Are you looking to buy an investment property?
Here are some items to consider and have a plan in case something happens!
Maintenance that is required and keeping money aside for maintenance
Properties require maintenance whether they are brand new or over a hundred years old. Yes, a brand-new property shouldn’t require as much but in South Australia the Residential Tenancies say that a property’s paint and floorings (carpet etc.) only have a life span of every 7 years. This should be factored into the money that you you’re likely to get from rent.
It’s also a good idea to know the age of all the appliances in the property and keep them in good working order so that you can get as long out of them as possible. Some preventative maintenance will help you in the long run.
As a general rule of thumb $2,000.00 per year should be put aside for general maintenance.
What happens if there is an extended period of no rent.
If you’re lucky you’ll find a long-term tenant and that they will stay there for a long time. What we have noticed however is that generally there are changes in people’s lives and as they are renting they find it a lot easier to up and move.
We have had it at times that properties have been vacant for extended periods of time, either because tenants are no longer attracted to a particular area/property or because of renovation works that are being carried out between tenancies. It’s a plan to keep some money aside if this should occur so that you can still pay your mortgage. If your property isn’t being rented due to tenant’s not being interested our quick suggestions are:
- Look at dropping the rent by $10 per week – a drop of $520 over a year is still most likely cheaper than a property vacant for 2 weeks or more!
- Are there any cosmetic things you can do to the property to make it more attractive for example painting, new carpets, putting in robes or tidying the garden.
Residential Tenancies Legislation
No matter whether you’re going through a Property Management Agency or managing the property yourself you and your tenant are bound by the Residential Tenancies Legislation. It’s best that you familiarise yourself with this and to know what your rights and responsibilities are as a landlord.
For example, did you know that if a tenant places their own air-conditioner in a window it then becomes a fixture of a property that you are then required to maintain. Or if asks if they can install a water filter for drinking, that it is then your responsibility to change the filters?
This legislation is also there to protect you for example allowing you the ability to chase up rent if it falls behind, as well as ensuring that the property is kept in a reasonable condition. There are a number of great resources for you to read on the Consumer & Business Affairs website https://www.sa.gov.au/topics/housing/renting-and-letting/renting-privately/forms-and-fact-sheets-for-private-rental-tenancies
We always suggest that you also seek advice from your accountant and financial planner to ensure that buying an investment property is the right decision for you.
Written by our Guest Blogger:
Heather Luke from Luke & Associates Real Estate www.lukeandassociates.com.au
The team at McKay Business Services are all members of the AICSA and are proud Adelaide conveyancers