Things you need to know before renting out a property
Whether you’ve bought a new property or an old Queenslander and you want to turn it into an investment property, there are a few things you need to consider before renting it out.
Don’t assume that because you have rent coming in you’ll have an additional income overnight. You need to consider all the costs, things like property management, advertising fees, maintenance costs, capital gains tax, insurance and more. Before renting out your property, you should calculate the weekly income you will receive from the property so you can determine how it will affect your budget and lifestyle. Do you need to put in any additional money every month to cover a shortfall in the mortgage or are you left with money after all your expenses? If so, what are you going to use it for?
Finding a property manager
While you may be tempted to manage your own property, there are a lot of downsides to this approach. A dedicated property manager will have a better idea of pricing, will manage any disputes, will help select a suitable tenant, conduct reference checks, organise for any repairs and ensure your tenants are looking after your property. Hiring a professional to manage your property will remove stress and emotion from the process, leaving you to sit back and relax.
As a new landlord you will need specific landlord insurance, in addition to your standard house insurance. You will need a policy that covers you for things such as tenant damage and rental default, which general house and contents insurance won’t.
Will your property rent?
Just because you like it doesn’t mean everyone else will. You need to make your property appealing to the rental market by keeping the colors and finishes natural. This could also mean fixing those repairs that you’ve been putting off, replacing that old carpet, giving the rooms a fresh coat of paint and as you’ve probably heard make sure your house has curb appeal. These things can increase the rental price while attracting good tenants.
Claiming your tax
As an investor, you fall into a different tax bracket and have access to a range of tax benefits that owner occupiers don’t. This includes tax depreciation, where you can claim deductions for wear and tear, and even the properties contents over time, saving you thousands. However you should also consider, if you need to pay Capital Gains Tax (CGT) when you sell the property in the future. A good accountant will be able to assess the most suitable way for you to own an investment property.
Since you are putting your hard-earned money into this property it’s understandable that you will have an emotional attachment to it. However, when investing, it’s important to remove as much emotional attachment as possible. You still need to care about it and ensure that you don’t leave any damage unrepaired or let it get into a state of disrepair, but you also have to be open to changing things if it means keeping the right tenant happy.
You need to ensure that you manage your investment in a legal manner including everything from the tenancy agreement to inspections, rent collection, smoke alarm testing and terminations. This is why it is a good idea to hire a property manager, so they can take this concern and liability away from you – be your gatekeeper.
Furnished or Unfurnished?
What will you include? This could depend on the type of target market you want to attract or do you plan on short term or long term leases? For instance, will you include all furniture, just basics like the washing machine and fridge, or no furniture at all? Always remember you can leave areas off-limits to tenants, such as the loft or the garage if you’re using it for storage, but don’t forget this could also affect the rental price and how easy it will be to find a tenant.