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.