When letting your investment property it’s important to secure a lease that will not only maximise the return but also underpin the security of your investment. There are essentially three elements of making a good lease.
Always number one on any list, is quality!
Everything will fall into place once the quality of something (in this case a tenant) is established. To ensure a good tenant is found and subsequently selected, it’s critical for you property manager to thoroughly check references before passing on the final selection duties to yourself.
Written references are fast becoming a requirement for this process and you should consider those applicants above all else, it proves these applicants are serious and above all else, organised and considerate of not only a property manager’s times, but yours as well.
If, in the case of your prospective tenants being young or void of a rental history, a guarantor adds to the security of the lease.
Anyone who has sat down and talked to myself, knows this is my favourite topic and will tell you the ins and outs of why this is important.
Selecting a lease period that supports your property goals for the near future is also very important. I would consider a lease of 12 months or more as a priority to secure your investment for a longer period of time (also dependant on the time of year you enter into a lease).
Longer term tenants will reduce vacancy, reduce changeover costs like the leasing fee, advertising costs, and the loss of rent that could occur between the end date of the old tenant and the start date of the new one. If you’re concerned about achieving market-rate rent at all times, get your property manager to work 6 or 12 monthly rental increases into the tenancy agreement.
In theory all parties (except for the tenant) want maximum dollar for the asset. This is eminently achievable in markets with very low vacancy rates where there is active competition for the property between prospective tenants.
Rent flexibility is common in markets where demand for rental properties is lower BUT the key to maximising the yield lies in ensuring regular rent reviews with minimum escalation clauses. Offering the property in a cosmetically attractive fashion is also important in ensuring top dollar for rent.
Considering each of the three above elements before letting process begins should ensure a positive outcome for your investment property and arm you with a trouble free tenancy.
If you would like to discuss more about these three elements, please give Shannon Callanan a call on 0413 050 606.