Posts

Repairs, Maintenance & Fair Wear & Tear

16 September 2020

Taking care & looking after a rental property is a shared responsibility between tenants, landlords, and the Property Manager if managed by a Real Estate Agency.

The landlord is responsible for ensuring that the property is fit to live in and that repairs and maintenance are completed so that the property is in a reasonable state of repair. The tenant is responsible for keeping the property reasonably clean and undamaged and leave it in the same condition it was in when they moved in (fair wear and tear excepted). If the property is managed through a Real Estate Agency, then the Property Manager will act on behalf of the Landlord and will ensure that the property is fit to live in and is the go-to person, for the tenant to report any repairs or maintenance issues that arise during the tenancy.

What happens when maintenance and repairs are needed?

A tenant should contact their Property Manager or Landlord (if not managed by an Agency) as soon as possible and report the maintenance and/or repairs that are needed.

The Property Manager will need to identify how the maintenance and/or repair came to light. Was it due to damage caused by the tenant or just wear and tear?

If it was damaged caused by the tenant, then the tenant will be responsible for the reasonable cost of repairing, restoration and/or replacement to rectify the damage, however, if it is wear and tear, then the landlord will bear the costs.

What is ‘fair wear & tear’?

Fair wear and tear, is a term for damage that either naturally or inevitably occurs as a result of normal use and/or ageing. Another way to look at it is, fair wear and tear is damage that occurs even when an item is used competently and with care and proper maintenance. This covers property fixtures and items that deteriorate over time due to daily use and/or ageing.

Some of these are:

  • Worn kitchen benchtops
  • Worn handles or hinges
  • Scuffed flooring on the carpet on high traffic foot areas

On the other hand, it is not, wear and tear when the damage to the property is due to an accident, negligence, or even malicious.

Some of these are:

  • Burns on kitchen benchtops
  • Holes in the walls
  • Stains or burn marks on the carpet

As an example, carpet has an expected lifespan of 10 years, and therefore wear and tear consistent with its lifespan is expected, so daily walking on the carpet will result in wear and tear.

However, excessive staining, like from a spilled glass of red wine would not be considered ‘fair wear and tear’.

Somethings aren’t always as clear cut, so your Property Manager will need to apply some common sense and ask the right questions in order to make an informed decision on whether or not the damage is ‘fair wear and tear’.

Saying that fair wear and tear is not always something that requires repair, but simply needs to be taken into account based on the age and economical life of a fixture or fitting. Fair wear and tear always has to be a consideration, for example, at a final inspection at the end of a tenancy.

‘Fair wear and tear’ forms part of a Lease Agreement

The NSW, Residential Tenancy Agreement (Lease Agreement) and the NSW, Tenant Information Statement both reference the term ‘fair wear and tear’. Fair wear and tear is the responsibility of the landlord, and tenants are not responsible for paying for ‘fair wear and tear’, however, tenants need to be aware that it is there obligation to leave the residential premises as nearly as possible in the same condition, fair wear and tear excepted, as at the commencement of the tenancy.

There is though, excessive wear and tear, which takes into account, how long tenants have resided in the property or how long it’s been since things like repainting or flooring have taken place.

Excessive wear and tear, is wear from use that isn’t normal and that can come from a lack of overall care taken or just too many people residing in a property, above what has been agreed, as noted on your Lease Agreement.

Tenants need to be mindful that the cost of repairs, or the restoration of, the premises or goods leased with the premises if it is a result of damage caused by the tenant, other than ‘fair wear and tear’, may be deducted from the bond.

Landlords, what you need is a Property Manager that knows the difference and can step in accordingly, and tenants, you need a Property Manager that’s willing to take the time to Inspect the property and explain what’s what.


Antonio Mesiti is the Principal & Property Manager at The Management Agency, a local Property Management specialist offering a one on one and end to end service for his Property Investor clients. For more information visit; https://themanagementagency.com.au/about/

Rental Properties. What you can & can’t claim

It’s not uncommon for landlords to be confused about what they can and can’t claim for their rental properties. What often seems to make perfect sense in the real world does not always make sense for the Australian Tax Office (ATO).  

The Team at Simeoni Accountants have highlighted some key common problem areas in their blog below;

In general, deductions can only be claimed if they were incurred in the period that you rented the property or during the period the property was genuinely available for rent. This means a tenant needs to be in the property or you are actively looking for a tenant. If, for example, you keep the property vacant while you are renovating it, then you might not be able to claim the expenses during the renovation period if it was not rented or available for rent during this time (there are some exceptions to this general rule). There needs to be a relationship between the money you make and the deductions you claim.

Here are a few common problem areas:

Interest on bank loans

Only the interest on repayments for investment property loans, and bank charges, are deductible – not the actual loan itself. Also, if a loan facility is used for multiple purposes then only some of the interest expenses might be deductible. For example, if some of the loan is used to acquire or renovate a rental property but further funds are drawn down to pay for a holiday then this is a mixed purpose loan and an apportionment needs to be undertaken.

Repairs or maintenance?

Deductions claimed for repairs and maintenance is an area that the ATO is looking very closely at so it’s important to understand the rules. An area of major confusion is the difference between repairs and maintenance, and capital works. While repairs and maintenance can often be claimed immediately, the deduction for capital works is generally spread over a number of years.

 

Repairs must relate directly to the wear and tear resulting from the property being rented out. This generally involves restoring a worn out or broken part – for example, replacing damaged palings of a fence or fixing a broken toilet. The following expenses will not qualify as deductible repairs, but are capital:

  • Replacement of an entire asset (for example, a complete fence, a new hot water system, oven, etc.)
  • Improvements and extensions where you are going beyond the work that is required to restore the property back to its former state

Also remember that any repairs and maintenance undertaken to fix problems that existed at the time the property was purchased are not deductible, even if you didn’t find out about the problem until later.

The sharing economy

The deductions you can claim for ‘sharing’ a room or an entire house are similar to rental properties. You can claim tax deductions for expenses such as the interest on your home loan, professional cleaning, fees charged by the facilitator, council rates, insurance, etc. But, these deductions need to be in proportion to how much and how long you rent your home out. For example, if you rent your home for two months of the financial year, then you can only claim up to 1/6th of expenses such as interest on your home loan as a deduction. This would need to be further reduced if you only rented out a specific portion of the home.

Friends, family and holiday homes

If you have a rental property in a known holiday location, the ATO is likely to be looking closely at what you are claiming. If you rent out your holiday home, you can only claim expenses for the property based on the time the property was rented out or genuinely available for rent and only if the property was not actually being used for private purposes at that time.

If you, friends or relatives use the property for free or at a reduced rent, it is unlikely to be genuinely available for rent and as a result, this may reduce the deductions available. It’s a tricky balance particularly when you are only allowing friends or relatives to use the property in the down time when renting it out is unlikely.

A property is more likely to be considered unavailable if it is not advertised widely, is located somewhere unappealing or difficult to access, and the rental conditions – price, no children clause, references for short terms stays, etc., – make it unappealing and uncompetitive.

Blog via; Simeoni – Small Business Accountants.

Contact the team at Simeoni or your trusted accountant if you need any further advice.

Antonio

A beginner’s guide to depreciation

Property depreciation is a complex topic for Property investors and a topic that’s best covered by going straight to the Specialists, being BMT  Tax Depreciation. So here’s their beginner’s guide to Depreciation. What it is, how it works and how investors can use it to take full advantage of the deductions that they’re entitled to. Of course, shared with their express permission.

Depreciation is the natural wear and tear that occurs to a building and the assets within it over time.

Property investors are entitled to several taxation benefits however many fail to take full advantage of the depreciation deductions available to them.

While most investors are aware of claims for expenses such as interest on their loans, council rates, property management fees and repairs and maintenance costs, depreciation is a hidden factor often not considered.

To help you better understand property depreciation, here are the answers to some of the most frequently asked questions.

What is property depreciation?

As a building gets older, its structure and the assets contained within it wear out – they depreciate. The Australian Taxation Office (ATO) allows owners of income-producing properties to claim this depreciation as a tax deduction.

What can you claim?
Depreciation deductions are split into two distinct categories:

  • Division 43 capital works allowance
  • Division 40 plant and equipment depreciation

The capital works allowance relates to claims for the wear and tear that occurs to the structure of the property and any fixed items. Capital works includes items like the roof, walls, doors, kitchen cupboards, bathroom tubs and toilet bowls.

Generally, any residential building where construction commenced after the 15th of September 1987 will entitle its owner to capital works deductions. These deductions can be claimed at a rate of 2.5 per cent per year for up to forty years.

Owners of buildings constructed prior to 1987 should still find out what deductions are available, as often these buildings have undergone some form of renovation which can result in capital works deductions.

Plant and equipment depreciation can be claimed for the easily removable fixtures and fittings found within the property. There are more than 6,000 different depreciable assets recognised by the ATO, including items like carpet, blinds, air conditioners, hot water systems, smoke alarms and ceiling fans. Each plant and equipment asset is assigned an individual effective life and depreciation rate.

Under current legislation, owners of second-hand residential properties who exchanged contracts after 7:30pm on 9th May 2017 cannot claim deductions for previously used plant or equipment assets. Investors who purchase brand-new residential and substantially renovated properties, commercial real estate or add new plant and equipment assets to a second-hand residential property can still claim substantial depreciation deductions.

How will claiming depreciation help an investor?

As the owner of a residential investment property, claiming depreciation deductions can make a big difference to your cash flow.

During FY 2018/19, BMT Tax Depreciation found residential clients an average first year claim of almost $9,000.

A BMT Tax Depreciation Schedule covers all deductions available over the lifetime of a property to ensure you maximise your cash flow and is 100 per cent tax deductible.

What is involved in completing a tax depreciation schedule?

BMT Tax Depreciation start by collecting the basic information needed to prepare the schedule. This includes simple details like the name you would like to appear on your depreciation schedule, the property address, purchase information and your property manager and accountant details.

Then, a property inspection is conducted. To make this as easy as possible, BMT can contact your property manager or tenant directly to arrange access to the property. A property inspector will count, measure and photograph all depreciable assets such as the flooring, light fittings, tapware and other items. All the depreciable assets found within your property will be recorded during the inspection and reported back to your local office.

From there, the depreciation and specialist tax team will review the information gathered and prepare your tax depreciation schedule. BMT can even forward your schedule to your accountant directly, saving you time.

Property investors who would like a quote on the deductions available in an income-producing property can Request a Quote online or contact one of the expert staff at BMT on 1300 728 726.

Article provided to The Management Agency by BMT Tax Depreciation.
Bradley Beer (B. Con. Mgt, AAIQS, MRICS, AVAA) is the Chief Executive Officer of BMT Tax Depreciation.
Please contact 1300 728 726 or visit 
www.bmtqs.com.au for an Australia-wide service.

I hope you’ve found this post helpful and that it’s cleared up some of the questions you may have had about Depreciation.


Antonio Mesiti is the Principal & Property Manager at The Management Agency, A local and Property Management specialist offering a one on one and end to end service for his Property Investor clients. For more information visit; https://themanagementagency.com.au/about/

A Quick word on Professional Photography

6/2/2020

You might have read a recent post I did about preparing your Property for Rent. After that’s said and done you need to consider marketing.

There was a time where agents snapped away on their camera, or iPhone, and those photos were loaded online to advertise a Rental Property.

Sometimes we’d even make a half-hearted effort to lighten them up using whatever software we had already pre-loaded on our Desktops.

Those times are dead and gone though, see for yourself. Scroll to the bottom of Domain.com.au or Realestate.com.au and you’ll likely see the listings that have sat online for weeks and weeks, the ones with the dodgy photos.

Sorry fellow Agents, I realise your landlords really don’t want to pay for Professional Photos.

Would you, as a landlord want your property to be among those?

“Professional Photography should be the bare minimum because Virtual Tours are becoming more and more common.”

Vacant or furnished, get professional photos. It might be that you can reuse the same set of photos time and time again if the property remains largely unchanged.

My professional photographer, for example, will take 5 amazing shots for $150.00, such a small investment for the difference it makes to your advertising, reach and ultimately, number of enquiries and then Prospective Tenants through the door which is the aim. Getting as many prospective tenants as you can through your property increases the likelihood of getting applicants. Keep in mind that the cost of photography is a tax-deductible expense.

Whenever I am with a potential client, I won’t push or do the hard sell to list with me because that’s not my style. I will, however, push when it comes to professional photography because of the benefits.

There are also benefits of listing your property with me, but that’s another conversation.

So potential landlords, say yes and be proud to say “that’s my investment property” when it goes online remembering that you’ve got to spend money to make money.

“Remember that with the right photos, correct pricing and ad placement on the major portals your property may not stay For Lease for long, that’s the point. The photos were not a wasted expense or effort especially when they can be reused”.

If you’ve read this blog, mention it when you list your new property with me and I’ll even go ½ on the cost.

Antonio – The Management Agency

 

NOTE:

If professional photography is going to capture any tenants’ furnishings or belongings, permission from the tenants must be sought first.

Preferably confirmed in writing, This is a new requirement included in the changes to the NSW Residential Tenancies Act which come into place in March 2020.

What does a Property Manager do?

1/11/2019

 

Ask any Property Manager that question and you’ll likely get a “What don’t we do” as a response, and in most cases they would be right.

Whilst many might think that a Property Manager’s role is simply monitoring and collecting rent, which let’s be honest, technology helps us a lot in that sense, there’s a lot that we do consistently behind the scenes that Owner’s do not always know about.

The bulk of my work, managing properties for my clients, is carried out behind the scenes, working on the finer details to ensure that their investment interests are always being looked after. Therefore, a lot of the workload is not always obvious or even seen.

If you’re weighing up if you need a Property Manager, consider what you would have to do yourself and if you would be prepared and have the time to do it effectively.

This post will also give investors a good idea of what the value is in having a Property Manager and hopefully dispel the theory that a Property Manager only springs into action when something goes wrong.

So, here’s a behind the scenes snapshot, of what I do for my clients.

 

All things Rent & Accounting Related

Collecting rent is not as simple as just that, there is accounting and a lot of compliance requirements that come with it not to mention the regulations regarding record keeping.

A lot of conversations had with tenants are surrounding rent, particularly due dates, status and the changing of payment frequency.

Reconciling missed or part-payments, following up on rent or tenant invoices, and then there is the allocation of these funds to the relevant clients. Also managing payments for client’s outgoings such as rates and bills, monitoring due dates for these payments to avoid interest and/or penalty fees.

When it comes to rent, we can’t forget regular reviews where all factors are taken into consideration to determine if and when a rent increase can be justified. Communication and compliance requirements come into play when reviewing and increasing any rents.

As an agent, a Trust Account must be in place to hold all monies collected on behalf of clients. In order to hold a Trust Account, legislation requires an agency to undertake on-going and regular self and outsourced auditing in order to be able to operate.

The technology I employ allows me to access records, documents, ledgers and transaction history from everywhere and anywhere.

This information and documentation, such as statements and ledgers need to be easily accessible and easy for all to understand.

 

Compliance

The one that scares most Property Managers is ensuring that their properties are compliant with the many rules and regulations across the Acts that we’re subject to, namely the Residential Tenancies Act (RTA) as well as the Property Stock and Station Business Agents Act (PSBA).

The RTA, for example, is reviewed every 5 years and amendments are made at this time. At times amendments may be made within the 5-year period and a Property Manager must know where all parties’ responsibilities lie within the Residential Tenancy Agreement at all times.

An agency and/or agent must ensure the Agreements used are compliant as well as our internal Practices, Policies, and Procedures.

Moreover, we need to ensure our landlords and tenants are complying with their responsibilities within the terms of the Residential Tenancy Agreement, communication and consistent follow up is needed here whilst educating landlords and tenants of their obligations.

There is also periodic compliance required for Smoke Alarms, Water Efficiency and Swimming Pools. These three areas alone need to be certified regularly by outsourced professionals.

It is imperative as a Property Manager to have a system in place which allows for regular monitoring, auditing, and record-keeping to ensure 100% compliance of the properties under management. Some aspects of maintaining records can be the keeping of notes, email records, compliance certification, etc.

In order to renew a Real Estate License, a Property Manager must undergo regular Educational training each year. However due to the nature of the role we are always learning whether it be via conferences or webinars, in order to keep up to date with changes within the industry.

 

Marketing & Securing Tenants

We always have to be at the ready when a tenant gives the notice to vacate to get started on our search for new tenants, and for me, this takes priority whether it’s a new listing or re-letting a currently managed property.

Preparing and editing our marketing to get a property online and Inspections arranged cannot be delayed regardless of the rental market as time is of the essence.

Pricing, Photography and Property Description all need to be on point.

Rental Properties need to be on the major portals in order to gain the most exposure to prospective tenants.

I aim to ensure that my listings are given a high priority with prominent positioning on the major portals that gather the highest levels of traffic.

From experience, landlords looking to self-manage, find that advertising is not that easy or inexpensive on the major portals. These landlords can also find it difficult and overwhelming to manage rental enquiries, let alone the process of securing the right tenant.

On a Recent Listing, I was receiving an average of 25 emails per day for over a week plus text messages and phone calls. Of those enquiries the end result is securing only one tenant for the property. The workload during this period can be demanding.

Beyond the initial Marketing, there are the showings, application processing, and tenant selection and therefore declining unsuccessful tenants. Then comes processes for collecting bonds, rent and preparing the Lease, Condition Report along with supporting documents and fact sheets, ensuring that all of the compliance measures have been covered for each and every property leased. Without missing any steps, they are all crucial in their own way.

 

At the Property

Regular inspections of Rental Properties are a must.

These are an opportunity to identify issues, whether they are concerns raised by tenants, potential issues that pose a risk and to forecast improvements.

Doing so is with the view of being proactive when it comes to ensuring that the property is well maintained and identifying maintenance before or as it arises. These inspections ensure that landlords are aware of what needs to be done and what will need to be done at the property, in order for it to maintain its value as an investment.

All of this needs to be communicated to the landlord within a report that is concise, detailed yet not too overwhelming. These reports document how a property is being maintained by the tenant and at the same time allows a landlord to plan ahead for any future upgrades needed.

Outside of these set inspections, Property visits can be for anything from allowing access for tradespeople, checking completed repairs, valuers, owner visits or anything that needs prompt attention.

I find it valuable to sign leases and lease renewals at the property itself as this provides another opportunity for me to view the property as well as discuss any concerns with tenants then and there.

Being mobile, available and willing to get up and go is a must. A Property Manager is the owner’s eyes and ears and that can’t be undervalued when considering the value of the investment.

 

Working with Tenants

Property Managers communicate with tenants a lot more than their clients might realise. They are essentially working for the client as their middle person. Most of the time, landlords won’t know or need to know what these conversations are about if it doesn’t require their involvement or input.

It could be a query that is easily resolved, a problem that can be solved directly but it’s a regular occurrence in any case throughout a tenancy.

My aim here is to be the client’s problem solver.

I believe in creating a courteous and open relationship with tenants so that I am always in the know about what is happening at a Property.

Therefore, being approachable and available is a must.

This is all of benefit to the owner and they can choose to be in the “know” as much as they like or opt to authorise me to use my judgment as they’re assured that I am keeping their best interests in mind.

It also goes to say that Property Managers have to have all of the difficult conversations. The rent increase and the I’m sorry the property is being listed for sale conversations etc.

 

Repairs, Maintenance & Improvements

Repairs and Maintenance are a significant part of the role. Although most are straight forward such as repairing and replacing fixtures and fittings within Rental Properties, occasionally they can be quite involved and ongoing.

For example, today it was an oven not working, a request for a Pest Treatment (standard as it warms up) but the day is not over yet.

I of course deal with Urgent Repair calls, but The Management Agency has the best tradespeople on board that has been tried and tested and will go above and beyond for me.

 

“A common misconception is that our tradespeople will charge our clients exorbitant rates, I find this is often the reverse. The trades I use are always mindful that Property Managers are the source of a lot of their work and for this, they wouldn’t jeopardize a long term and good working relationship by burning a Property Managers client.”

 

Property Managers coordinate the tradespeople, property access and expenditure whilst communicating options and approvals with clients. At the same time providing tenants with updates as well as dealing with any grievances that the tenants may have.

 A Property Manager can oversee complete overhauls of a Property and essentially become a Project Manager, to budget and time constraints.

More on that in another blog to follow.

If your property is within a Strata Complex, there are certain repairs that will be covered by Strata and your Property Manager should pass these onto your Strata Manager and liaise directly with them.  It is a Property Manager job to know whose responsibility certain repairs fall under.

 

Miscellaneous

Phew! This one could go on so I’m going to list a few odd jobs I’ve done in the last month;

  • Changed light globes (quicker and easier than claiming from a tenant’s bond)
  • Changed a Smoke Alarm Battery, beeping like crazy when I was inspecting a property
  • Multiple locksmiths trips to cut extra keys, particularly letterbox keys that always go missing
  • Ordered and installed spring pins for Plantation shutters, $5.00 on eBay instead of a min $100 call out fee. Thanks, YouTube tutorials.
  • Helped a tenant move Lounges out of a property after the owner ran out of time, arranged council to collect them
  • Left over floorboards in a Property, delivered to the owner’s workplace
  • Surface cleaning & vacuuming, yeah no one should really have to do this when they’re suited up for work but time constraints sometimes mean these things need to be done
  • Disposing of left-over unwanted items, vacating tenants can leave a lot of bits and pieces around after a move

Now!

I’m not advertising that I’ll do any of these odd things as part of my role, but when you’re tight on time or owner’s funds and something needs to be done then sometimes it’s just easier to do it yourself, then and there. Hence why the boot of my car is packed with spares parts and supplies.

 

So, it leaves me to wonder, how many Investors want to oversee, manage and generally deal with all of this and the other one-offs I haven’t touched on?

 

“Property Managers are essentially problem solvers and we use our knowledge and our many past experiences to come up with solutions for our owners and tenants.”

 

You might think, as some people have said, “How do you do that job, I could never.” Yes, I’ve made it sound tough because that’s the truth, but it is also a rewarding career and like most, it has it’s good and bad. For the most part, we’re out and about, free to move around and meet people, and when it’s fine-tuned and working efficiently it is manageable.

Similarly, to how we don’t service our own cars, some things are better off outsourced. Just saying!

If you’re weighing up if you need a Property Manager, consider what you would have to do yourself and if you would be prepared and have the time to do it effectively whilst meeting all of the legal requirements.

This turned out to be a very long post but I hope you’ve found this to be insightful and informative.

Thanks for reading!

Antonio

Sydney Rental Market Update

22/8/2019

A slight climb in Vacancy Rates is always the norm around June coming into the winter months but this June up from 2018’s 2.8% vacancy rate for the same month.

The figures don’t lie and it does represent a shift where there’s been much more supply to meet similar demand levels. Time on the market is what’s been most frustrating as tenants take their pick of what’s on offer and then making offers on rentals their interested in.

The winter months do mean a seasonal time for hibernation in a sense with not many tenants wanting to make a move unless they have to or really want to.

On the front line, I’m seeing less enquiries and fewer prospective tenants through properties overall. With some one-off offerings, that look like great value, tenants are turning up but many turn away when the offers been too good to be true.

The Key has been to keep your rent in line with other similar properties or pay the price in Vacancy, tenants will still apply if it’s the right fit but they’re looking at so many more properties than ever before looking for the best value for money, quality properties, position and access to amenities. Rent reductions have been key to getting properties occupied quickly otherwise they risk getting stagnant on the market.

Whereas usually you would see slight rent reductions done over weeks, many owners and savvy agents wanting to cut to the chase offer significant reductions knowing that some Income is better than none!

If you need any advice or want my opinion on your Vacant Property feel free to contact me.

Hoping for a more positive report next time with a little less on the market, though I know many tenants that are hoping it remains in their favour, obviously!

Personally, I feel it’s on the up much like the sales market where things are showing positive signs of improvement as is showing in July’s Vacancy Rate Survey Results, down to 3.0% from June to July, so just in time for some warmer weather. Yes the property markets are cyclical but also seasonal and Spring is just about here!

Residential Vacancy Rates (Inner Sydney):

Jan 2019        3.2%

Feb 2019        2.9%

Mar 2019       3.7%

Apr 2019        3.2%

May 2019       3.1%

Jun 2019        3.4%    June 2018      2.8%

July 2019       3.0%

Things are looking up just in time for Spring.

Antonio 🙂

 

A Landlords Rights & Responsibilities – the brief run down

25/7/19

At some stage in the near future it will be a requirement that all landlords read and sign a disclosure that they have read and understood their rights and responsibilities – BEFORE – a lease can be signed but ahead of that I’m going to outline some of these as briefly as I can keep it.

I would be confident in saying that the majority of landlords would be well aware of their responsibilities and even their rights as a landlord and where I’ve come across that don’t, I feel it’s a Property Managers duty to educate and inform their landlords along the way. This ensures landlords are not unknowingly breaching their responsibilities as well as protecting their rights.

I think it comes down to a Property Manager looking after their clients Best Interests which in turn also ensures the property and its tenants are looked after as well.

TIP: Ask for a copy of a Blank Lease Template and you’ll be able to read everything that you’re technically agreeing to as a landlord.

So, I’ll keep this post really simple and lay out what an owner should / needs to be doing to look out for themselves first and fore most and for any tenants reading, this applies and assess who’s looking out for you!

  • Be Selective with your Property Manager, do not base a final decision purely on fees. You get what you pay for- always. You need to pick someone that’s efficient and communicative.
  • Present your property in the best way you possibly can to attract the best possible tenants
  • When selecting a tenant, you can choose the best applicant for your property, but you cannot discriminate purely religion or race.
  • Each and every repair is your responsibility (aside from standard light globes) try and have all repairs up to date before tenants move in.
  • Leases can be for 6 or 12 months, longer leases can be negotiated though
  • Landlord Insurance is highly recommended, with a bond consisting of 4 weeks rent it’ll do little to cover your financial losses in many possible scenarios
  • All repairs should be action as soon as possible with express requirements of Urgent Repairs. In any case, all should be acknowledged and tenants informed along the way. Your agent should be given your instructions on how to act should they not be able to contact you.
  • Smoke Alarms should be checked annually, an owner’s responsibility, all agents will recommend outsourcing this for a small annual fee. Invaluable for peace of mind!
  • Pets are more common than not these days so be open to the possibility; many apartment buildings have an approval process in place but you have the ultimate say. Give Pets consideration in order to open up your property to so many more prospective tenants
  • Your agent will do periodic inspections of the property, you should think of these as monitoring the condition of the property and how it is being maintained. These inspections are not necessarily to check the tenants living habits unless they are damaging or causing excess wear and tear.

Landlords, It’s not always fun. I called an owner the other day and had to promise her next time I called her I’d give her good news because it’s been challenge after challenge of late. So I called her and gave her my own personal good news, my wins for that week.

I get it, sometimes we just need to hear something positive and not just be thrown issue after issue.

And that’s what you have to do, roll with the punches. It’s not always satisfying to have tenants because of the rental income. The income goes straight away to mortgages, rates and bills, but having a happy tenant and a smooth-running tenancy can be very satisfying for many landlords.

You don’t always reach that point where all parties are consistently happy but if everyone is meeting their end of the agreement then that, is the bare minimum we should always all expect.

If you have any questions about this Post or anything else Property Management reach out to find out more about my services or simply if you just need to know where you stand!

Curious to see a copy of a Draft Lease, Email me and i’ll flick one straight back at you.

Antonio

Buying into ANY Strata Building

27/6/19

I recently posted a blog covering what to look for when buying into a NEW Strata Building and I had promised a more general post about buying into a Strata Complex that’s existing.

In light of the recent Mascot & Opal Towers matters I thought it needed to be written, aside from all that we’re hearing in the media, there’s a lot here but it’s worth noting all of these points!

I’d really recommend reading this and as much as you can before going out to look at apartments, you simply can’t afford not to. We now have in Mascot, uninhabitable properties where leases are easily broken and owners paying mortgages and extra levies with no income and a property they cannot occupy. I can not imagine the toll this is taking on peoples lives.

One thing that sticks with me is that we as Australians have more consumer rights and guarantees for an appliance than an apartment. Think about that for a second.

FACTS:

  • In NSW alone about 15% of the population live in Strata Apartments that’s over 1.1 million residents in NSW  according to the Australian National Strata Data 2018 report carried out by UNSW and Strata Community Association
  • A massive 48% of these are occupied by tenants
  • Nationally it’s 2.2 million so NSW holds a huge portion of Strata residents

As a Property Manager, property in Strata titled complexes i.e. a Strata Plan, make up the majority of rental properties managed for many agencies and many investors specifically choose to buy into a Strata Plan for their investment property.

So why do I invest and think others invest in apartments specifically?

When you buy into a Strata plan, you’re effectively buying allocated airspace, aside from what’s affixed to the floors and walls those structural floors and walls are owned by and therefore maintained by the Strata Plan.

So, if you get your airspace and fit it out well and maintain your fixtures and fittings then you essentially have less maintenance and easily lettable space, for everything else that’s a common area issue you can report that to your Strata Managing Agent but be aware of all of the following!

As an investor, your property manager should know what’s what and do the liaising on your behalf with Strata.

Essentially, I believe that if your property in a Strata Plan is in a good location and that the complex itself appears to be well maintained then you have a good investment but there are a few things to look out for and be vigilant about before committing;

Check the By-Laws              

Each Building has a set of By-Laws, rules to live by, that apply. A lot of these are standard but you need to know what’s allowed and what isn’t. Look for things like Pets, when you can and can’t move in and out, smoking etc. Definitely read through them all. Tenants MUST be provided a set of the By-Laws when they move in.

Carry out a Strata Search with Budget Forecasts included

Any Strata Building has running costs as well as forecast future upgrade costs. Make sure that the building has built up a healthy fund known as a Sinking Fund, that shows a decent balance for what the building will need down the track. New lifts, painting and sprucing up. Low balance and when necessary upgrades come up all owners will be hit up for some quick fund raising regardless of when you bought in. These searches will also show how good everyone else is at contributing or do are the arrears huge. Your conveyancer / solicitor should be able to seek and assess a Strata Search.

You’ll need to check some of the past meetings, you need to know what’s going on and that there is an owners committee that cares about the building.

I’d also be looking through as many common areas as you can, look for cracks, signs of damage or poorly maintained areas. It could be an indicator for a building where not a lot gets done!

Check if there are any capital works proposed or that might be needed.

This should be highlighted in the Strata Search and noted by your solicitor or conveyancer but you want to question and know if any major projects are in the works that might be at your expense. Things such as dealing with upgrades or concrete cancer involve a lot of work and long-term expense. They also highlight that the building may have issues that you don’t want to be part of or that won’t make it worthwhile investment. If you’re set to lease this property then you want to make sure that there’s nothing in the works that will be an ongoing inconvenience or turn off to potential tenants.

Any other planned developments in your area

Is your view going to be obstructed or street parking set to be lost due to a new complex going in? These are all things you need to know and can find out by filtering through Development Applications via your local council online or by calling. Take a walk around the area and try to pin point land that might be slated for redevelopment, this can effect infrastructure down the track and the availability of local resources. We’re also hearing a bit too often of damage to existing buildings when a new one goes up close by

How much are your Strata levies?

Now this directly affects your bottom line, each and every quarter. The more amenities the building has the more the levies. Do you need or want access to a pool or onsite building manager? Those costs go up over time and not down as does the upgrade of elevators the more a complex has the more it’s going to cost to upkeep and that’ll come down to how the sinking fund looks now and is maintained. Lots of Strata plans need to enact Special levies to raise money when necessary upgrades occur so you need to be aware of what the building will need down the track and be prepared to contribute. You therefore can’t always budget on the current levy amount as some buildings see that rise year on year, to one of my investments there’s been a 45% increase in 7 years.

Design & Appearances

Appearances, you know, can be deceiving. You need to have a thorough look at the building  and look at it as an outsider. Ask yourself:

  • Impression as you walk up to and through the building
  • Is it well presented and maintained, lawns and gardens tidy
  • Do the exterior, internal or common area walls have any issues like cracking, peeling or running paint etc.
  • Pay attention to the materials used internally and externally as well as the overall quality of the construction. If in doubt take someone along to inspect with you
  • If possible, research the developer, check out their other sites, their overall build quality and reputation. Good to see how other builds are holding up down the track, They NEED to have a good track record.
  • Is the car park well lit and dry? If it’s not dry then find out why

Internally you want to make sure the apartment itself has a good layout, light throughout the day and air flow are specifically important. Tenants look for these things. Make sure bathrooms have some form of ventilation preferably a window or at the least an exhaust fan. Not all apartments are the same, you want to make sure the bedrooms are reasonably generous and the living room. An internal laundry or fixtures for a washing machine at the least are valuable additions.

If parking is a feature then check its location and accessibility as well as the carpark generally, is it well lit, laid out and reasonably maintained.

Lastly on this point. You need to consider your ideal tenant that you’re seeking and it needs to appeal to that demographic, families, couples and singles all have differing needs so consider that when factoring in the location, size and layouts.

And FINALLY

Don’t look at an apartment and fall in love, really look around and ask questions. Do all of your due diligence and one would hope that you buy into a (hopefully) hassle free strata complex. Ask agents, ask Strata Managers and people in the area for advice on building history.

There’s a lot to think about, along with financing your purchase but these are valid points you need to consider before committing. If it will essentially be an investment property then you don’t need to be able to live there yourself and you personally don’t need to live it but it needs to be attractive to future tenants and have the right layout and management behind it, to make it a worthwhile investment in the long term.

It’s obvious that with the recent events impacting Opal & Mascot Towers that reforms are needed when it comes to Building Regulations which are finally being looked at. You can read the latest here on what’s being proposed by the NSW Government to step in and get involved on this important issue.

Happy to help with any advice you might need.

Happy Buying- Antonio

To Furnish or Not to Furnish your Rental Property

15/5/2019

This gets asked a lot.

A few months ago, I was reading “The Subtle Art of not giving a ^%$” and something stuck, not quoting word for word but the message came across clearly, the more we have in life the more we have to maintain, the more we have on our plate and more to manage. This really applies here as well. Also, well worth a read!

At several stages over the years where managing furnished properties I’ve had to call owners about replacing or upgrading furnishings. I remember one time where a landlord was outraged, they had to replace a vacuum cleaner that had stopped working, from memory to appease them off to The Good Guys I went to get a new vacuum cleaner. I always say though, the more you leave within a property the more responsibility and upkeep costs you have as a landlord and that goes for anything you provide with your rental property at the outset.

Leasing furnished properties is really the exception and not the rule, furnished properties being offered with Residential leases are not come across by on the regular.

Believe me the costs do come, a Fridge that’s worked fine for years will need new seals or re gassing, a chair may break and so on.

So if you really do want to lease your property furnished or with any inclusions that’s something to be aware of. As an agent the upkeep and management of a furnished property is a lot more involved, thorough inventory reports are needed to be provided with the properties for one thing and maintenance will be more regular.

From a tenant’s point of view, it’s quite clear cut, a tenant will either want a property furnished or unfurnished.

If you as a landlord want to leave a one-off appliance, most commonly a fridge or washing machine then your Rental Listing should indicate that and prospective tenants told by the agent when viewing the property. That one-off inclusion then just needs to be listed on the In going condition report and photographed- and the responsibility to maintain will be on the owner of course.

Interestingly, In my experience owners are relocating and don’t have use for their furnishings and are not purposely furnished for leasing, so the key is here, removing any personal and precious items. I once appraised a property in Redfern that was complete with Antique and beautifully details furniture and bric a brac, I had to walk away from that one sensing the owners attachment to their pieces.

Want to lease your property furnished? Here’s some pro’s and cons’

PROS

Owners are likely to save time, money and effort. i.e.  removalists and ongoing storage

If it presents well then it can help when leasing vs presentation of a vacant property

Rent achieved (maybe) slightly higher, dependant on overall presentation and quality of included furnishings

CONS

Owner is responsible to maintain anything included with the property, furniture and appliances

Furnishings are subject to wear and tear and upgrades and replacements will be needed

Prospective tenant pool is decreased, more tenants demand long term and unfurnished property

Increased change over in Tenants, tenants seeking furnished properties typically want shorter leases and not long-term tenants. They maybe on short term work contracts, travelling etc.

Agent costs may be slightly higher due to increased initial and ongoing work required

You will need to be flexible; some tenants will want to negotiate what stays and what goes

The time frame in which to lease the property is typically longer, although this can be seasonal and dependant on your pricing and overall offering

TIPS

-Be open to un-furnishing or partly if the ideal tenant comes along and present this option in your advertising if you want to make that available to prospective tenants.

-Find the right agent that wants to help with your furnished property and knows what they need to cover in terms of documenting the tenancy and properties condition and inclusions. Someone that already manages furnished properties already.

-Furnishings and overall colour scheme will have to be neutral with some key points of interest such as art, great rugs and homely touches. A complete IKEA display suite might not attract tenants.

While I don’t absolutely love or loathe working with furnished properties and only manage 3 furnished properties, there is more work involved, more to think about and always a smaller target market looking for furnished properties. As an owner you need to decide if your property and your needs will align with the that target markets needs and wants.

I also feel that it’s in the owners best interests to have a longer lease, less to maintain and therefore less ongoing costs when considering that there are turn over of tenants and therefore agency costs and the usual risk of vacancy between tenants.

Patience and persistence is key, to find the right tenants and my main goal is to find tenants that will sign a 6 or 12 month lease and plan to stay on for a reasonable amount of time. The main reason being to prevent a cycle of turn over that’s costly to the landlord and at the same time we’re preventing wear and tear and unsteady or unpredictable stream of income.

Lastly though I think some properties are better suited than others to be leased furnished so worth getting an agent through that can assesses the pro’s and con’s of your particular property.

Have I missed anything?

A 🙂

Buying off the plan and into a New Development? Read this!

26/4/2019

With so many New Developments being delivered in and around Sydney many of these new properties are being bought as investment properties, I’ve heard estimates of 200,000 new properties being completed this year alone.

It’s likely that this trend will continue, having been the first property manager to oversee the hand over, leasing and ongoing management of several new properties I thought it’d be useful to share my experiences of some common occurrences when buying new.

This is also a post that maybe a few of my clients would’ve liked to have come across before they had purchased, they’re Investment property off the plan or in a Newly completed building.

This isn’t to say in any way that they’ve made a bad decision but there are somethings that a developer or selling agent won’t tell you. I don’t sell so have nothing to lose!

Further to that, as a Property Manager it’s on us to foresee these issues where possible but some have been new and surprising, even to me.

NEW BUILDINGS MEAN, NEW…

  • …Defects

A new building is not and never without some form of defect or defects but owners and agents will be provided with a guide on how to deal with these and they should be reported as soon as possible to the appropriate person.

New Buildings are increasingly improving their procedures and the information they provide at handover.

Defects can be anything from patchy paint work, doors that don’t line up, appliances not connected (it’s happened) leaks or any number of teething issues.

The first tenants will likely pick up on these as they start to settle in so it is crucial to make sure tenants are assured that you want these issues reported and as soon as possible so that these defects do not become the owner’s responsibility down the track.

 

  • …Rules

Move ins (and outs)

Many newer buildings now require that tenants pre book they’re physical move in date along with a timeframe, some even require that tenants leave a deposit in case of any damage to common areas.

For the most part it’s to ensure that there aren’t an excessive number of move ins at any one time, or that the move will disturb other occupants. It also allows the building managers time to put up protection curtains within the elevators or assign a lift for the tenants use.

It’s also important to know if the building doesn’t allow moves over the weekend- have been caught out there, and never again. Weekends are tenants preferred move in dates so new tenants need to know well ahead of time and generally book well in advance is as they will decline requests where there are other bookings already set.

 

TIP: Make sure your agent has the appointed Strata Manager and/or Building Managers details so that they can obtain all the information they need.

 

Keys

Security keys, swipes and access cards are strictly limited in newer buildings where the aim is to really ensure the building is only accessed by those that need access. Definitely something to be mindful of if you have 3 Tenants, and your access limit is 3 security passes per apartment- this means no spare set available. See Costs sub-heading to follow!

 

By-Laws

Every building has its own set of By-Laws, these always need to be reviewed but especially within a new complex so things like I’ve mentioned above can be picked up.

New Properties should come with an Owners Guide which will include;

-By Laws

-Contacts for Developers, Builders, Strata and Building Managers

-Instructions relating to appliances and fittings

-Procedure for reporting issues, defects

 

Worthwhile sharing with your tenants as well!

 

  • …Costs

You’ve paid for a brand-new property but are there hidden costs? Well there may be.

If you have more tenants on a lease than you have security keys these need to be provided to all tenants listed on the lease, some buildings limit how many they’ll issue to each property- that limit could be just at settlement or a limit imposed permanently.

With a new building, will come a New Development Charge if your tenant wants to be connected to the NBN. Currently $300.00, as to who’s responsibility it is to pay is highly debatable. While the lease will state it’s the tenant’s responsibility, a lot of advice on this leads to fact that owners “should” reimburse tenants as that connection will remain with the property long after the first tenants have moved.

Does your property come with Blinds?

A worthwhile question asking at the point of purchase or you’ll need to provide these for tenants and arrange them once you have possession. From my experience most New Developments don’t come with any window coverings.

Repairs are inevitable with all rental properties and one would think that with a new property there would be little to maintain, and you would be right as most repairs would come under defects so reporting these are crucial in the first weeks.

 

  • & Look out for!

When doing your Pre-Settlement Inspection, which should be the time you’re looking for defects is to take a close look at the finished paint job.

Not only obvious patchy paint work but it’s sometimes obvious that new apartments are only given one undercoat and one coat of paint, you’ll be able to tell by the appearance and it is especially obvious on any internal door frames.

Have a feel of bench tops surfaces and floor boards, while everyone loves the look of raw materials in many cases, I’ve seen unsealed surfaces that are no good when it comes to every day spills and these materials will soak up stains. While the builders may not rectify this it’s something that should be detailed at the time of purchase, specifically materials and finishes. Whatever assurances or inclusions are promised- get it in writing!

 

TIP: Agents need to make sure that the Strata & Building Managers know who is managing the apartment and ahead of any tenants moving in. They need contacts in order to resolve any issues.

 

  • …Competition

When a new building gets its final tick of approval, AKA an occupation certificate, new owners will rush to get their keys.

Then the individual properties will start to surface on the rental market and where the properties are all new and appearing online one after the other, pricing is everything.

Your pricing really will be based on how your property sits against the others. Is your floor plan more practical and spacious? Do you have a better aspect?

What I did in a recent situation was unashamedly attend the competitions inspections, being upfront about who I was of course to see where we sat compared to other properties and priced it accordingly.

Thinking as a tenant though, if you’re looking in a new building, you’re also likely to have a look at as many available properties as possible and they’re likely to have their pick based on preference.

 

TIP: If you’re paying for professional photography, have your photos watermarked with the agent’s logo- or it’ll be a free for all to use- at your expense.

 

Up Soon –  I’ll cover some General Tips for Strata Buyers