How do you find the right tenant for your rental property?
The first challenge to get your head around in renting out your investment property is how to find a tenant. Having a good tenant that looks after your property, pays the rent on time, and stays for the full term of the lease is the big aim.
I think there’s a tendency to believe that a real estate agent is more likely to be able to do this. But the reality is, all they do is follow a prescriptive process with the aim of finding someone as quickly as possible. They put in the minimum effort for the multitude of properties they manage.
The benefit of doing it yourself is that you can actually meet the prospective tenants, talk to them yourself, and feel confident that you are getting the right people for your property.
In a series of blog posts, we’ll be walking you through the process of how to find a tenant. We’ll:
- outline what you should look for in a good tenant,
- provide ideas about how to go about advertising your property and setting up viewing times,
- provide an application form template that you can ask prospective tenants to complete, and
- discuss the process of interviewing people and their referees prior to making a decision.
Finding a tenant is not that hard, and you’re sure to do a better job at it than a real estate agent.
Previously we’ve talked about how property management, as a job in a regular real-estate agency, is a bad job, done badly.
There are several reasons why a conventional property manager isn’t always the right answer:
They’re often inexperienced, and having gained experience both in the job and with your property, they leave for greener pastures. Because they don’t necessarily live or work near your property, they won’t see it except during inspections - and then, only for a few minutes.
And they have to manage so many properties at once that they can’t give your property the attention it deserves.
Let’s think about the attributes of a great property manager:
They’d be experienced. They’d be long-term. They’d be local. And they wouldn’t have too much on their plate.
Here’s what we’re thinking. Find local people, people connected to the community, to handle just a few properties in their local area. Properties they walk past on the way to the shops - so they can see if the tenants are looking after it, if the lawns been mowed or the letter box is full. Surely every suburb has semi-retired people who could make some supplementary income doing inspections, vetting tenants, and organising tradespeople.
Forget company-based property management. Think community-based property stewardship.
Home renovators may be the ‘third wave’ of asbestos-related disease.
There has been quite a bit of recent media about the dangers of asbestos to home renovators, prompted by an increase in the number of home owners and specifically home renovators suffering from asbestos-related disease. This is becoming known as the ‘third wave’, behind miners and tradespeople.
In her property blog in the Sydney Morning Herald, Carolyn Boyd discusses the issue:
“More than a million Australian homes are suspected of containing asbestos. The bad news is, if your place was built before 1990, it’s very likely to have at least one thing with asbestos in it.”
She goes on to say:
“Building products with asbestos in them are thought to be safe as long as they are not disturbed. But it’s when renovators start tearing down those walls or making changes that dust starts flying and tiny particles of the naturally occurring mineral, which are extremely sharp, become airborne.”
The ABC News program 7.30 ACT also did a recent story about an ‘asbestos nightmare’ in a rental house in Canberra.
The long and short of it: the landlord commissioned a renovation which included the bathroom and laundry while the tenants were still living in the house. The builder did not take appropriate measures in dealing with the asbestos (which the tenants didn’t know was there) and the tenants were exposed to serious amounts of asbestos dust.
Each State and Territory in Australia has measures to protect people from asbestos. As a landlord you should make sure you understand your responsibilities and protect yourself, your tradespeople and your tenants.
When we started Rentmonkey, one of the characters we kept thinking about was Chantelle.
Twenty-something Chantelle is hoping that Property Management at the real estate agency will be a stepping stone to a career in real estate sales. So while she does the best she can under difficult circumstances – it’s not well paid, there are too many properties to manage, and never enough time – if she shows talent and initiative, maybe she’ll leave that job in a few months and move on to better things.
At which time a new Chantelle will come in and have to learn the ropes.
Property management in a regular real estate agency is generally a bad job - and it’s generally done badly. That’s when it’s going well: one of us used to rent a garden flat whose property manager had a gambling addiction, and lost all his tenants’ bond instead of depositing it with the authorities.
Do you really want Chantelle (or, worse, the property-manager-we-won’t-name-for-legal-reasons) looking after your most important asset? Yes, there *are* good property managers out there. If you can find one, use them.
But also think about the peace of mind you’ll get from knowing that your rental property is in the hands of someone who really cares about it.
Free ATO tax seminars for rental property owners.
The ATO runs regular free seminars for rental property owners. They’re a great way to learn more about the financial aspects of being a landlord.
They cover:
- purchasing a rental property
- owning a rental property
- deductible expenses
- repairs versus improvements
- capital and private expenses
- selling a rental property
- capital gains tax, and
- record keeping.
Check out the ATO website for information about session times and locations.
Understanding asset depreciation and how to make the most out of your investment.
One of the really important money matters for investment properties is asset depreciation. Maximising what you can claim for your property can help you save lots of dollars each year.
What is depreciation?
Depreciation refers to the decline in value of an asset over time. For example, the fixtures in your investment property will wear out and lose some of their value compared to when they were new.
How does the ATO treat depreciation?
Depreciation is tax deductible. For certain assets you are not allowed to claim the actual cost of buying that asset, but you can claim the decline in its value each year.
How do you work out the assets and how much to claim?
This is a pretty complex area. The ATO Rental Property Guide (which we introduced in our last blog) explains the ins and outs of asset depreciation for rental properties.
Fortunately, you can also get good professional advice about this from quantity surveyors. They are qualified to examine your rental property and provide you with a tax depreciation schedule. The schedule sets out how much depreciation you can claim each year. You can then provide that to your accountant at tax time.
More help on money matters
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Introducing the ATO’s rental property guide for landlords.
Making the most out of your investment property means getting everything right at tax time. The ATO publishes a guide each year that helps landlords understand how to deal with income and expenses from rental properties.
The guide steps you through:
- How to treat income associated with the property
- The expenses that you can claim
- The tax considerations that apply
- Issues associated with assets and depreciation
Here at RentMonkey we think you should be as informed as possible about managing your property. But we also think that professional advice for issues like managing your tax is essential. Find and use a good accountant to make sure you make the most out of your investment.
We want to help you with your financial planning, join our newsletter to be notified about other money tips.
Karmin used RentMonkey to create a lease for her rental property. We asked her what she thought of the experience.
Why are you managing your own property?
“I already had tenants organised, so with the use of RentMonkey I didn’t have to go through an agent just to have a lease agreement drawn up. There seemed little point in paying an agency to do that.”
Why did you use RentMonkey?
“I needed help with the paperwork. If RentMonkey wasn’t around I would’ve gone through an agency. I wouldn’t have trusted myself to make sure I had everything I needed to manage it privately.”
What do you think of RentMonkey?
“It’s brilliant. It’s simple, easy to use and takes all the hassle out of figuring out what documents you need. Basically in less than 5mins I had everything needed and didn’t have to go searching for the documents on nasty sites.”
Yet another reason to be careful about picking the right tenants.
Landlords in NSW may now be responsible for the behaviour of their tenants. This article in the Sydney Morning Herald talks about landlords who were served with a noise-abatement order (rather than the tenants who were the people creating the problem):
“It means if a landlord has been told about a problem with their tenants but does nothing about it they effectively ‘adopt’ the problem and are responsible for it.”
Good tenants pay on time, keep the place clean, and hopefully stay for the full term of the lease. This is just another reason to make sure your tenants are good people.
Walking you through the new water efficiency requirements for NSW.
As part of the new tenancy laws in NSW, landlords can only charge for water use if the property has a separate water meter and is considered to be ‘water efficient’. What does water efficient mean, how do you know if your property meets the requirements, and how do you charge the tenant?
What does water efficient mean?
A property is water efficient if:
- The kitchen sink and bathroom taps have a maximum flow rate of nine litres per minute (this doesn’t apply to laundry, bathtub or outdoor taps)
- Showerheads have a maximum flow rate of nine litres per minute
- There are no leaking taps anywhere at the start of the tenancy
How do you know if your property is water efficient?
To work out if your property is water efficient you can either pay someone to come in and help you (e.g. a plumber) or do it yourself. If you are doing it yourself, there are two ways to work out if the fixtures meet the standards:
- You can test the kitchen sink and bathroom taps and the showerheads using a bucket and stop watch to see if they have a flow rate of less than nine litres per minute, or
- Make sure fixtures have a water efficiency rating of 3 stars or more under the Water Efficiency Labelling and Standards (WELS) Scheme. This would only apply to fixtures that were made from 2005 onwards
If the fixtures are not water efficient, you’ll need to replace them or use flow controllers or aerators to reduce the flow rate. You will also need to check that there are no leaking taps anywhere on the property.
Once you are happy that the property is water efficient, you will need to note that it meets the standards in the condition report and record the water meter reading at the start of the tenancy.
How do you charge the tenant?
You can only charge the tenant for the volume of water that they use. You can’t charge them for the service charge.
Once you receive the bill for water use, you have three months to ask the tenant to pay. They then have 21 days to make the payment.
Useful information
This blog is based on the official water efficiency fact sheet from NSW Fair Trading. Other useful information includes:
