Becoming a Landlord in South Australia

Being in the position to provide housing to other’s by owning an investment property, is a huge step. Many of us like the idea of tangible, bricks, and mortar assets, especially when the stock market dips, and we forget we invested in shares for the long haul.

However, there are numerous factors to weigh up, while considering your investment decisions.

Before you buy an investment property, turn your mind to the following.

Will you employ a property management agency or be a private landlord?

Employing a professional Agency/Property Manager takes much of the stress out of owning an investment home but it is certainly something you can do yourself if you have time.

There are private property advertising portals with realestate.com.au and Domain for private proprietors to use, to advertise, set inspections and find tenants. Additionally, Consumer Business Services (CBS) has a myriad of helpful forms and fact sheets to guide private landlords. There is much to learn about the rules of providing rental accommodation, with or without professional help.

What are the advantages to using a property management agency?

The main advantage is that a property manager (PM) immediately knows what to do and can hit the ground running. They will teach you the obligations from all angles.

Using a manager is tax deductible and finding a good one, makes being an investor infinitely easier because they support you.

• They understand tenant selection processes.

• They become liaison between you and your tenants, as you keep somewhat anonymous.

• They are available to deal with problems 9am-5pm and out of hours, so you do not have to be.

• They walk the fine line of keeping the tenant happy and keeping them for as long as possible, while persuasively demanding compliance of the law.

• They know the market and if it is time for a rent increase.

• They will advise you, but know all decisions are ultimately your own.

• They check that the rent has been paid into their trust account for dispersal and chase any arrears.

• They can explain your rights and responsibilities to you.

A good property manager will build rapport with you and your tenant and be one step ahead of what needs to be done.

The key qualities to look for in a property manager (PM)

• Exceptional client service skills, attention to detail, organisational and scheduling skills, and planning ability.

• They also need to possess excellent communication skills and a good dose of emotional intelligence.

• Property managers must be qualified and registered with Consumer Business Services as a PM or a Land Agent.

• They need to be knowledgeable and committed to ongoing training/professional development.

• Maturity and life experiences are certainly a bonus for any PM, they are problem solvers.

• Enthusiasm and caring are critical to the PMs success!

What are your legal/landlord obligations and where are they to be found?

Landlords and Tenants alike must rely on The Residential Tenancies Act 1995 SA (The Act)

to understand their obligations, this piece of legislation is described in its title as,

“An Act to regulate the relationship of the landlord and tenant under residential tenancy agreements, and for other purposes.”

Part 4 of The Act explains the mutual rights and obligations of landlord and tenant.

Some of the main landlord obligations are below.

The landlord must:

Provide and maintain the premises in a reasonable state of repair and cleanliness Residential Tenancies Act 1995 (SA) ss 67, 68]

Comply with all statutory requirements affecting the premises, Residential Tenancies Act1995 (SA) s 68 (1) (b)

Not cause or permit any interference with the tenant's reasonable peace, comfort, or privacy Residential Tenancies Act 1995 (SA) s 65

The property also owner needs to:

• Upkeep repairs to the structure, interior and exterior of the property

• Provide and upkeep of heating, cooling, hot water systems, the safe supply of electrical and or gas appliances, provision of specialised gardening and property maintenance. The landlord must continue to provide all that was available at the beginning of the tenancy. For example, if a TV is in situ and breaks down, an equivalent TV needs to be supplied.

• Landlords are responsible for repairs even if the tenant knew about the issue when they moved in. Unless the issue was legally excluded from the agreement.

• Landlords cannot contract out of statutory obligations.

• Working smoke alarms must be present and checked at all routine inspections.

• Homes must be able to be made secure and keys for all locks must be provided.

• Owners must respect the privacy of the tenant and not enter the home without legally acceptable notification, as defined by the Act.

• Abide by minimum housing standards, these can be found here housingsafetyautoritysa.gov.au.

The contract between the Landlord and Tenant is the Residential Tenancy Agreement.

This contract grants legal occupancy to the tenant and sets out the terms of the lease, the duration, the cost, and the obligations.

Tenants’ obligations - some of the main ones are found below

• Tenants must keep the property in reasonable condition, report any required maintenance in a timely fashion, and emergency repairs such as burst water pipes or gas leaks must be reported urgently.

• With instructions, tenants normally clean the air conditioner filters, extraction fans, the oven, the rangehood, plus tenants are responsible for mowing, weeding, general gardening and cleaning.

• Tenants must pay their rent on time.

• Subletting without permission is not acceptable but a property owner cannot unreasonably refuse such requests.

• Illegal activity is not tolerated.

• Pets are not permitted without approval.

• Damage caused by tenants must be fixed by them, or at their expense.

• Any property alterations must be approved by the landlord, if alterations are later removed, any damage must be made good.

What is a bond?

A bond is a form of financial security for the owner. The bond may be claimed against to pay rental arrears at the end of a tenancy or for any damages discovered in the outgoing inspection. Often the outgoing cleaning is deemed unsatisfactory, and a landlord may ask to claim a cleaning fee from the bond.

A private landlord must lodge a bond within 2 weeks of receiving a new bond, however an agency has 30 days to lodge a bond.

Housing SA can advise about bond guarantees and help paying bonds.

CBS hold bonds in a trust account, and they are submitted via BONDS ONLINE.

Residential bond enquiries at CBS are a valuable source of information.

• A bond will be 4 weeks rent if the weekly rental amount is $250.00 or less.

• A bond will be 6 weeks rent if the weekly rental amount is $251.00 or more.

Rules for bonds are found in The Residential Tenancies Act 1995 section 62.

What kind of insurances are required for a rental property?

The bond may cover some amounts of loss, but it is still imperative to be insured for other losses.

The tenant is responsible for buying a policy that covers any contents of the home that belong to them.

The property owner is responsible for landlord insurance and building and contents insurance.

A good insurance broker will know exactly what you need, it is always a good idea to work with an expert.

What about tax?

It is best to speak to your accountant regarding expert investment tax advice. Most landlords employ depreciation schedule experts such as Real Property Matters, who create and update the tax depreciation schedule regularly, creating tax deductable savings for new works or depreciating assets.

Where can I get general property management advice?

Consumer Business Services in South Australia provide a valuable source of information. The website has an enormous amount of helpful information and forms available for tenants, agencies, and private proprietors.

How do I maximise my earnings?

You need to attract quality tenants who will care for your investment home as if it were their own. Ideally, we love to attract long term renters. To do this consider the following.

Your property needs to be well presented, keeping it in good clean condition will ensure the property appeals to prospective tenants. Why would tenants take care of a home the owner obviously does not care about? Start the way you wish for the tenants to continue.

• Mow the lawn, water the garden,

• Keep the garden simple and tidy.

• Maintain the home fastidiously, clean the gutters and prune regularly.

• Hold open inspections when looking for quality tenants. It is not just about what tenants can afford to pay, but question if the property would suit individual applicants, for example.

• Is it big enough for the number of people applying?

• Does it have the right number of bedrooms, bathrooms, and car parks for them?

• Are the neighbourhood facilities a good match for applicant’s needs?

Choosing tenants intelligently will save time later, as mismatched tenants move on and break leases.

Keep your depreciation schedule updated and provide it to your accountant.

Choose an accountant who understands and is interested property investing. Check the ATO website for any landlord /investor claim allowance updates.

Confirm all tenant references and if you are concerned ask for additional referees. Trust your intuition and listen to your PM.

Choose a good area in which to invest. Young working professionals love to be close to the city. There is excellent rental demand close to the city and finding quality tenants will be easier. Families will not mind being further from the city, keep this in mind if purchasing a family home.

It helps to buy in an area you are familiar with, your insight will give you an edge over the buying competition.

Keep up to date with comparative rental values and do not be afraid to raise the rent annually.

Learn the law as it relates to your investment.

If you work with an agency, attend the quarterly inspections with your property manager, stay aware of what is happening. A good property manager will suggest this.

Follow and learn the market before buying your investment. Understand the median prices for units, homes, and townhouses in your areas of interest.

There is much to consider when become a landlord, but it can be satisfying and rewarding if you do your homework, plan and employ the professional experts you need to succeed. We wish you well in your property investment journey!

Resources

Core Logic

realestate.com.au

Domain

Consumer Business Forms & Fact Sheets – Property Management

The Residential Tenancies Act 1995 (SA)