You bought an investment property – congratulations! But it is just the beginning. Here are things you need to consider to help maximise your return – Is your property manager across these? if he or she is not, time to ditch your property manager and speak to the team at Everest Realty (+61(02)9412 3838)
1. Do it yourself property management?
Many inexperienced property investors make the mistake of thinking they don’t need a property manager at all. This is primarily because people don’t understand what property management entails. While it is tempting to manage the property you yourself and save on their fees, you will have to do everything.
This includes: research the market, setting the rent for the property, market the property, conducting viewings, selecting tenants, maintaining the property, negotiating and troubleshooting with tenants, and dealing with any legal issues arising from non-payment of rent ( like going to the tribunal). Landlords who use property managers generally have fewer problems with their tenants, even if they do; it is managed by a separate resource and expert.
2. Do it yourself landlord
If you do proceed to manage your own property being a exceptional landlord is difficult. You need to understand your legal obligations and the Residential Tenancy Act based in your state. You will se the rent, need to advertise for the property and screen tenants, manage the relationship with these tenants, and ensure the property is well maintained throughout their tenure (do you have reliable tradies who can help when you ring?), and last but not the lease, chase rent when they fall in arrears. You also need to have access to and provide documentations like lease agreements. You should also seriously consider taking out relevant insurance like landlord insurance, to cover things like loss of rent or property damage if these do not go your way.
3. Finding and vetting tenants
Everyone wants tenants who pay on time and look after your property. Finding these tenants can be a challenge but possible with the right agency. The secret is to ask the right questions upfront and screen prospective tenants thoroughly. That means confirming they have the means to pay bond deposit and weekly rent over a period of time, have a good rental history and are likely to look after your property. A property manager can facilitate all this for you, or if you are a DIY landlord look to advertise on sites like Domain, Realestate and Rent.
4. Working out the rent
You want to maximise your rental income to increase the return on your investment, but on balance be fair and set a rate that is in line with current market rates. Local demand and supply of similar properties, location, time of year, market condition and seasonality can all affect what you can price. A property manager, who is in tune with the local market, can help you to work out a fair rate. Your lease with your tenants should include a clause covering the rental rate and when increases will occur with inclusions and exclusions. At the end of the lease, discover what properties are renting for. If rents have increased, you should look to raise your rent.
5. What does a property manager do?
When you hire a property manager you can expect she or he to cover a range of critical tasks. A fantastic property manager have access to all the right tools to advertise the property, highest possible rental return and ensure your tenants are vetted, protecting your key investment. They will be the primary contact with your tenants, managing inspections, collecting bond and rent payments, dealing with routine maintenance requests, rent arrears and much more. If through a poor advertising campaign, your property remains vacant for even 2 weeks, this could cost you almost the same as what you would have paid a property manager in fees for the full year. Then you still need to actually manage the property yourself.
7. Communication is key
Effective communication is the key to a profitable investment property. This is true for all relationships within the agency but applies significantly to property managers. They are the key link between you, the property owner and your tenants. They need to be able to quickly relay requests from them, manage maintenance issues or if the tenants are giving the notice to vacate, and ideally is able to converse in a few languages. If your tenants are happy you are likely to have longer-term tenancies and lower vacancy rates, which all help ensure your investment property pays its way. The same goes for your dealings with your tenants and/or property manager - be helpful, approachable and able to respond to their requests promptly.
8. Property management fees
The commission a property manager charges will vary from state to state and will depend on the local market, type of property and the property manager you choose. Property managers typically take a commission based on a percentage of the weekly rental amount. This could be anywhere from 5% to 12% depending on where you live, and the industry average is 7.6%.
There are also other fees that you could be liable for, including advertising costs, management fees, lettings fees (typically 2 weeks rent), monthly administration fees, annual statements and lease renewals. There will also be a cost associated with your property manager attending a tenant tenancy tribunal.
With Everest Realty there are no hidden charges. Our competitive fee structure ensures that you get maximum return on your investment and that you’re covered, even if things go wrong to worse. Get in contact with the property management team on (02) 9412 3838 to found her about our service and how we can improve your property.
9. Keeping on top of maintenance
Even if your property is new or nearly new things do go wrong, and you never know when it is going to happen. So be prepared for unexpected costs - everything from a leaking tap to a faulty water heater or electrical outlet. If you are using a property manager they will take care of this, after notifying you of the issue and cost implications. If you are DIY then it is down to you to get everything repaired asap for your tenants.
10. Time to ditch your property manager
You get the feeling your property manager is not quite ‘up to scratch’ as they should be, it could be time to move on. Warning signs include consistently poor tenants, excessive fees, frequent repairs, the poor workmanship of repairs, poor communication and rental rates that seem to flat line. You want an agency that is proactive and a property manager that is going to look after your interests.
11. Tax deductions for an investment property
Deductions can be claimed to maximise the tax benefit of the property upon your personal circumstances. Repair and maintenance costs can be claimed as income tax deductions, but they must directly relate to wear and tear or damage that occurred due to renting out your property. Other claimable expenses include letting fees paid to your property manager, body corporate fees interest on your loan, advertising costs, to name a few. You can claim a deduction for any capital works) to your investment property (only if the construction began after 17 July 1985). If you use a managing agent to look after the property, their fees are also tax deductible. An accountant can help make sure you claim items you are entitled to and maximise the return on your property asset. A worthy property manager will provide you with monthly and annual statements, itemising the rental income and property expenses to make claiming deductions at tax-time easy.
12. Depreciating assets
Certain items in the property can be claimed for the decline in value. Items like flooring, appliances, solar hot water systems and curtains – are known as depreciating assets. You must have acquired these for your investment property and they must be worth more than $300. he rules around this are complex and often change each financial year, but the cost of each item can be depreciated over the life of the asset and claimed as a tax deduction. The ATO has suggested depreciation rates or you can get an accountant help you work out the rates and what is claimable for your property.
13. Hiring the right property manager
Property managers are not just glorified rent collectors, they need diverse skills to make sure they are on top of all the properties, tenants and clients in their portfolio. A professional property manager need needs to be proactive, ethical, knowledge of all relevant local laws, organised with keen attention to detail, and be a good communicator with excellent people skills and language skills.
Go quiz your property manager - hiring the suitable property manager is all about asking the right questions. That way you can be sure they have the right experience, attitude and skills.
In some states, property managers need to be licensed or be supervised by a licensed agent, please make sure yours is if this applies. Ask them:
• Will you be looking after my property?
• How long have you been working as a property manager?
• How frequently do you conduct routine inspections on my property?
• How will you market my property and what channels will you use?
• How do you vet prospective tenants?
•Do you have a procedure for handling requests for repairs from tenants?
• How do you manage tenants who are in arrears?
• What other charges are there besides your management fee?
• How many years experience do you have with tribunals?
• Do you handle the payment of property expenses (water, council rates etc) on my behalf?