Most property investors choose to have a Property Manager handle the second part of this process. This takes out most of the hard work. However, as the landlord of the investment property you own, you cannot abrogate all of your responsibility.
There will always be decisions that you need to make. To help you make these decisions, here are five common questions that landlords ask and the answers to them!
1. What can I do if my tenants are late with their rent?
If your tenants are late with their rent you need to try to find out why. Have they always been late paying or is it a recent occurrence? There may be a simple explanation. Perhaps the rent payments do not coincide with their wage cycle. The solution may be to find out how and when they get paid and reschedule rent payments to fall into line.
If the tenants have fallen upon hard times, through redundancy or ill health, then your Property Manager should be able to elicit this information from them and try to find out how long until the tenants might get back on their feet. These circumstances are more complex and may require an empathetic approach.
If your Property Manager has carried out thorough tenants’ reference checks, their rental payment history and employment status should have been scrutinised and you should be assured of good tenants. Allowing tenants to set up automatic direct debit payments also helps.
Despite many landlords citing late-payments as a concern, if handled correctly this should not be too challenging to resolve. In the rare circumstance that a situation can’t be easily resolved, you will need to follow the correct procedures and use the correct documents to advise the tenant of what he or she must do or what action you may take.
2. Should I put the tenant on a fixed term or let them go month by month?
This is another one that comes up time and time again and it’s a hard one. It really depends on how the market is performing in the area at the time. If there are low vacancy rates (high demand) and increasing rents, you would be more inclined to allow a month by month arrangement (sometimes called a periodic tenancy) after a lease finishes. This gives flexibility to both tenant and landlord. The tenant is not locked in to a lease and if they do decide to move on, you can be quite confident of re-letting the property easily. Also, it gives you the opportunity to give the tenants notice if you are considering carrying out some improvements and re-letting the property for a higher rent.
If vacancy rates are high or on the rise, you would probably be safest to request the tenants sign another fixed term lease. This gives you peace of mind and you are able to budget knowing your property will not be vacant in the coming months.
The time of year that the lease comes up for renewal is important too. Some areas have periods when rental enquiries are higher and it is easier to find a tenant. Make sure you know your market trends. Here in Warrnambool, the winter times are normally slow moving, whereas summer we normally see an influx of prospective tenants.
If you buy in a new development it is worth considering having a lease shorter or longer than the standard 12 months. When the building opens, all tenants will move in at about the same time so several might also vacate simultaneously a year later. An unusual lease term will avoid you competing for tenants at the same time as other landlords in a group of similar properties.
3. I want to sell my property, should I wait until the tenants vacate?
Landlord’s need to keep the tenants’ feelings firmly in mind when making a decision whether to wait until tenants vacate before they put their property up for sale. Your property is your tenants’ home and they will understandably be unnerved when they hear that you are putting it on the market. If the new owner is an owner-occupier they will move in and your tenants will have to move out. Even if the new owner is an investor they may increase the rent or not maintain the property as the tenants have been accustomed to.
It is an inconvenience for any vendor to keep a property looking immaculate for regular home opens and inspections. It is an even bigger ask to expect the tenants to keep the place immaculate, particularly as it brings uncertainty and there’s no positive outcome for them.
There is an argument that a property presents better when there is furniture in it, rather than when it is empty. If this is your belief then it is still better to wait until the tenants vacate and then hire furniture and a home stylist to make it look attractive and welcoming.
4. My tenant has applied to break the lease. What are my rights?
If the tenant is on a fixed term agreement they are not required to give a minimum period of notice, but they will be obliged to pay certain costs. These include:
If tenants are on a month-by-month tenancy then the notice periods are as discussed in question 2. In these circumstances tenants will most likely give the minimum notice and then move out, leaving you to find new tenants and cover all the associated costs.
5. How do I find a good Property Manager?
You usually find that good Property Managers are their own best advertisement—they will get referred again and again if they are doing a good job. Their fees and charges are only one consideration when you are choosing a Property Manager. You need to know that your Property Manager will select the best tenants for you, make sure the rent is paid on time and that vacancy periods are kept to a minimum. They need to carry out regular and thorough inspections of the property, alert you to any maintenance that you will have to attend to and organise for this work to be done if you agree to it. Here at Ray White Warrnambool, we have this all covered for you to give you piece of mind.
Good reporting and communication can also make a difference, particularly when it’s tax time and you need to prepare rental property management reports for your accountant. If all rental income and costs, management fees and other outgoings are itemised then this makes it easier for you.
If you have any other questions not mentioned here please be sure to call Shannon Callanan on 0413 050 606