Tips for renting out your investment property
22nd May 2020 - Freya Cormack
Whether you already own an investment property or are planning to buy one, it’s smart to think about making your property as rentable as possible. Your property won’t always automatically draw in potential tenants, so here’s what you need to know about renting out your investment property.
What makes a good investment property?
What makes a good investment property will depend on your goals. If you intend to strategically negatively gear your property, you’ll want to look to buy in a high growth, likely urban area. On the other hand, if you’re focused on making passive income and increasing your cash flow, you might prefer to buy in a regional area.
Before you buy an investment property, research the locations that you’re interested in. Consider who your ‘target audience’ is (i.e. your likely tenant). For example, if you want to buy a 3 bedroom home, your likely tenant will be a family. They’ll probably want to be in close proximity to good schools, parks and amenities, cafes and public transport. Just being close to a reputable school can skyrocket your rental income.
On the other hand, if you’re buying a 1 bedroom apartment, you are likely to attract young professionals. They might be more concerned about proximity to public transport, business centres and nightlife.
Remember that you don’t need to buy in the area you live in. You could pick another suburb, city or state! If you buy an investment property far from where you live, you may need to hire a property manager.
Updates and renovations
Step back and look at your property critically: would you want to live there? By updating and renovating your property, you could potentially ask for a higher rent. Think of it as an investment and a sign of respect towards your future tenants.
No one wants to walk around on stained old carpet or cook in a kitchen that hasn’t seen a facelift since the 70s. Even minor changes, like a coat of paint, a new tile backsplash, a little landscaping and changing the door handles can make a major difference.
Marketing your rental property
Now that you’ve got the place looking presentable, take some high quality photos and list your property through a real estate agency. Often the agency will organise photos to be taken because no, dodgy phone photos aren’t good enough. By using an agent, they’ll be able to list your rental on popular property websites like domain.com.au and realestate.com.au.
These advertising costs are tax deductible for investors, so they’re worth it if your property won’t be as quick to rent out.
Think about other things you could do to make your property more attractive to prospective tenants. A pet friendly home with a secure yard will be a big drawcard. Don’t forget to let people know that you’re renting out by word of mouth and social media.
Managing your rental property
Managing a rental property can be more time consuming than you’d expect. Whether you’re buying locally, or across the country, a property manager can help you look after the place and attend to the needs of your tenants.
Property managers typically charge a fee that is a percentage of the monthly rent. It’s typically between 5-10% and property management fees are usually tax deductible. When selecting a property manager, do your research. You want a property manager who:
- Is responsive and a good communicator
- Has positive reviews and testimonials from current and former clients
- Is knowledgeable about the industry
You can definitely be your own property manager (i.e. landlord), but if you’d like to avoid potential stress and late night phone calls, it may be best to outsource.
Maintaining your rental property
As a landlord, you are legally obligated to guarantee the safety of your rental property. You could be held liable for injuries to tenants if the injury resulted from you neglecting your responsibilities.
Prevent these issues from arising by being on top of property maintenance. Some of your responsibilities as landlord include:
- Tend to issues that have the potential to cause health issues (e.g. mould, damp or exposed asbestos)
- Maintaining the property’s structure and exterior
- Safely install and maintain landlord-owned appliances
Tip: treat minor issues before they turn into big problems. Prevention will probably be cheaper and safer than complete repairs.
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The information in this post is general in nature and should not be considered personal or financial advice. You should always seek professional advice or assistance before making any financial decisions.
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