Letting property can be lucrative – if landlords heed the advice of experts
LETTING a property can make good business sense and generate considerable income – if handled correctly and professionally, says Adrian Goslett of Re/Max.
Rent control laws that favour tenants, along with bad tenant behaviour and the responsibility of looking after another property may put many people off the idea of letting their homes, says Goslett. But if landlords are well versed in all aspects of letting a property, it need not be a headache.
“Whether you employ a rental agent or manage the property yourself, landlords have certain responsibilities and obligations to fulfil. These include providing a safe and well-functioning home for your tenants – such as making sure plumbing, wiring and appliances function and that outdoor areas and stairways are safe. It also means quickly responding to a tenant’s report of any malfunction or problem.”
Landlords will need to advertise the rental, select suitable tenants and evict them if problems arise that can’t be resolved.
“The benefit of dealing with a reputable rental agent instead of going it alone, is that they take care of the good, the bad and the ugly when it comes to tenants and are expected to have the knowledge and professional expertise to handle difficult situations correctly and in accordance with rental laws.”
Before letting a property, landlords need to carefully calculate the cost of keeping the property functioning smoothly. This should include bond repayments, utilities and maintenance, repairs and any professional services such as property management through a reputable rental agent, tax assistance and legal consultants, says Goslett.
The rental price needs to be competitive, he says, “so just translating your ownership costs into a rental fee won’t work”.
Casey Edwards, co-author of The Complete Idiot’s Guide to Being a Smart Landlord and The Complete Idiot’s Guide to Making Money with Rental Properties, suggests working up two profit-and-loss statements: a best-case list and a more conservative one that includes all the things that could go wrong.
“But even if the figures don’t show an immediate profit, there are many other good reasons to let a property, including the long-term appreciation, or holding out until you can get the price you want if you consider selling the property.”
Tenant screening is a crucial task, Goslett warns. Assessing suitability includes checking back - ground and financial capabilities with information about their earnings to ensure they have enough to pay the rent on time each month. A payslip and references from employers would help.
The rental application should include an applicant’s full name and identity number, rental history and credit picture. If you are going to perform a credit check, this must be disclosed on the application and prospective tenants need to sign the form indicating they agree to this.
A rental agent should provide all the necessary legal documentation when assisting you with a rental property. The rental contract should include clauses specifying what the rental charges are and what the consequences would be if the property were not vacated when the contract ends.
The contract should also specify that sub-letting is prohibited and the period of notice on termination of the rental agreement must be clear.
Goslett advises that whoever manages the property, rental records should be separate from personal accounts.
“This will allow you to see at a glance where your rental property stands financially,” says Goslett.
Other advice includes putting monthly contributions into a sepa- rate, high-interest-bearing account that can then be drawn upon for repairs, new appliances, maintenance and taxes if and when required.
If you need to evict a tenant, it should be handled professionally, Goslett says, suggesting it would be wise to enlist the help of an attorney, as landlords must issue appropriate warnings before they can proceed with an eviction.
Even if letting a proper ty through an agent, pay tenants an occasional visit to make sure your asset is being well looked after. These visits must be arranged with the tenants in advance, he says.