Rentals: Pam Walkley How to be a good landlord

Keeping tenants happy requires effort and skill but it’s worth it in the end

No matter what business you run, the customer is king. And if you’re a landlord your customer is your tenant. Attracting and keeping a good tenant is the key to success. They help pay your mortgage while you, hopefully, benefit from capital gains.

Yet many landlords run their investment property as a hobby rather than a business. If you don’t have the time, patience or communication skills to be a good landlord, you’re probably better off hiring an expert. But even then you have to select someone who is good at their job. Just because they have a real estate licence doesn’t necessarily mean they’ve got the skills to select and keep good tenants. Managing agents usually charge a letting fee of a week’s rent and an ongoing fee of 5%-15% of the rental income. These fees are tax deductible.

Vacancy rates around the country are relatively low, so getting a tenant should not be a major problem but snaring a top-notch one is another matter. Vacancies in Sydney and Melbourne were 1.8% and 2% respectively in September, up marginally from August, according to SQM Research. Brisbane’s rate rose to 2.9% from 2.7%. Perth reported the highest vacancy, steady at about 5%. Hobart had the tightest rate at just 0.6%.

Find the right tenant

Securing a good tenant is the first step in becoming an awesome landlord. Good tenants are worth their weight in gold, as they will take care of your home and pay their rent on time.

Tenant selection is crucial. Take the first person who rocks up on inspection day and you could be asking for trouble. Sit down with prospective tenants and review their applications, suggests major real estate agency Ray White. These should include:

Photo identity such as a driver’s licence or passport. Any reference letters, which can be from previous landlords and employers.

Pay slips as proof of a steady and sufficient income. A deposit ledger, which shows a history of their rental payments (only available if they’ve rented before with a real estate agent).

As a final check before accepting the application, landlords and real estate agents can pay to access databases with tenant blacklists – people with whom property owners have had trouble in the past, says Ray White.

Some databases are restricted to agents but TICA (tica.com.au), which claims to be Australia’s biggest, is also open to landlords. Membership, which includes up to 10 searches, starts at $198 plus an annual fee of $33.

Once you have found a tenant, make sure everything is documented. Tenants, in conjunction with the landlord or managing agent, should fill out a condition report, so any problems are clearly outlined. If these are rectified that should also be noted on the condition report. You should also secure a bond. The generally

accepted amount is a month’s rent, which you must lodge with your state’s residential tenancies bond authority. This money isn’t meant for general wear and tear but can recompense you for things such as damage and unpaid rent.

You or your managing agent should inspect the property regularly but not too often, and then only when you have made a scheduled appointment with the tenant. Definitely no unexpected visits, please!

Fix any problems quickly

If you run your rental properties as a business, you’ll soon realise you want to keep your best customers for as long as possible. The No. 1 bugbear for many tenants is poor property maintenance.

Awesome landlords not only make sure their property is neat, clean and tidy with everything working at the onset, but they also respond very quickly to tenants’ problems. No one wants to put up with a stove which doesn’t work, smelly drainage or anything else that affects their lifestyle or enjoyment of the property.

If you use a good managing agent, they should have reliable tradies to fix problems quickly. If you are a DIY landlord you’ll have to find your own, however.

Sometimes it can take a bit longer than you’d like to get a tradie to the property. Make sure you keep the tenant informed so they know you’re making the effort. Good, open communication with tenants is a must for successful landlords. Again, if you DIY make sure your tenant has several ways to contact you and don’t ignore their emails or reject their calls.

Many tenants also value the little things that make a home more pleasant – things they might install if they owned the place themselves – for instance, flyscreens, a washing machine and clothesline, wiring to allow cable internet and TV, or solar panels to save on electricity costs.

Gardens are also important to some tenants, and they are likely to be willing to pay more if a landlord includes garden maintenance or lawn mowing. Garages, carports or off-street parking, sheds and built-in storage are also likely to be high on tenants’ lists.

Successful landlords also listen to their tenants’ requests and don’t just reject them out of hand, especially if they are the kind of tenants you would like to keep.

Many property owners are reluctant to allow their renters to keep pets but be aware you’re ruling out a considerable percentage of potential tenants. Landlords who allow pets can find themselves at a competitive advantage. And because pet owners often have a hard time finding a place to rent, they tend to stay put and be very loyal, making great tenants.

It’s not unreasonable to make sure the pet is appropriate to the property – probably not a great dane in a studio apartment – and maybe negotiate a slightly higher rent.

Then there is the contentious issue of tenants wanting to put their own stamp on a property, perhaps painting the odd wall, changing the curtains or hanging their artwork. Again, if you have a good tenant it might pay to be flexible on this. Remember, tenants who pay to undertake limited redecorating have an incentive to stay.

Ask your tenants to keep you fully informed of any changes they plan before they make them, including colours for any painting, and stipulate they need your permission in writing before they go ahead.

And then, of course, you may have tenants who want to rent out part of your property to others, such as running an Airbnb business. Legally this is a grey area. In June a landlord won the right to evict the tenants from a Melbourne apartment after they rented it out on Airbnb. The judge ruled the tenants had sublet the apartment because they offered the whole of it, not just a room, without the owner’s permission.

Of course, some tenants will run part of their rented property as an accommodation service without telling the landlord. But if you’ve built a good relationship with your tenants this shouldn’t happen and if they do approach you on this you have to decide. If they’re trustworthy tenants you want to keep, you may agree, perhaps in return for a percentage of the income. In this case, you should make sure that any insurance you have also covers short-term rentals.