lounge room which looks onto the front garden, a large eat-in kitchen which features modern streamlined cabinetry, sufficient storage and work space, gas cooker plus 'Euro' dishwasher. Sliding doors have access to the outdoor area.

There are 2 well proportioned bedrooms, both with built-in robes and ceiling fans. The bathroom displays a bath, vanity and shower cubicle. The w.c. is separate and the laundry provides a cupboard and handy work bench.

A paved pergola area at the rear is a nice spot to sit outdoors and there is a large lawned garden as well, so there is plenty of room to potter around in.

There is reverse cycle ducted air conditioning for all year comfort and the single car garage is remote controlled.

It is located in a popular area and within walking distance to transport and close proximity to local shopping centres and schools. Invest in your future now...

I look forward to seeing you there...
9/10 Robert Avenue Broadview $299,000 

Debi Zecevich Mobile 0412 170 014
Email debi.zecevich@toop.com.au
Telephone +618 8362 8888
Fax +618 8362 8898

You don’t know what you have until it’s gone

Last week we discussed the option of rent increases, particularly how and when rents can be increased. This week as a follow up, we will discuss the effects that follow from changing the rent and whether it is suitable in the current market.

When it comes to rent increases, it can definitely be beneficial for the landlord by receiving more income from their investment property; however it may also be detrimental for the tenant. If you are thinking about increasing the rent at your property, as well as following the legal requirements set out in the Residential Tenancies Act 1995, you should also consider how it may affect the tenant.

If your tenant pays rent on time and maintains the property well but can no longer afford the rent with an increase, you must consider if it is worth losing them over something as small as a few dollars a week. In the current market, as discussed in previous blogs, it’s a tenant market and they have a huge choice of properties at the moment. Rents are also on the decline so increasing the rent at your investment property may not be the best option for you.

Good tenants can be hard to come by, so the safest bet is to suggest an increase at the end of the lease term when you are asking if they are going to renew. If the tenant decides not to renew, prompt them to find out why. If it is due to the rent increase, you should consider keeping the rental payments as is, particularly if they are reliable tenants which you would like to keep on.  You should also consider the rent you may lose if they property takes longer than expected to find a new tenant.

The truth is, you don’t know what you have until it’s gone. Your tenant may decide not to renew with you in order to find a cheaper property and you may find it hard to find tenants which are just as reliable.

So consider all of the facts and make sure you are aware of the current market situation before making any decisions and increasing rent at your investment properties.

Rent Increases

The market at the moment is still not in favour of the landlord due to the influx of properties that have not sold coming onto the market for rental. Unfortunately this means rents are dropping rapidly compared to other years. In needing to decrease the rent to find a suitable tenant you may feel stressed with added pressure on your financial situation. The good news is there are options to increase the rent during the tenancy provided you follow the regulations set out in the Residential Tenancies Act 1995.

“During a fixed term tenancy agreement the rent cannot be increased unless you include a condition in the agreement specifically allowing for an increase in rent.

In an order of the Residential Tenancies Tribunal made on 29 September 2008, the Tribunal found that a condition stating ‘the rent shall be reviewed in accordance with the Act’ is not specific enough to provide for an increase, and therefore is invalid.

For a rent increase condition to be valid, it must specifically retain the right to increase the rent during the term of the agreement. An example of a valid rent increase condition is ‘the landlord reserves the right to increase the rent during the agreement’.” (OCBA)

55.(1) The landlord may increase the rent payable under a residential tenancy agreement by giving written notice to the tenant specifying the date as from which the increase takes

effect.

• A series of residential tenancy agreements single residential tenancy agreement for the purposes of this section unless at least six months between the same parties and relating to the same premises is treated as elapsed since rent for the premises was fixed or last increased.

(2) However—

(a) the right to increase the rent may be excluded or limited by the terms of the residential tenancy agreement; and

(b) if the tenancy is for a fixed term, the residential tenancy agreement is taken to exclude an increase in rent during the term unless it specifically allows for an increase in rent; and

(c) the date fixed for an increase of rent must be at least six months after the date of the agreement or, if there has been a previous increase of rent under this section, the last increase and at least 60 days after the notice is given but—

(i) if the maximum rent for the premises has been fixed by a housing improvement notice, and the notice is revoked, the landlord may, by notice given under this section within 60 days after revocation of the housing improvement notice, increase the rent for the premises from a date falling at least 14 days after the notice is given; and

(ii) if the landlord is a registered housing co-operative, and the residential tenancy agreement provides for variation of rent in accordance with the tenant’s income, the landlord may increase the rent on the ground of a variation in the tenant’s income from a date falling at least 14 days after the notice of the increased rent is given; and

(iii) if the landlord is a registered housing co-operative under a residential tenancy agreement that allows the landlord to change the basis of calculating the rent payable under the agreement, and the landlord gives the tenant written notice that there is to be a change in the basis of calculating rent as from a specified date (which must be at least 60 days after the notice is given and at least six months from the date of the agreement, or if there has been a previous change in the basis of rent calculation, at least six months from the date of the last such change), the rent may be increased to accord with the new basis of rent calculation as from the specified date without further notice under this

section.

(3) The rent payable under a residential tenancy agreement may be reduced by mutual

agreement between the landlord and the tenant.

(4) A reduction of rent may be made on a temporary basis so that the rent reverts to the

level that would have been otherwise applicable at the end of a specified period.

(5) If the rent payable under a residential tenancy agreement is increased or reduced under this section, the terms of the agreement are varied accordingly.

(6) This section does not affect the operation of a provision of a residential tenancy agreement under which the rent payable under the agreement changes automatically at

stated intervals on a basis set out in the agreement

If you require further clarification on this please call Sharna on 8362 8888

The Break-up, it’s kind of complicated

Lease breaks, you may not like them but it’s a cold hard truth to a lot of tenancies. Situations change, minds change and before you know it you're out of your comfortable position and back looking for a new tenant.

So these are the facts, as a landlord your tenants are allowed to break their lease what ever the reason may be. However consequences do apply in accordance with the regulations stated within the Residential Tenancies Act. 

As a landlord your investment property is a “business” always keep this in mind with managing it. The tenants are your “clients” they have rights as much as you do, although they may differ in ways.

“Where the agreement is for a fixed period and the tenant leaves before the expiry date, the landlord may claim for loss of rent until the premise is relet, pro-rata advertising costs and other compensation which may arise under the agreement, such as a proportion of reletting fees charged to the landlord by an agent. Under these circumstances, the landlord has an obligation to relet the premises as soon as possible.” (OCBA)

The landlord must take reasonable steps to mitigate any loss the tenant may suffer and is not entitled to compensation for loss that could have been avoided by those steps. The importance of taking “reasonable steps”  Is highly important in a lease break situation. You may feel comfortable knowing that your tenant breaking lease is still paying the rent but it must be shown that you are actively seeking a new tenant to take over the lease or you may not get any compensation brought on by the lease break.

In order to be actively seeking a tenant you need to advertise in at least one form of print media as well other medium (generally the internet). However by law you do not need to start advertising until the tenant has handed back the keys and vacated the property. You will find most agents will advertise immediately once notice has been given by the tenant. This is because it will enhance the prospect of finding a new tenant leaving less likelihood of the property being vacant which in turn will help mitigate the tenants costs.

If you are receiving no enquiries for your property you may consider aligning the price with the market and negotiating with the lease break tenant to pay a portion (difference between previous rent and new rent) to the end of the original lease date. It is generally recommended that you decrease the rent every 3-4 weeks until a new tenant is found in a lease break situation.

If you are receiving applications which could be suitable to your property but are not accepting them due to personal preference as to who you think should be in the property (not necessarily the market your property appeals to) you may be seen in the eyes of the tribunal to not be alleviating the tenant’s costs. If the tenant wants to take you to tribunal for this reason it may be ruled that the tenant is allowed out of the lease break without costs and/or there is a chance you have to pay back all received monies to the tenant.  

Investment Seminar

This week Toop&Toop Real Estate held an investment seminar in conjunction with The Commonwealth Bank informing guests about purchasing and investing in the residential property market. This seminar covered topics such as the state of the current market, financial planning, property management and the depreciation of property.

Held at the new Golden Grove office we had several guest speakers including Kerrie Akkermans General Manager of Toop&Toop property management, Tim Thredgold corporate auctioneer and sales partner at Toop&Toop , Lisa Davis  Commonwealth bank Area Manager Northern Area SA/NT Region, Warren Halfpenny of The Commonwealth Bank and  Ryan Martin from BMT Tax Depreciation.

There is an oversupply of properties in the current market which is causing prices to drop, making it an ideal time to begin or add to your investment portfolio. The Commonwealth Bank have a range of loans and financial advice to help you build your portfolio, with interest rates at the lowest they have been for some time and innovative technology rivaling other banks its no wonder they have just been announced Mortgage lender of the year for 2012.

It’s undoubtedly a hard job to manage an investment property and it’s important to recognize once you purchase an investment property you are “running a business” as Kerrie Akkermans explained on the night. Landlords and tenants can have very different views on situations and managing that relationship can be a difficult task so its best to have an expert in the field to ensure  your business is running well.

The tax benefits of having an investment property particularly with depreciation over assets can help cover costs for wear and tear as Ryan Martin discussed. It’s a good idea to have your investment surveyed by a BMT quantity surveyor who are the only depreciation surveyors recognized by the ATO. “The ATO allows property investors to claim a rental & investment property depreciation deduction related to the building and plant and equipment items contained within it. It can be claimed by any owner of an income producing property. This deduction essentially reduces the investment property owner's taxable income”(BMT, 2012)

It was the first event run so far with investment information from Toop&Toop and financial information from The Commonwealth Bank with the fantastic turnout no doubt there will be more to come.

Thank you to everyone who came and supported us and also to the guest speakers from the night who provided invaluable insight into property investment. We plan to run more of these nights in other offices across  Adelaide so let us know if your interested!