There are a lot of advantages to becoming a landlord, but it is still not a decision to be made lightly. There can be great financial benefits and it can really help you to achieve more of your property investment goals, however there are a few things you should know before taking the leap.
1. Understand and prepare for the responsibility
Renting out your property comes with a range of legal and financial responsibilities so it’s important you are clear on how much work you want to put into being and landlord and what elements of renting your property might be better outsourced. Before you rent out your house or apartment, you will need to make sure the property is habitable for tenants as well as equipped to stand the rigours of strangers living in it.
You need to walk a delicate tightrope of attracting the right tenants to want to move into the property and at the same time prepare it for those same ‘ideal’ tenants scratching floorboards, marking walls, letting their pets pee all over the house and never cleaning the oven. Ever. Most tenants do the right thing but there are always horror stories and of course nobody will take care of your home as well as you would. In addition, the more value you can add to your property, the greater the amount of monthly rent you can realistically charge.
2. Prepare the property for tenants
Your first priority should be to make a checklist of basic things that could be updated – being able to list things such as ‘freshly painted’ and ‘new dishwasher’, or ‘split system included’, could make the difference between your rental listing and all of the rest. Once you have a list of repairs and upgrades, your net task is to make the property ‘tenant friendly’.
You can make choices about the kinds of heavy duty materials to use – as paint that washes easily, inexpensive low pile carpet that is easy to clean and can tolerate high traffic, appliances that have a low energy consumption score (especially if you are paying utilities); they should also withstand being used frequently and serviced rarely. In addition, you will be obligated to install and maintain smoke alarms and if you have high ceilings, consider the most efficient and practical lighting solutions for tenants to be able to easily clean and replace globes.
3. Decide if you will DIY or recruit an agent?
Now that the property is ready to be rented out, where do you start? Well you can contact a real estate agent first to get an idea of what costs would be involved for them to take care of your property, or you can simply get advice from them about the current rental market. They will be well informed about what kind of monthly income other properties similar to yours are generating, and what things you could change or add to get the competitive edge in what might already be a tough rental market for landlords. You will probably learn a few things you didn’t know from this conversation and you should use this information to decide how realistic it is for you to manage the property yourself.
You can do it yourself easily enough – put an ad in the paper or online, then organise times to show the property to the various people who are interested. Once you’ve selected your preferred tenants, you’ll need to have all the relevant paperwork including tenancy agreements, bond lodgement forms and of course for your own protection, make sure you have the right insurance and a professional to look over the details of the lease to make sure it addresses the specifics of your property.
In most cases, landlords discover the costs involved with having a property manager are more than worth the investment. Not only can they navigate the complexity of establishing the right price for your rental, they also ensure boundaries are established between you and the tenant, as well as take care of the important legal and financial details that are much better taken care of by someone who knows that they’re doing.