House prices to add another 20% if banks don’t slam the brakes
Chatter about the possible introduction of macro-prudential controls to slow house price growth is increasing, while rep...
Investors in WA are warned not to make irrational decisions with their properties during the summer months.
Blogger: Shane Kempton, CEO, Professionals Real Estate Group
A growing number oflandlords who are desperate to lease their property are failing to carry out the necessary background checks.
There were nearly 9,000 vacant rental properties in Perth – an increase of around 3,000 compared with a year ago.
Desperate landlords are effectively playing ‘Russian roulette’ with their investment property because of the risk to damage to their property by choosing the wrong tenant.
This risk will be heightened during the summer months because rental demand rises with the influx of overseas students and inter-state migrants to the Perth metropolitan area during January, February and March.
During the summer months, the rental vacancy rate generally falls in the Perth metropolitan area.
With the vacancy rate in Perth now over five per cent, a growing number of investment properties are vacant for more than four weeks at a time. In this environment, more landlords will be tempted to lease their property during this seasonal increase without undertaking the necessary tenant background checks.
For many landlords, overseas students are ‘easy renters’ because there is always a shortage of accommodation for this kind of tenant. However, unlike other tenants, students tend to take up short-term leases and are therefore less likely to maintain the property.
Similarly, the growing number of people moving from inter-state and overseas require careful background checks to ensure that they will maintain the property in a responsible manner.
Unfortunately, most landlords who manage their property make their decision on a new tenant on ‘first appearance’ basis. More than half of all landlords in Perth manage their properties themselves and unfortunately many fail to carry out the necessary background checks.
Choosing the wrong tenant can prove financially disastrous for an investor because a bad tenant could cause more than $20,000 in damage and/or fail to pay several months' rent.
First-time investors are the most likely group of landlords to play ‘Russian roulette’ with their investment property because they have overpriced their rent or could be finding it difficult to find a tenant because they have purchased a poorly located or overpriced property.
Anyone who is considering leasing their property during the coming three months should ensure that the rent is correctly priced to attract the maximum number of tenants and that they undertake extensive background checks.
They should also consider using the services of a professional property management company, which has access to data bases for bad tenants.