Owning a rental property is an exciting achievement and something many individuals strive to accomplish. Investing in a property portfolio can help set you up later in life as you increase capital gain over time to build a sustainable residual passive income. However, this doesn’t happen overnight and it takes hard work, dedication and time to accomplish.
So what is involved in owning a rental property, and what is it that you need to know before you can rent out a property? In the following article, we have outlined a list of the top 5 things you need to know and do before you rent out your property.
It is important to get all the maintenance work done. Your property will be a lot easier to rent out if these are already taken care of, plus it will be faster and easier to get done while the property is vacant. Dealing with tradespeople and tenants at the same time can be tricky and may result in you, the landlord, having to deal with more unnecessary admin and logistical juggling. As they say, time is money, and your time may be better spent focusing on things other than maintenance issues.
Having a rental property that is run down and less desirable can also influence the types of tenants you attract. Having reliable tenants that will look after your property, stay for a while and treat it like it’s their own is essential to the success of your rental. Happy tenants are paying tenants, the moment your tenant steps foot into your property they will be calling it home hopefully for the foreseeable future, so making sure it is well presented will set the standard. Having a nice, clean, healthy home enables you to attract the tenants willing to pay a little more each week to live in a comfortable environment. This can increase your rental yield and give you income security for years to come.
If you are to self manage your property it is essential you develop relationships with a range of different tradespeople so that, when there are urgent repairs, you've got reliable and efficient people to turn to. However, if you were to use a property manager, they have access to reliable and trusted tradespeople who will be able to get the job done in a professional and timely manner all without you receiving the emergency call near midnight about a blocked drain!
Like many things, making sure legal aspects are all in line is a step not to be missed. Having incorrect paperwork or reports could result in a significant fine and could cost you significantly more than effective legal counsel would have in the first place. Many tenants know their rights and will not hesitate to make the most of a situation if it were to present itself.
As a landlord, you need to know what your responsibilities are as well as being familiar with all legislation that governs residential tenancies. There are also many rules that landlords need to follow, such as:
- Giving tenants 24 hours notice before doing any maintenance work.
- Giving tenants 48 hours notice before routine inspections.
- Sending the bond to Tenancy Services within 23 working days.
- Any rent increases are to be given in writing at least 60 days prior.
There is a lot of helpful information around the legal requirements of a landlord which can be found on the Tenancy Services website and it pays to make yourself familiar with these as soon as possible. It also pays to check these regularly as current laws are expected to change and interpretations, or precedents, can affect the application of these laws. One of the many benefits of using a property management company is that it is their job to keep on top of these changing laws and regulations. They will update you on any changes that may arise and will take care of these for you, giving you one less thing to worry about.
One of the latest changes for rental properties is the Healthy Homes Standards. If you haven’t yet heard about these standards, they have been put in place to ensure all New Zealanders have a safe, warm, dry place to live in and call home. Find out if your property meets the Healthy Homes Standards by taking our Healthy Homes Quiz.
Landlord-specific insurance is different from normal house and contents insurance as it covers you for risks such as loss of rent due to factors outside of your control. When you sign up for landlord insurance it is important to make sure you read the fine print as with all insurance as not everything is created equal. Insurance for the following can be a standard inclusion within landlord insurance:
- Sudden and accidental damage
- Hidden gradual damage
- Methamphetamine contamination
- Damage to someone else’s property
- Natural disaster
In August 2019 the Residential Tenancies Amendment Act 2019 took effect and brought with it a raft of changes for tenants and landlords. One of the biggest changes was who pays for careless damage to a rental property. The law change states that tenants are liable for an amount equal to four weeks' rent, or the landlord's insurance excess, whichever is lower if an incident of careless damage by the tenants or their guests is proven.
From the 27th August 2020, landlords and property managers now have to give their new and current (if they ask) tenants their insurance details. This is so tenants understand what they would need to pay in the event of damage. If you do not, you, as the landlord, can be fined up to $500.
For more information on the Residential Tenancies Amendments Act 2019 click here.
With the current global pandemic, holidays and trips away may feel like a distant memory but it’s important to note that when borders open up you can’t go away for too long if you have a rental investment. If you are leaving the country for more than 21 days, the Tenancy Act states that you need to have a named person look after the property.
This means that you need to be available when your tenant needs to contact you. This could be to answer questions that your tenant may have, or due to an emergency situation such as a burst pipe or a leak. Whether small or large, it's important that you're available if you're self-managing your investment property and ensure you don’t go away for too long. This could mean taking calls, organising maintenance or visiting the home during work hours or weekends.
If you travel a lot or are going away for an extended trip then you need to assign a friend or family member to manage the property on your behalf. They’ll have to respond to any emergency calls and find a new tenant if the current one leaves. This can be a lot to ask of a friend or family member as they don’t receive the financial rewards you do from the stress of not knowing when the next phone call will come in.
That’s why our property management services are flexible. We can do a single month of management with no obligation to continue to cover you while you’re away. Relax on your trip without wondering whether your friend or family member is tearing their hair out waiting for you to come home! Talk to us about our short-term management solutions if you’re after a break with full peace of mind.
Neglecting your tenants could result in your property being neglected in return. It pays to keep on top of property inspections and regular communication. It is also important to respect and implement boundaries for both yourself and your tenants when appropriate. Developing mutual respect is important for both parties when it comes to defining and outlining a relationship.
As a landlord, you should respect your tenant’s privacy and personal lives. As long as their private activities are legal and do not affect the property, it is not your business to become involved. Sometimes things happen, so both tenants and landlords need to be understanding of each other’s situations and this stems from empathy, trust and good communication.
As the middle-person between tenants and landlords, our property managers know how quickly and unexpectedly life can throw a curveball. And when two parties can’t agree on the best way ahead, the third party representation from a property manager can see the middle ground to achieve the best outcome for both groups.
When talking about something as personal as a home, emotion can get in the way.
Because your investment in property is designed to return you a passive income to enjoy life and build for the future it is vitally important you know how much your property could be rented out for each week. The market is constantly changing and prices are shifting so it can be good to periodically check and get a rental appraisal, if you haven't’ had an appraisal recently we suggest that you get one. Most property management companies do free no-obligation appraisals. And it may surprise you just how much your property could earn in today’s market. Finally, it also pays to be familiar with the current Work and Income Accommodation Supplement figures so that you are aware of the changing situations.
Property management can be fun, rewarding and challenging all at the same time. For some, they live for the rush of a late-night phone call and the ringing around tradies to see who can get there. Others love calling references for 20 applicants and fielding messages late into the night as people share their personal circumstances in the hope you’ll choose them over others.
For others, that’s too much stress, heartache and worry for something that’s designed to be an easy passive income while it increases in equity.
If you don't have the time or expertise to manage your property effectively then our team of trusted professional property managers may be able to help. Contact us today for a free, no-obligation assessment of your property and the help we could offer.