What is the best time to rent my property?
The time of year that your property is either vacant or due for a lease renewal can have a considerable impact on the demand for your property and, therefore, the return on your investment (ROI)
January - February
This is the busiest season in the rental market and the time of year that people are most on the move. Their reasons typically include transferring for work, settling the kids into a new school, students starting university or simply renters who want a change in location or lifestyle.
June - August
This is the second busiest time of the year in the rental market. New university intakes are occurring and the six-month tenancy agreements are due for expiry, so this is another optimal period to maximise demand for your rental property.
Key Takeaways
While it is not impossible to find a suitable tenant at any time of the year, these two peak periods provide investors with more - more selection of suitable applications, more demand, more quality applications and more potential for the optimal rent to be achieved. A common misconception about tenancy agreements is they should be either six months or 12 months. This is not a legal requirement in Queensland and if you are an investor who has a tenancy agreement due to expire in any other time of the year, it is wise to consider aligning your tenancy to end in any of the peak seasons. Some tenants might find it odd that a lease being offered to them is not for a typical six or 12-month period, so your property manager should communicate clearly the benefits to the tenant of ending a lease in a peak rental season.
How long will it take for my property to rent?
The length of time a rental property is on the market will reflect how it is priced with comparable properties, how it is presented to prospective tenants and the demand from the market for properties such as yours. If your property is vacant it may require a different strategy to that of a property with a tenant already in place in order to minimize vacancy periods.
Your property manager should advise you of the current “days on market” figures for their clients and for similar properties to yours. You can then discuss with them the best approach to pricing your property in order to secure a suitable tenant in a time that matches your needs.
Key Takeaways
The price and demand for properties similar to yours along with the pro-activeness of your property manager will determine how long it takes to secure a suitable tenancy application for your property.
What happens when a tenant applies for my property?
So your property manager has just received an application from a prospective tenant who wants to rent your property and they have provided everything from previous rental ledgers to bank statements and a list of references. It all looks great, so you should let them move in right?
Wrong.
Providing they have supplied all of the required documentation with their application form, the prospective tenant is about to undergo a thorough check of previous rental history, tenancy database and reference checks. If the applicant’s current property manager or landlord is wanting to remove the tenant, their reference could be tainted so at minimum, two previous rental references should be provided to check on the applicant’s history as a tenant prior to where they are living now.
Tenancy databases such as TICA may hold records of tenant breaches for up to seven years and there are now strict regulations for how a property manager or landlord can list a tenant on one of these databases. When presenting an application to you, your property manager should inform you of the results from their database search along with any details surrounding a database listing.
Key Takeaways
Even if your property is vacant and you require a tenant as quickly as possible, it is critical to determine by all means necessary that an applicant is the right tenant for your property.
What happens during the lease renewal process?
In Queensland, a tenant is required to be given two months notice prior to the end of their fixed-term tenancy of an offer to renew their lease or a notice to vacate.
Should you decide to offer a lease renewal to your tenant, a proactive property manager will commence the process at least three months prior to the end of your tenants fixed term. Your property manager will first prepare a Comparative Rental Analysis (CRA), which identifies how much properties similar to yours are rented for. Combining this data with the consideration of what time of the year the tenant’s lease will end and other measures such as the Consumer Price Index (CPI), your property manager should be providing you with this information to justify their recommendations of the new rent being offered to your tenant and how long the new lease should be.
Once you are happy with the new lease being offered, your property manager will prepare the necessary legal paperwork along with their new lease terms and present this to your tenant at least two months prior to the end of their fixed-term lease. Your property manager should also provide a strict time-line for your tenants to respond to your offer of a lease renewal to ensure you can commence advertising for new tenants well in advance should your current tenant decline your offer. Should your tenant accept the lease renewal offer, the contractual paperwork is signed and you should be formally notified of the acceptance from your property manager.
Key Takeaways
There are strict time-lines in Queensland that relate to providing notice to end a tenancy. Should you consider offering a lease renewal to your tenant, you and your property manager need to commence the process in advance of these notice periods by discussing your intentions for the property, negotiate new lease terms and rent amounts to be offered and then provide the tenant with an offer with clear instructions and a deadline to advise of their intentions.
If your tenant decides to vacate the property at the end of their fixed-term tenancy, your proactive approach to working within the legal time-lines will provide you with plenty of time to secure a suitable new tenant at the appropriate rent and avoid those nasty vacancy periods.
What happens if my property is vacant?
A vacant investment property does not produce income and unless your property is vacant for a specific purpose, such as renovating or selling, there is a need to generate money from that investment as quickly as possible. If a tenant has vacated or you have vacated the property yourself, there are strategies available to help you fi nd a suitable tenant as quickly as possible to minimize the amount of income being lost.
If your property has been vacant for some time, consider the amount your property is being advertised for and whether this could be reduced on the basis that a shorter lease period is offered to a suitable applicant. In a time like this when your investment property is not producing income for you, this will help you secure a suitable tenant. You can then review the rent at the end of their fi xed term, rather than prolong the vacancy in the hope more rent will be achieved. Here is a scenario to consider:
Example
It is the month of August. John and Wendy have an investment property that has been vacant for four weeks. Their property manager has it advertised at $450 a week and has been recommending to the client that it be reduced to $430 a week in order to be competitive in the current market. John and Wendy aren’t budging and ask their property manager to keep trying for $450 a week. The property remains vacant for another two weeks until John and Wendy finally agree to reduce the rent to $430 a week. The property is leased the following week bringing the total vacancy to seven weeks. The new lease period is for six months up to February next year.
Summary
If John and Wendy had taken the advice of their property manager to reduce the advertised price of their vacant property, they would have been $3,010 better off. If they did finally achieve the higher rent of $450, an additional $20 above what their property manager had advised, it would have taken them 150.2 weeks to recover the money they lost by holding out for more rent.
Key Takeaways
A property rented slightly below market value is better than a vacant property with no rent. It takes a long time to recover any loss from a vacant property so consider pricing it appropriately and whether a shorter lease period than normal can be offered to align the next potential vacant period with busy market conditions.
What insurance do we need?
It is compulsory for investors to have the appropriate level of cover for public liability insurance for their investment property. The standard rules regarding building and contents insurance still apply for your dwelling type, although it is a tenant’s responsibility to insure their own personal property. Landlord insurance is optional, however it should be considered whether it is right for you.
Landlord insurance covers you for tenant-related risks including loss of rental income and loss or damage to your contents and building by the tenant. Bad things can happen to great tenants and a bad tenant is unpredictable. There are numerous very affordable policies available and you should speak with your property manager about the level of cover that is right for you.
Key Takeaways
There are hundreds if not thousands of horror stories about investors being left with huge costs due to little or no insurance cover. The cost of insurance far outweighs the cost of little or no insurance. If you have just purchased a property, the best time to start is straight away – especially if the property is vacant and being advertised for rent. As a landlord, you have a liability exposure from the moment you or your agent begins showing potential tenants through the property.
Who is responsible for repairs and maintenance?
As an investor you need to be comfortable with the fact things need fixing or replacement, and you will need to budget accordingly. Repairs that are proven to be the fault of the tenant are of course at the tenant’s expense.
However, there are two types of repairs as described in legislation that are entirely a landlord’s responsibility: urgent repairs and routine repairs. Urgent repairs require immediate action by both the managing agent and the landlord, and include:
• A burst water service or a serious water service leak.
• A blocked or broken lavatory service.
• A serious roof leak.
• A gas leak.
• A dangerous electrical fault.
• Flooding or serious fl ood damage.
• Serious storm, fi re or impact damage.
• A failure or breakdown of the gas, electricity or water supply to the property.
• A failure or breakdown of an essential service or hot water, cooking or heating appliance.
• A fault or damage that makes the property unsafe or insecure.
• A fault or damage likely to injure a person, damage property or unduly inconvenience
a resident of the property.
• A serious fault in a staircase, lift or other common area or premises that unduly inconveniences a resident in gaining access to, or using, the property.
Failing to attend to urgent repairs in the appropriate time as deemed by legislation can result in significant compensation being awarded to the tenant in court that may well exceed the cost of the repairs. It is always wise to budget for things going wrong and act fast if they do. Otherwise it may cost you above and beyond what the repair would have cost alone.
All other repairs apart from those above are considered by legislation to be routine repairs. These may include anything from loose fixtures or fittings to faulty air-conditioners or garage remotes. These kind of repairs should not be ignored as there have been numerous cases of compensation awarded to tenants in court for amenities that were included in their lease that were proven to be faulty during a tenancy.
Key Takeaways
Investors should not bury their head in the sand when it comes to repairs and maintenance. Depending on the type of repair, tenants may be permitted under legislation to arrange for repairs to be carried out and the costs to be invoiced back to you as the property owner.
There have also been numerous cases in tribunals where tenants have been awarded considerable compensation for the loss of certain amenities so delaying or neglecting repairs and maintenance at your investment property can be costly.
When will our tenant's rent be paid into our account?
Tenants are required to be in advance with their rental payments, however the frequency with which they pay their rent can sometimes fluctuate. More often than not, the frequency of a tenant’s rent payments coincide with their employment wages being paid. This will vary from person to person.
Your property manager should suggest to any new tenant who is paying their initial rent payment to include any additional rent up to and including their next pay day. This will align each corresponding pay day to the amount of rent they owe to ensure a consistent calendar of rent payments is set up right from the start.
Key Takeaways
Your tenant’s rent payments may not always align with your mortgage repayments so to ensure there is no confusion during the tenancy, it is important to discuss with your property manager the frequency and estimated dates of each rental payment based on their discussions with the tenant. Ask your property manager how often they disburse funds to their clients. Is it monthly, fortnightly, weekly? Often they can be flexible to your needs.
Who is responsible for paying the utility bills?
One of the most common disputes in a tribunal is about the responsibilities of both parties relating to paying for utilities such as water, gas, electricity and telecommunications. These responsibilities will depend on a range of considerations including your dwelling type and council laws.
The way in which your property is set up with relation to metering will also impact on the responsibilities of both the landlord and the tenant. For example, in Queensland there are a set of steps that must be taken and fittings installed to have a qualified trades-person certify your home as water efficient before you can charge your tenant for 100% of water consumption.
Key Takeaways
There are many deciding factors that will determine who will pay for utilities at your investment property. You should speak with your property manager about your legal obligations to understand what you can and cannot charge a tenant for your specific property.
What happens if we decide to sell during a tenancy?
The rights and obligations of both the tenant and the landlord including notice periods differ depending on whether your tenant is on a periodic tenancy or fixedterm tenancy. A tenant cannot be forced to vacate the property just because you have a buyer. There are legal obligations that must be met to terminate both a fixedterm and periodic agreement.
The sale process can impact on the tenant’s “quiet enjoyment”, a term referred to in tenancy legislation as a right of the tenant during their tenancy. The sale process can often result in an unhappy tenant who may become uncooperative during the time the property is for sale.
To encourage the tenant to cooperate fully with the marketing strategies and inspection times, and to have the property clean for inspections, these popular options may be considered:
• Consider offering the tenant a cleaner to come once a week before the open for
inspection. It is money worth spending and a good way to keep the tenant on
side.
• Offer compensation to the tenant by reducing the rent payable for the selling
period.
• The recommended method of compensation to tenants for rent is via a Rent
Rebate.
• Understand the following legislation, rebate concept and system involved for a
Rent Rebate and discuss the process with the lessor so they understand how it
would work.
• Consider selling via your property management agency as they will have full maintenance history of your property which a new owner will appreciate.
If you know there is an intention to sell the property prior to a tenant moving into your property, you must advise your property manager as there are legal requirements relating to notices that must be issued prior to the tenant signing their agreement.
Key Takeaways
The selling process with a tenant in place is a delicate and sometimes unpredictable situation. You should work very closely with your property manager to ensure the process is handled with utmost care. Besides the benefit of having them communicate with your tenants on your behalf, there are numerous benefits that they can provide to potential buyers, such as copies of the maintenance history of rental appraisals.
What happens if my tenant doesn't pay their rent?
Rent arrears can impact on the performance of your investment property and your emotional wellbeing if not managed correctly. Bad things can happen to good people and should your tenant find themselves in financial struggle or stop paying their rent for any reason, a diligent rent monitoring system will ensure that you as the landlord are not out of pocket. This includes checking rent payments daily and issuing the appropriate notices as permitted by legislation.
The software your property manager uses should provide a daily report of any rental arrears. The legislation is clear about when the formal notices can be issued, however your property manager should have a detailed arrears follow-up process and should be working with the tenant pro-actively to resolve any rent arrears from day one. Some tenants genuinely may have forgotten to pay their rent if they don’t have an automatic payment set up so if it is left until when a notice is issued, the relationship with the tenant can become quite negative.
Key Takeaways
The key to effectively managing rental arrears is to have a daily monitoring system and proactive communication with the tenant. Handled with negativity, the tenant may end up causing more headaches for you than just rental arrears. Insurance payouts or court orders may be affected if the correct notices are not issued in line with the legislative requirements, so a thorough knowledge of the time-lines and proactive approach to handling rental arrears is critical.
