Investor's guide: How to find the right property manager for you
For those who choose to use the services of a property manager, finding the right one can make or break your investment ...
Rental property costs keeping you up at night? Here are some practical ways landlords can save money.
There’s no question that being a landlord can be a highly profitable venture. If properly managed, a rental property can generate a sustainable income and profit.
But unfortunately, the COVID-19 pandemic seemed to turn the rental property market on its head. Tenants are losing their jobs and incomes and are struggling to pay rent, while some have been even unable to access property markets due to border restrictions and lockdowns. This has had a domino effect and resulted in record-high vacancy rates in some capital cities.
Even if landlords are reducing or waiving rent for their tenants, vacancies are almost unavoidable during these unprecedented times. So what can landlords do?
One of the best ways that landlords can protect themselves during such dire economic times is to cut costs. By cutting costs wherever possible, you will be able to maximise your return on investment or at the very least soften the blow of the pandemic on your business and your tenants.
Here are some money-saving tips for landlords.
1. Keep on top of maintenance and repair of your property.
Keeping your rental property in tip-top shape is important, as first impressions really count when it comes to rental properties. After all, nobody wants to live in an unkempt property. If your property is looking worse for wear, it will be harder for you to find a tenant that will be willing to rent out your property.
Keeping your property in prime condition does not mean you need to overcapitalise with unnecessary or expensive renovations. Fixing minor issues can prevent big ones and result in huge savings in the long run. Leaving unrepaired jobs might result in one big job, and could mean a bigger bill to pay for repair costs down the track.
Here are some other minor maintenance duties that you should be keeping on top of that would save you money in the future:
Depending on your property’s features and type, you may need to perform other regular maintenance tasks. So, use your best judgment and coordinate with your tenants or property manager to complete maintenance with as little interruption for them as possible.
As the property owner, it’s important not to dismiss or ignore maintenance requests from your tenants. While you feel some of these complaints are frivolous, it would do more good than harm to check them out. It will not only help you keep a good relationship with your tenant (which aids tenant retention), but it also protects your investment property in the long term.
But how about repairs and maintenance works you can’t do on your own? Experts recommend property investors shop around before working with suppliers of maintenance repair and building work. It’s also a good idea to look beyond your real estate agent’s recommended supplier list.
Lastly, don’t forget to get a number of quotes before engaging and negotiate the rates. To get the best out of your money, “cheaper is better” is not the recommended mantra for landlords to follow. Rather, landlords are advised to go with the quote that meets their needs.
2. Offer a competitive rental rate.
Vacancies, especially extended periods of it, can be a landlord’s nightmare. To make sure that your tenants will stay in your rental property and to reduce turnover costs or vacancies, make sure that your rental rates are reasonable and competitive against comparable properties.
During periods of economic uncertainty, landlords may choose to charge a lower rent payment than what the rental property is worth. While this may sound like it will hurt your pockets, charging tenants a slightly lower rent could pay off in the long term since you will avoid vacancies. For some landlords, it may be better to earn lower rent than hold a vacant property.
To make sure that your asking rent is competitive, do your research and know the average rental rate for comparable rental properties in the area. You should also assess the current vacancy rates in your area so you have an idea about the demand for your property. From there, you can decide when and if you need to adjust the rental rate to balance tenant retention and profit potential.
If you don’t assess the market rates, you might end up undercharging for the rental property and losing a lot of money each month. If you overcharge, it can drive tenants away, only costing you more in the end.
With that said, you can check the gross rental yield of your property’s suburb through Smart Property Investment’s Suburb Search to ensure that your rates are both fair and competitive.
Smart Property Investment also provides the latest updates and information about the country’s rental market, so don’t forget to check our website’s news section.
3. Look for (and retain) good tenants
Any experienced landlord will tell you that a good tenant is worth their weight in gold (literally, not figuratively of course).
To find the right tenants, be sure to check every prospective tenant’s criminal history, eviction history, and credit history/record. If you want to streamline the process, you can use tenant screening websites such as RentCheck or other similar real estate apps in the market.
By doing so, you will greatly alleviate the risk of ending up with tenants that are difficult to deal with. Good tenants will take care of your property, pay their rent on time, and follow the rules in the lease agreement. If you have managed to secure good tenants, it may also be easier to come to an agreement that satisfies both parties.
So how do you keep good tenants happy? Aside from the things we’ve mentioned (regular maintenance and fair rent), another way to keep your tenants loyal is by being a good landlord.
If you are an unapproachable and insensitive (or even cruel) landlord that never handles requests from tenants in a timely and courteous manner, they are likely to treat your property recklessly, vacate, or even take legal actions against you. All of these will, of course, hurt your finances.
4. Claim all possible tax deductions
Do you know all the tax deductions you are entitled to as a landlord? If you’re not 100 per cent sure, make sure to check what expenses that are tax-deductible for investment properties.
By knowing and including all potential rental property expenses on your tax return, you can claim a significant amount of potential tax deductions and allow you to have more cash in your pocket.
Knowing all the tax-deductible expenses will also prevent you from running into trouble with the Australian Taxation Office (ATO) and incurring fines and penalties.
When you own a rental property, you are likely to have several forms of insurance coverage. This can include building insurance, landlord’s insurance and even strata insurance.
You may also have mortgage protection insurance or lender’s mortgage insurance (if you have borrowed more than 80 per cent of the property’s value).
To lower your insurance costs, here are steps you can take as a landlord:
6. Be smart about hiring a property manager
Hiring a property manager is a financial investment, and their monthly fees can also eat into your rental income. With that said, in what situations can it be beneficial for a landlord to hire one?
If you have a smaller real estate portfolio and you have the time, skills (and determination), you should consider managing your rental property yourself. By doing this, you can lower costs and pocket more of your profits.
But if you are overseeing several properties and have a larger real estate portfolio, hiring a property manager may be the best option for you. Tasks like marketing, tenant screening, property maintenance, rent collection, accounting, and dealing with tenant issues can be overwhelming if you have several properties to manage.
Property managers can handle all of these tasks and more, which can help you focus on other investments or have fewer problems dealing with your tenants. Another upside to hiring a property manager is that property management fees and operating expenses can be a tax write-off for your rental property.
Just as with do-it-yourself maintenance, evaluate your options. If managing your rental properties on your own means discontented tenants and empty units, the cost of a property manager might well be worth it.
If you’re on the hunt for a good property manager, here are our tips for finding the best one for you.
7. Council rates, land tax and strata fees
Aside from maintenance costs, other ongoing costs such as council rates, land tax and strata fees also affect your overall income.
Unfortunately, council rates are not something you can avoid and can be a significant ongoing cost to property owners. They vary between local councils and are usually levied against the estimated value of your property.
But if there has been a sudden increase in your rates or you think that you are paying too much, your best option is to request an “Objection to Valuation” from the valuer-general to reduce the rate. While it can be a time consuming process, it’s worth a try if you think your rates are inflated.
Land tax differs in each state and territory. A land valuation is carried out annually (also differs in each state and territory), which is used to determine the rate of land tax an investment property owner must pay. You can also contest the outcome with the valuer-general if you disagree. But for other smart strategies, here’s our full guide on how you can lower your land tax.
Finally, strata fees. A strata fee is a contribution you make as an owner to ensure the maintenance of your common areas of a property. If you own an investment unit or townhouse, you will be required to pay strata or body corporate fees, which cover the maintenance and upkeep of the building’s common areas. Some of the ways to minimise strata obligations may include by reducing building running costs and contesting any unnecessary upgrades or renovations.
8. Lower utility costs
Usually, energy costs run higher than other utility bills. If it’s your responsibility to pay the energy bills as a landlord, find ways to get the best energy deals. Make sure that your property is energy efficient so you can cut costs significantly.
Some of the changes you can make include using LED lights, modernising the heating systems, installing solar panels etc. Before investing in anything that involves a significant investment, make sure to run the numbers and that the savings will eventually outweigh the initial costs.
To cut water consumption, make sure that there are no leaking taps or fixtures in your property. You can also install water efficient taps and showerheads to lower water usage.
Smart Property Investment provides Australian property investors with must-have insight, strategies and real-life experiences to help guide successful buying and selling decisions in the Australian property market. Tune in to our podcasts covering a variety of topics related to the real estate market.
An investment property refers to a land, condo unit or building purchased to earn profit through rentals or capital appreciation.
A landlord, also known as a lessor, refers to an individual that owns a leased property.
A property manager is an individual or company hired to handle the day-to-day operations, maintenance and administration of a residential, commercial or industrial property on behalf of its owners.
Rent collection is the process of collecting payments from its tenants, personally done by the landlord or by an agency.
A rental property refers to homes or apartments used as dwellings for tenants.
Tenant screening is the process used by landlords and property managers to do a background check on prospective tenants and assess their compliance with the lease agreement.