It is an exciting moment when you realise that you are “an investor”. But there is so much to learn. Are you ready to become a landlord?
When you are looking to buy, think “selling.” For when the time comes to sell will your property hold it’s value? The next buyer maybe someone who wants to make it his home and will appraise it totally differently.
Research … Research
There is no such thing as too much research. Don’t rely on the selling agent to be all giving with comparisons of sale prices and rentals for other properties. You need to do your own research, including visiting the “Open for Inspections”of both properties for sale and rental in your area.
Inspect Your Chosen Apartment Several Times
Check for necessary repairs. Is painting needed? Are there cracked or loose tiles in the bathroom or kitchen? Does the stove work? Would the carpet benefit from a shampoo? Look for grinding door rollers and broken light fittings.
Have these repairs carried out early as the tenant will report them and they will still need to be done. It could be a choice of an unhappy tenant or possible loss of rent. Both can be avoided.
Remember the better the presentation the easier the apartment is to rent and the higher the rent achievable.
Inspect the Building as Well
Notice the overall maintenance and repair of the building. Does it need painting? Are there any damp stains on the outside walls, particularly on the “bad” weather side? All these things can and will lead to additional cost to the owners.
Understand What You are Buying
When buying into a block of apartments you are buying air space bounded by four walls. The building is owned by the Owners Corporation (sometimes referred to as the Body Coporate) which is in fact all the owners whether they live on site or not.
Much of the responsibility for repairs will be the owners corporation’s cost. Before undertaking any repair of items like faulty TV reception relating to the aerial, blocked drains, electrical work, and external leaks entering the apartment and causing damage, establish if it is your responsibility.
Your Managing Agent
There is no obligation to employ the selling agent’s firm to manage your apartment. Many people do but you may know of a preferred agent who gives you confidence. You are free to use whom ever you choose.
Meet the new tenant at the agent’s office before the lease is signed and do not be afraid to ask questions. Natually your managing agent when recommeding this tenant has checked his references, but as the investor you have a great deal of money tied up here so you can politely, but firmly ask your own questions and you will have faith in this tenant with your investment.
Ask the Tenant:
- Are you local? Have you rented in the area before?
- Do you work locally?
- Have you rented throiugh this managing agent before?
- On past rentals did you have your bond monies refunded in full?
- How long did you stay at your last rental and why did you leave?
- Do you have contents insurance to cover your personal items and furniture?
Also make sure that you have ample opportuniy to read the lease before it is signed by your agent and the tenant, paying particular notice to the times that inspections are permitted and the clause on pets. The standard lease usually states,”no pets allowed without written permission.” In many cases unknown to the owner this clause is amended or crossed out. Make your agent fully aware of your wishes and take into account the building rules may not permit pets.
Arrange to accompany your agent when they attend the apartment to do the written condition report. Use this opportunity to take your own photos.
- Light fittings
- Bathroom – tiled areas, vanity fittings
- Kitchen – tiled areas, benchtops, stove — make sure exhaust fans, stove, and oven work
- Floor coverings, including any damage or stains
- Window coverings
A few minutes taking these photos ensures that most future disputes, particularly at the end of the tenancy involving bond monies, can be solved quickly. Your tenant maybe in residence for over a year — date and sign your photos and put them aside for the future.
Meet the Owners
Once a year the Owners Corporation holds its annual general meeting (AGM). Make sure you attend, not only to be aware of planning and finances for the building, but also to meet other owners. Some will be investors like yourself.
By chatting with the owners present you will be quickly informed of any news, good or bad, about your tenants.
Insurance for Your Investment
There are three types of Insurance affecting your apartment:
- The building structure including common property areas, such as foyers, hallways, drive, roof area, and garages are all insured by the “Owners Corporation.”
- As an individual owner you need to carry insurance for paint on walls and ceilings, light fittings, floor coverings, fixtures, and fittings. You may also wish to include a special policy for “Landlords Insurance” which takes into account loss of rental or damage suffered from the actions of a tenant.
- The occupants should undertake insurance to cover their personal effects and furniture as these items are not covered by other types of insurance.
Becoming an investor is a wonderful life changing experience. Learn to enjoy it and prosper.