Wednesday, May 17, 2017

5 Things You Need to Know when Starting Out as a Landlord

tips for landlord, landlord insurance, property maintenance

Being a landlord and managing your own property can be a time-consuming and often difficult task if you’re not properly prepared. It’s always a good idea to educate yourself a little beforehand and find out exactly what the job requires. This gives you the best chance of being able to manage the requirements that come with being a landlord. This article will go through a few of the most important considerations and things you need to keep in mind as you go through the process.

Legal requirements

legal requirements of landlord, landlord obligations, landlord insurance

It is absolutely imperative that you understand the legal responsibilities of yourself as landlord and that of your tenant. Common law dictates that landlords have a duty to guarantee the safety of rented property and its contents and there are also laws and regulations specific to rental properties that must be followed to the letter.  To make matters more complicated, each State in Australia has its’ own specific requirements.
Information is available from each state’s relevant body along with forms and guides to assist you to be in a better position to protect your interests and fulfil your obligations as a landlord.

Screening your tenant

tenant screening, tenant selection

There is nothing that makes a property owner’s life simpler than having great tenants and no greater nightmare than bad ones,  so here are some screening tactics that have been proven to work;
1. The screening process starts when you meet the applicants at the property.  How they respect the property provides a fair indication of how they will continue, but always trust your gut and bypass them if you feel they are not genuine.

2. Use a comprehensive Tenancy Application form that requires the tenant to provide 100 points of Identification, Proof of Income (3 x recent payslips & bank statement), Employer & Personal references, and details of their current Property manager and their rent ledger if they are current renters. Once you have all the information, screen it ruthlessly.

3. Asking the right questions is key to getting the information you need, some useful questions are; Current Agent: Did they look after the place, was rent paid on time, did you refund their bond, would you rent to them again?  

  • Work Reference:  Verify income with Payroll and ask to speak with the applicant's supervisor.  Good employees generally make great tenants so you want to know if they are they reliable and if they have job security
  • Personal References:  You will usually get a glowing reference here, but the question to ask is “If you had a rental property would you rent to them?’ If there is no hesitation in saying yes, its’ a good sign. Finally, we recommend the use of a Tenancy Database such as TICA to check that the applicant has no previous history of rent default and/or damage.

Choosing the right tenant can save you a lot of unnecessary heartache and stress, so it’s definitely worthwhile spending some time on getting this right.

Property maintenance

property maintenance, property management, rental property maintenance, home repair

There are certain legal requirements on the part of the landlord to ensure the property is well maintained. So as a landlord you need to be aware of potential problem areas in the home and have an idea of how and when they will need to be dealt with. 
Landlord responsibilities include: Maintaining the structure and exterior of the house; ensuring all 'installations' are working, such as gas, electricity and heating; Installation and appliance maintenance and safety. Please note: only applies to landlord-owned appliances; Treat potentially health-threatening issues such as rising damp; anything else that's stipulated in the tenancy agreement
Not to mention, future maintenance considerations need to be made if you want to be sure of your future income and the profitability of your rental property. Quite often it is overlooked by new landlords, however, maintenance costs should absolutely be factored into the equation.

Taxes

Tax is a tricky subject at the best of times, and managing a rental property will certainly complicate your tax situation. Broadly speaking, the income you earn from renting out your property is added to your income tax, but you also need to consider the expenses that you can claim as deductions and possibly capital gains taxes when you sell your property.  
It is also worthwhile to consider having a Depreciation Schedule prepared which enables you to claim against the reduction in value of items such as carpets, curtains, stove cooktops, some light fixtures, shower heads and so on.  Landlords can claim between 10 percent and 40 percent off a variety of depreciable items, and in many cases, up to 2.5 percent of the building cost of the investment home on an annual basis.
Have a chat to your accountant about way you can maximise your tax benefits of your investment property.

Landlord Insurance

landlord insurance, landlord protection, rental property insurance

Ensuring that you have an appropriate insurance policy in place for your property is of vital importance and you need to carefully choose a policy that offers you the right coverage with respect to the type of property and its value. Remember that landlord insurance is quite different than standard property insurance, and generally offers more coverage to protect your interests, especially when it comes to your legal liability.  Keep in mind that when you’re collecting property insurance quotes, make sure you’re comparing apples to apples, especially when it comes to levels of cover and the excesses applicable if you make a claim.  Take the time to fully understand what you are covered for and more importantly, what you are not covered for before deciding to go ahead with your policy.

We’d highly recommend doing further research on these topics, educating yourself is the best way to ensure you’re prepared. If you have any queries about landlord insurance or you’d like to chat to a professional, contact St George Underwriting Agency today.

General Disclaimer

The information contained in this article is general information only and does not constitute legal, financial or compliance advice. We recommend that you obtain your own independent legal advice about all matters relating to the ownership of investment property.

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