Hope for the best, prepare for the worst.

If you are an investor looking to make minimal payments towards your investment property and rely almost solely on the rental payments from tenants to cover your mortgage its time you get realistic and make sure you are prepared for any circumstances.

Many landlords buy into real estate looking to make a sizable return from rent, significant enough to cover the mortgage so they do not have to pay anything significant towards the loan. In some cases this may be possible, but its best to be prepared for the unforeseen situations in which you find yourself stressed when you can not make loan repayments.

Relying solely on income from tenants is not a viable option in many cases because we can never predict the future. People’s circumstances change, families’ breakdown, employment changes, financial stresses for whatever the reason can impact on your investment and the mortgage payments may not make the bank.

There are many reasons why your property may be left empty for a considerable amount of time, and if you are only dependent on the rent from a tenant you may find yourself under a considerable amount of stress.    

When tenants fall in arrears your property manager will follow the procedure to ensure the money is recovered.  Part of this procedure requires lodging Form 2 (remedy of breach) and if the tenants do not make a payment when the Form 2 expires  ( usually between 7 and 9 days, depending on postage) a Form 7 (application the residential tenancies tribunal) is applied for . Once this application is lodged it may be up -to 8 weeks before a hearing date and your tenants may still be living in the property.

The tenants may be evicted at the Residential Tenancies Tribunal or they may be put on scheduled payments depending on the circumstances surrounding their rental arrears.  If evicted you will be awarded the bond but this will in most circumstances be 4-6 weeks rent, still not covering the amount outstanding.

Due to this and the other circumstances as previously mentioned we recommend that it would be an ideal situation to set aside around 3-4 months of mortgage payments , just to cover those “incase” situations.

Obviously there is landlord insurance which is always recommended to anyone that has an investment property. As property managers we have to follow procedure and although it may leave you without income in the short term it will be a requirement should you wish to lodge to be reimbursed through your landlord insurance.  – we will cover landlord insurance soon so stay tuned to this blog for more information on how to minimize your losses and remain in control of your investment.

Marketing Your Property

Driving down a side street recently, I happened to look out the side window and see an a4 sign sticky taped  to the front of a house “House to rent” and I had to think to myself “who would even see that?”

When renting out your investment property you need to market it in a way to make it visible to potential tenants. The internet is everything when it comes to marketing, lets face it if you are wanting information on anything the first thing you do is jump online and Google it.

For rental properties nothing is more vital than advertising online, it’s the quickest and most informative way to reach a large audience. Essentially you want your property rented as quickly as possible and the best way to do that is via the internet. Websites allow many people to view your property which enhances your chances of finding a suitable tenant. 

Property management companies will often offer marketing packages to you proposing a range of online advertising.  Larger real estate companies may have their own website in which they advertise on as well as large property rental websites such as www.realestate.com.au  and www.domain.com.au.   These large online websites are not accessible by the self managing landlord and are a real benefit when it comes to looking for a tenant.
“realestate.com.au is Australia's No.1 property site, delivering a unique audience of 3.11M people in October 2011. realestate.com.au delivers access to a broad audience in various stages of the lifecycle - with dedicated sections for buyers, renters, sharers, renovators, builders, sellers and retirees you can reach your target audience effectively and efficiently. (Nielsen Online Ratings, Domestic Audience, Oct 2011)”

When marketing on these sites, it allows your property to appear under a number of specifications, so for instance if your property is in Norwood but someone is searching for a property in Walkerville they can include surrounding suburbs and this may bring your property up. An intensive amount of information can be revealed on a webpage compared to a newspaper advert. The page is larger, involves pictures and a detailed description so you only have truly interested people want to view it.

Webpages are accessible at all times and are updated regularly; people can view your property ad many times.  Some real estate companies will have premier position on realestate.com.au so your property will appear at or near the top of the page consistently, giving you the best chance of being seen.

If you are serious about renting out your investment property get with the times and GET ONLINE!

Is your property ready to be re-let?

So you’re about to have your property come up for re-letting? There are a number of things you need to consider before you go in guns blazing to sign up a new tenant.

The time between tenants when re-letting a property is an ideal time to do those little bits of pieces of maintenance and renovations needed to increase the life and quality of your rental.

Found a leaking tap? Great! Replace all the washers throughout the property, if one is going, it won’t be long before the others follow. If you envisage having a tenant living in your property over the summer months clean and service the air conditioning units, and while you’re there, replace any missing light bulbs. You can also look at the maintenance level of your gardens, if the maintenance level is quite high, look at removing some plants, maybe place some pavers or re-lay the mulch and most importantly, look at your flooring and painting throughout.

Time and time again landlords neglect or put off simple maintenance and the opportunity to freshen up their property. As a rough guide, in a rental property carpet should be replaced every 7-10 years and re-painted every 5-7 years.

The most common misconception is that by doing this necessary maintenance you will increase the rental return of your property, however unfortunately the majority of the time this is not the case. Replacing carpet and re-painting is more of a necessity, it can be hard trying to find a tenant that will accept a property in a run down condition. Rental prices are down and tenants are ‘picky’ over properties that are not presented well.

By replacing carpet and re-painting (in neutral tones is best) the property looks fresh and clean and it is therefore more enticing to potential tenants (they think they’re getting more for less).

If you need to replace other flooring as well as carpet i.e. lino or laminate, go somewhere that services both items, this way you can negotiate a much better price. Be honest with the suppliers as well, there are some low maintenance long wearing carpets which are ideal for rental properties, so ensure you notify them that flooring is for a rental property.

Spending an extra couple of days doing some work on your investment property is a lot better than leaving you property vacant for a number of weeks where tenants will not apply because of the condition. Also remember, spending a little bit of money at a time to upkeep the property saves you a lot of money down the track where little issues can become big issues.

If you use a property manager to look after your investment ask them at re-letting time if they believe any maintenance needs to be completed. Weigh up the money that it will cost you to do compared to the weekly rent you may miss out on by not doing it. Often enough it will be more beneficial to jump on the maintenance straight away then to wait.