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What to expect when you’re a landlord

So, you have an Investment Property or you might be thinking about getting one? Well, I also find that a surprising number of property owners inadvertently become investors (or landlords) because they’ve moved out of one property into another and subsequently lease out their previous home.

Also increasing, is the number of rent-vestors where landlords are renting out their properties but are renting themselves elsewhere simply because the property that they own doesn’t meet their needs usually because of size or the physical location.

Whatever the way a landlord has become one there is obviously a stigma that landlords sit back, collect rent, and enjoy financial freedom. Sure, a property owner has a valuable asset but I’m sure we all realise that with any asset comes risk and other costs associated with holding an asset. Sure, there are landlords that are corporations, investment, and super funds but across the Residential Property Market in the suburbs across Sydney the majority of investors are what are typically known as the mum and dad investors – surely there’s a better way to describe them as they’re not all mums and dads. They are retirees, they are singles and couples, they are young and they are old(er).

Back to my point and don’t come at me, I will run a similar post for tenants of course, but landlording is not fun and games, and sitting back and watching the rent roll in. It’s just not.

How do I know? Because I’m the deliverer of all news to landlords. The good, the bad, and the ugly and to be honest sometimes sharing good news is rare and infrequent.

So, here’s my guide, in just a few points, to landlording.

1. The Property Manager

Firstly, if you feel that you can DIY this role, I would think again. With the number of non-negotiable compliance steps, you run great risks of missing several of these steps and many are unclear, grey areas that any good Property Manager will have policies & procedures in place for.

Secondly, interview or have a discovery call with a couple of Property Managers, read reviews and get a feel of how responsive they are. Responsive & communicative but beyond trying to lock you in as a client. Also, find out who you’ll be working with, I’ve covered this many times before in blogs and my tips, but find out who is managing your property aside from who is onboarding you to the agency. Many agencies use business development staff to list and onboard properties but then pass clients on to a Property Manager, and unfortunately, you are unlikely to choose who that is and it’s likely that your preferences and other general information are lost in the process.

2. Setting the Scene

From the get-go, you should be clarifying and locking down your instructions and preferences in writing to your agent. How do you want repairs and maintenance handled, do you want to attend the occasional inspection, how involved you want to be is up to you but also make clear your non–negotiables and you should be comfortable enough with your chosen agent to let them know your expectations. For clarity, we ask for Special Instructions in writing and include as many of these as we can in our Exclusive Managing Agency Agreement.

3. Expect the Unexpected

It is normal that you might see your Property Manager’s name appear on your phone and think “What Now” or something a little more colorful. It’s always out of the blue and it may result in an expense, but not always. Unfortunately, hot water systems burst and tenants have requests that need to be passed on. I think it’s good to always be prepared for the next hurdle. There will be hurdles but if you have a good Property Manager then they should present the hurdle, offer some solutions, and then seek your instructions on how you wish to proceed. You obviously have the end say and can implement your own ideas too. Don’t feel pressured to make rushed decisions unless it is an Urgent Repair, as in that case, you will need to make a quick decision.

Unless you’ve expressly advised your agent of your preferences on how to handle any matters, they will be seeking your instructions and this will require a landlord’s input and therefore a reasonable degree of responsiveness. If you have instructions on communications then these should be made known i.e. if you prefer calls, emails, or texts, your Property Manager should and will become accustomed to how you work as well.

4. Compliance is Everything

Being uncertain about compliance or your compliance status can weigh on people’s minds but it’s about outsourcing these tasks & maintaining appropriate Insurance coverage. Get the right insurance but don’t think that you can manage smoke alarms or water efficiency compliance on your own. Along the way, Electricians, plumbers, or other trades might make suggestions that need to be considered but not all are immediate. “Landlording” comes with a lot of “paying for peace of mind” or “throwing money at the problem”. Ok so not throwing but we can’t mess around and don’t when it comes to smoke alarms and your agent’s job is to guide you on these. There are many other compliance steps that can result in your lease being invalid, or open to insured events not being covered. If you don’t dot your i’s & cross your t’s along the way then there will unfortunately be a price to pay for that down the track. So, if you’re going to self-manage it is imperative that you get very familiar with all of the respective Acts & Regulations.

5. Buffer

At some stage, you’ll need to make economic-based decisions. A dishwasher or a dryer breaks down and it may be more economical to replace it rather than repair it. So, you’ll need to make decisions on these matters and have a financial buffer to cover these repairs and maintenance items that arise. Generally, any approved expenses will be deducted from your rental income along with any other rates you’ve asked your agent to pay, meaning that each month your rental income will vary based on what’s been paid in that period. Simply put, as in life, you do need some savings so you’re not in a panic when things arise especially the unexpected.

Many agents, The Management Agency included, offer live tracking online portals, that enable you to see what funds are held and bills are pending ahead of time.

Aside from the buffer, it’s helpful for you to be aware of, or be advised of any necessary upgrades that might be needed in the short or long term, such as repainting, or any capital expenses like upgrading kitchens and bathrooms which will obviously be a cost but also add value.

6. Just go with it

While going with the flow isn’t the best strategy or tip, sometimes you just may have to. If the market isn’t meeting your desired rent, or you just can’t get on board with a piece of legislation unfortunately you just have to go with that process. Even though writing to your MP and beyond them is always advisable, there are some things we cannot change and are the way that they are. Some landlords can be very cautious when placing a new tenant in a property be that for a lack of credentials or references but there are risks in all decision-making when it comes to being a landlord and sometimes, we have to use trial and error and patiently wait to be rewarded with some peace of mind. My point, sometimes you have to make decisions on judgement or intuition and take the human approach. Also at times, you need to consider and trust recommendations that are given to you, such as updating your professional photography, thoughts on rent reviews, etc. because ideally, your agent should be knowledgeable and experienced, therefore, giving you the correct advice.

 

7. Keep an eye on things

Regardless of whom you have living in and managing your property, the occasional check-in with your Property Manager or prearranged visit to your property is always a good idea. When I say “keep an eye on things” I mean, make sure you’re checking your monthly statements for expenses and that your income is where you expect it to be, if you haven’t seen an inspection report or had the rent reviewed for some time, question why or when this might be scheduled for. Unfortunately, some level of oversight is likely to be needed for your own peace of mind but also to make sure that everyone is doing what they’re supposed to be doing. As I mentioned, making sure your property is being regularly inspected is an important one as not having regular inspections, can void your insurance.

Sure, there is much more to being a landlord than this post covers. There is financing, growth & yield to consider along with adding value and upgrades to factor in along the way. If you scroll through my other blog posts, I cover a lot about adding value and what tenants look for in a rental property as well.

Hopefully, this blog sheds some light on the stresses and stressors that being a landlord does come with and hopefully, some useful tips and ways to navigate and manage your way through it all.

Should you have any questions or if you are unsure whether your property is being properly managed then maybe we need to have an obligation-free chat. Don’t hesitate to contact me on 0411 084 634.
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– Antonio

Director & Property Manager