There’s a lot to consider when you become a landlord for the first time. You’ve got some key decisions to make and paperwork to sort before you even think about getting a tenant in – and more to be aware of once you do. Luckily, you’ve also got our top tips for new landlords!
In the first part of this two-part series we looked at six tips for before a tenant moves into an investment property. One of the key tips was to engage a professional property manager. While some landlords choose to self-manage their investment property, putting the rental in the hands of a professional makes sense. An agent will take on the day-to-day management of your rental – things like handling lease agreements, entry and exit reports, routine inspections, bond matters, rent collection, vetting tenants, organising repairs and maintenance, and submitting insurance claims. Basically, they can handle all the things on the list below (taking a lot of a landlord’s plate!).
However, if you do decide to self-manage, the second instalment of this two-part series looks at top tips for what to do once a tenant is secured and moves in…
INSURNACE NOTE: Some landlord insurance providers, like EBM RentCover, only offer cover to properties that are professionally managed. Chat to your insurer to uncover any insurance implications if you go at it alone
Vet prospective tenants
In a perfect world, every tenant would be a dream – they’d pay their rent in full and on-time, they’d look after the property as if it were their own, never be demanding or have anything in their lives go awry that impacts their tenancy. The reality is that sometimes tenants turn out to be more of a nightmare. With bad tenants comes greater risk of property damage and loss of rent, increasing the likelihood that you will need to claim on your landlord insurance.
To reduce the risk of getting the wrong tenant in, you or your property manager need to properly screen prospective applicants. Trust is a wonderful thing, but it’s a luxury you can’t afford as a landlord (a bad tenant can be worse than no tenant at all). Always run extensive background checks (within the relevant privacy laws) on prospective tenants and take the time to contact referees and complete employment, income and credit checks.
Collect a bond
A bond is a form of security and you should make sure you collect one from your tenants (check the bond rules in your jurisdiction) in case they breach their rental agreement and you are left out-of-pocket. If your tenant causes minor damage, fails to clean the rental properly on vacating or doesn’t pay their rent for a week or so, the bond may be a way for you to recoup your losses. Of course, if the tenant causes substantial damage or doesn’t pay their rent for more than four weeks, then the bond collected will not cover your losses. This is where having landlord insurance comes in to cover the shortfall. But don’t think that if you have landlord insurance you don’t need to collect a bond – you do. It’s usually a requirement of the policy that you collect a bond from tenants before the loss of rent and tenant-damage provisions in the insurance become effective.
Keep up repairs and maintenance
Making sure your rental is safe is a legal obligation, and the upkeep of your property is also important when it comes to your landlord insurance.
Urgent and emergency repairs have legislated timeframes for attention, while failing to attend to routine repairs and maintenance could be a breach of the tenancy agreement. There is also a condition in practically all building insurance policies that relates to adequately maintaining the premises. If you fail to keep up with the upkeep (in insurance speak, neglect to protect and maintain the property), you could void your insurance cover.
Conduct regular inspections
One way of making sure you keep up with maintenance and repair needs is to ensure that property inspections are conducted regularly (in keeping with the tenancy laws obviously). If you have a property manager, they will do the inspections and provide a report. Otherwise, you’ll need to arrange and perform the inspection, being sure to document the condition and note any issues. Property inspection reports are often required as evidence in landlord insurance claims, so be sure to have them available. It’s also wise to keep other paperwork like receipts and communication records with agents and tenants – they may be needed for an insurance claim, legal proceedings or for tax purposes.
TIP: When it comes to legal proceedings in relation to loss of rent claims, EBM RentCover Platinum and Ultra policies include legal expenses cover up to $5,000.
Know your rights and responsibilities
It may be your property, but once you’ve rented it, you can’t simply do whatever you like with or on the property. If you use a property manager, they can advise you on your rights and responsibilities on matters like lease agreements, tenant discrimination, accessing the property, rent arrears, inspecting the premises, issuing breach notices, giving notice, and much more. If you are going it alone, you’ll need to make sure you are up to speed with your state/territory legislation and consult Fair Trading/Consumer Affairs or obtain professional advice to ensure any action you take won’t land you in trouble – which has repercussions for your insurance cover too.
Be aware of tax obligations
Your rental is an investment and owning and managing it may affect your taxable income. Seek professional advice on tax matters and check if your landlord insurance policy offers cover in the event you are subject to a taxation audit. Most EBM RentCover landlord insurance policies provide up to $1,000 to help cover the costs of a taxation audit in connection with ownership of the insured property.
Being a first-time landlord can be exciting and maybe a bit daunting too. But, with the right support – in the form of a good property manager, tax/financial advisor, trusted tradies and, of course, a specialist landlord insurance provider like EBM RentCover – you can ward off those investment property nightmares, and look forward to your investment property journey running more smoothly.
*While we have taken care to ensure the information above is true and correct at the time of publication, changes in circumstances and legislation after the displayed date may impact the accuracy of this article. If you need us we are here, contact 1800 661 662 if you have any questions.