After securing your investment property, you may feel like the hardest part must be over, but the purchase is just the beginning. You are now a property owner and when you become a landlord, a lot of responsibilities will follow.
One of the most important decisions you now need to make is how you are going to manage your property. Some landlords choose to outsource to an experienced property manager, whilst other landlords prefer to self-manage to maximise returns and take control over their property.
Self-Managing Your Rental Property:
Although managing your rental property may appear overwhelming, it really is possible to do it yourself.
Tenant Management:
Legally, you will need to understand the state landlord-tenant laws and follow the Fair Housing Act. But, one of the first steps in managing an investment property is to understand how you can attract tenants to your property.
Once you have received tenant applications, you will need to screen tenants and call references to ensure the tenant has a good track record to pay rent on time and will take good care of the property.
One of the hardest tasks for a property manager is dealing with tenant complaints. You need to be able to compassionately listen to complaints, handle them diplomatically, but also understand where you need to draw the line on unreasonable complaints.
It’s important that you try to keep good tenants in the property, as well as to reduce your tenant turnover, because this will all cost you more time and money with vacancy periods as well as new tenancy agreements, and the screening process.
Property Management:
Although you are not living in the property, you still have a requirement to keep the property in a safe and habitable condition for both the tenant and the surrounding neighbourhood. Performing routine maintenance, and other checks will prevent costly repairs in the future. Things like electrical checks, regular servicing of the air conditioning, pest inspections and spray, keeping gutters repaired and clear of debris, checking for broken roof tiles that may be letting water into the roof cavity, and check for any plumbing leaks, and similar.
When managing the property you will need to oversee all the repairs and maintenance, which also means dealing with tradespeople and ensuring that the property is compliant.
Completing a move in and move out checklist with photos that both the tenant and landlord sign, will assist with claiming any future damage.Documenting the condition of the home before the tenant takes possession and when the rental lease comes to an end.
The tenants should also be maintaining and looking after your property with good care. You are allowed to conduct routine property inspections to ensure the property is being maintained but keep in mind there are laws around how many inspections you are allowed to do in a 12-month period as well as how much notice you need to provide to the tenants before turning up for an inspection. These inspections can also catch any minor maintenance needs before it becomes a bigger issue. It is important that you remember this is your tenant’s home, so you should always respect their privacy and give adequate and proper notice before entering the property (the requirements on this vary by state).
Financial Management:
Since you are an investor, surely you want the property to be profitable, this means keeping a tight grip on the financial management of the property. You will need to understand financial reports like cashflow, profit and loss statements, as well as all the reporting requirements, particularly around taxation (and keeping all the relevant records).Financial management also means income management, managing how much income you will be receiving.
Accurately recording the cashflow (rental income and property outgoings) is important. You will also need to record the tenants deposit which is held in account to cover you for damages should the tenant prove difficult. You need to lodge this rental bond with the relevant state authority.You will need to manage all the expenses and costs like outgoings as well as ensure you have adequate Landlord’s Insurance that will protect you against damages, loss of rent, and legal liability.All purchases against the property, maintenance, GST, taxes, interest on mortgage repayments, etc all need to be recorded accurately.
Setting The Right Amount of Rent For Your Property:
When setting an amount to charge for rent, you should be considering the demographics of the area. An area dominated by singles may be cheaper to rent than families. What is the rental vacancy rate and days on market for a tenancy? What is the median rent of the competition charging?
What access to amenities does the property provide?
Is there anything unique about your property that deserves a more premium rent to be charge (such as swimming pool, large garage, access to great amenities, etc).
Ultimately, the amount of rent that you are able to charge is all based on the economics of supply and demand, but the best indicator on what rent to charge is by looking to the competition and not being too ambitious otherwise you will need to be prepared to adjust the rent downwards if your property remains vacant.
The main risks are that if you sent a rent price too high, it is going to discourage some good tenants and you may have your property vacant for longer, but on the flip-side a rental that’s too low can attract the wrong tenants, and reduce your profitability.
Employing A Property Manager:
If self-management isn’t for you, the more popular choice for landlord’s is to outsource their property management, typically due to one or more of these factors, they:
– Do not live near the property
– Do not have the time to management the property
– Do not understand the process
– Unfamiliar with the legal requirements
– Want an expert on their side that has the right knowledge and experience
If you are outsourcing property management, it is important to see where the property management company are located in relation to the property, read their reviews, and ensure their management style aligns with what you are trying to achieve.
The rate that you pay your property manager will most likely be be a percentage of the rental income amount and come directly out of the rental payments received, before you receive the payment. The rate will vary between management agencies but also keep in mind that you usually “get what you pay for”. The really cheap agencies may not perform as many property inspections, have so many properties on their books that they can’t efficiently manage the tenant requests, and may take short cuts when it comes to reviewing new tenancy applications.
Tips and Tricks To Make Managing a Property Easier:
Invest in an Accounting System:
- Some landlords use a basic spreadsheet to manage, but if you have a growing portfolio or imagine buying another property in the future, it would be smart to get a proper accounting system in place from the start to keep track of your investment and automate some processes.
Invest in Property Upgrades:
- Energy efficiency improvements (LED lighting, insulation, efficient heating/cooling) can increase rental appeal.
- Security features like deadbolts, window locks, and security screens can make your property more attractive to tenants.
Tips for managing tenants.
- Set a competitive rental price. Consider local market supply and demand as well as the cashflow needed to make the investment viable.
- Utilities can be charge to the tenant if the property is correctly installed with water saving measures, and is separately metered from other units (if applicable).
Rental Laws by State
New South Wales (NSW)
- Rent increases are limited to once per year from 2024.
- Landlords must provide a reason for ending a tenancy from 2025.
- New rules are making it easier for tenants to have pets.
Victoria (VIC)
- Minimum rental standards include requirements for bathrooms, kitchens, electrical safety, and heating.
- Fixed energy-efficient heaters must be installed in the main living area for new leases.
Queensland (QLD)
- The Residential Tenancies Authority (RTA) oversees tenancy laws.
- Landlords must lodge rental bonds with the RTA and provide privacy notices before entering the property.
- Rent increase rules changed in 2024: Landlords must record the date of the last increase in the lease.
Western Australia (WA)
- Landlords must provide minimum security standards, including deadlocks on doors and locks on windows.
- Rent increases can only occur every 6 months and must be stated in the lease.
South Australia (SA)
- Landlords must ensure all safety compliance requirements, including smoke alarms and pool fencing, are met.
- The residential tenancy agreement must state all costs upfront, preventing hidden fees.
Tasmania (TAS)
- The landlord must provide a Condition Report before and after the tenancy.
- A landlord cannot unreasonably refuse tenants to make minor modifications (e.g., installing hooks, water-efficient showerheads).
Northern Territory (NT)
- Rent increases require at least 30 days’ notice.
- Security deposits cannot exceed four weeks’ rent.
Australian Capital Territory (ACT)
- The Rental Property Condition Checklist is mandatory.
The ACT has strict eviction rules, requiring landlords to prove valid grounds.
