As a Landlord, having your first tenants move into your rental property can be so exciting. Finally, all of your hard work has paid off; you have purchased a property which has excellent rental potential and after careful screening, you have found the perfect tenants. From here it’s smooth sailing, right?
Sadly, no one can say that for sure, and every landlord knows there’s only so much one can tell about a tenant from their rental application. It’s also hard to predict what will happen later. What if the property stands empty for a while? What if the tenant damages the new carpets? A property owner’s work is never done so read on to prepare yourself for what lies ahead.
1. Prepare your bank account
Owning one or more rental properties is anything but cheap. You know you might have to mow the lawn or pay the electric bill on an empty house from time to time, but few investors really know the full impact that owning property can have on your bank account.
No matter how enticing your property looks or how great the location is, there’s still a chance your property will stand vacant for a time. If things really get bad, it might be six or more months before you get a regular tenant who plans to stick around for a while. If the worst should happen, can you afford the repayments?
Many owners have trouble preparing for fluctuating interest rates, but they’re definitely something to look out for. Interest rates can change at any time so plan ahead for the worst case scenarios. Manage your money as if the property was to be vacant for some time and the interest rates go up.
It also helps to put a little bit aside for emergency repairs. You won’t get any tenants with a broken hot water heater. Make sure you keep some extra money just in case something happens to the property, whether you have a tenant in or not.
2. Know what to look for
Before you even put in an offer on a piece of property, you should familiarise yourself with exactly what your ideal tenant would be looking for and where they would go to look for it.
Think of common criteria your tenants, no matter what kind of familial situation, will have. They’re going to need a decent kitchen with moderately new appliances and enough counter space to prepare a meal, and a lounge area will help them relax. Heating and cooling is a must, and there should be some form of parking on the premise, whether it’s on the street or in the driveway. You also might want to consider sprucing up the outdoor area, maybe even fencing in the backyard if the property is big enough for a family. Parents feel more at ease with fences.
You also want to do your research before buying a property in a neighbourhood. Look at surrounding property values. This will help you get a good idea of what a good price is for the property you want to buy. If you can, try talking to the residents, as you’ll get a good picture of what the neighbourhood is like on a typical day.
Try to get a better understanding of what a minor renovation can do for the rent. With just a quick paint job, you might be able to add as much as $20 per week to the rent.
3. Befriend a property manager
Tenancy laws are a bit of a grey area to most of us, which can get you into serious trouble if you accidentally break one. A property manager will know the ins and outs of tenancy law and be able to advise you on your rights and obligations as a landlord. So it’s best to hire one you trust.
Before purchasing anything, there are a few things to discuss with a property manager. Ask about some of the seasonal changes and how they affect the market. For example, a property in a popular school district will rent for higher as parents try to enrol their children. Houses near the beach or near a ski lodge will be more valuable in the summer and winter respectively. You should also ask for advice on tax deductions. There over fifty of them, but most investors only claim about half. Your property manager should be able to arrange a depreciation schedule, and an accountant can help you maximise your tax returns.
4. Purchase landlord insurance
Let’s face it: you’ll never have the perfect tenant. Though they may look good on paper, all it takes is a lost job for a tenant to abandon a house and break a contract.
This type of insurance costs about $280 per year, but the savings in peace of mind are endless. You’ll be protected should your tenant fail to pay rent, break the lease or severely damage the property.
5. Choose an agency wisely
An agency will be in charge of managing your property, so it’s important you pick a good one. Whilst it is important to get the best deal on the management fees, remember that cheaper does not necessarily mean prudent. If you find a cheaper fee, it might be because the agency has fewer property managers and a lot more properties. The stress of this often causes high turnover rates in employees so you might be dealing with new people every other month.
Instead, do your research. Look for agencies that understand the market and know how important property growth can be. Because most people search for rental properties online, you don’t have to worry about your property or agency being in a certain neighbourhood. People will find it no matter
An agency will also be able to provide detailed advice on the area and other nearby suburbs where you can potentially purchase rental property. If you stay within the agency’s territory, they can manage all of your properties, which is a huge strain off your mind. The agency will help you think about future investments as well.
6. Acquire long term leases
You might think that if you leave tenants alone, they’ll stay forever. This is not the case, however. Research has shown that tenants stay in properties for longer periods of time if:
- Lease agreements are made for a long term and not month to month
- The property is regularly maintained and repairs are made quickly and efficiently
- Thank-you notes or tenant surveys are received every year
Basically, rent increases are accepted by tenants who want to pay for a better quality home, and as a landlord you can help to create a positive environment for your tenants to live in.
In the end, it all comes down to the old adage, “You get what you pay for.” If you’re good to your tenants, they are more likely to be understanding and easier to work with if you do have to increase the rent. While no one really likes paying more, a good tenant knows that a good property is hard to come by, and that in itself is worth the money.View next article View previous article
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