How to avoid common rental management pitfalls

Know your tenants

Red flags you should be on the lookout for when reviewing potential tenants include a staggered employment history, weak or bad references, and prior evictions. That said, try to review the potential tenant as the sum of their characteristics, as one blight might be outweighed by other good traits. If you are using a property manager, seek their advice on the final list of candidates. If self-managing the rental, consider which candidates you believe you will work well with. Maintaining a good working relationship is key to minimising management upheaval and reducing vacant periods.

How to manage a tenant who is not paying the rent

As part of a lease agreement, tenants are required to pay their rent on time and to use the payment method stipulated in the rental agreement. In reality, this doesn’t always happen.

Neville Sanders, president of the Real Estate Institute of Australia, recommends first talking to your tenants if rent isn’t being paid on time. This approach will foster good relations, and is prudent considering the level of competition in the market for quality tenants.

“Find out the reason for the delay in rental payments,” Sanders says. “There may be temporary financial difficulties and the situation can be resolved by reaching an agreement to pay outstanding rent within a certain period of time suitable for both parties. It is important to maintain a good working relationship with your tenant, so always try to negotiate first.”

In the event a reasonable agreement cannot be reached, you may need to issue a breach notice. This outlines the timeframe in which a tenant must remedy the breach of the rental agreement. Refer below for your local fair trading or consumer affairs organisation to review current legislation.

“In Queensland, for instance, if a tenant is seven days overdue in rent payments, the lessor or agent can serve a Notice to Remedy Breach. The tenant then has seven days to pay the outstanding rent for a general dwelling (house or unit) and five days for a moveable dwelling,” explains Sanders. “The tenancy may be ended if the tenant has not paid the outstanding rent in accordance with the Notice to Remedy Breach.”

Consider property management services

If finding tenants and managing tenant relations, property repairs and accounts are not within your comfort zone, or you simply don’t have the time, you can engage a range of property professionals to undertake these tasks. These include real estate agents, taxation accountants and quantity surveyors. And while you can save money by managing the property yourself, these services are generally tax deductible and available at competitive market rates.

“It’s always best to organise a meet-and-greet with a couple of agents before making a decision,” Sanders notes. “If you don’t feel that they are taking your individual circumstances into account, then try another agent. There is a lot of competition in the sector and a good agent will value you as a client.”

Keep up to date with your responsibilities

You can avoid costly tenancy disputes by keeping up to date with your legal obligations and responsibilities and abiding by regulations. This includes:

• Maintaining a safe and secure property
• Providing tenants with appropriate notice of inspections, repairs, rental increases and lease terminations
• Responding quickly to tenant requests for urgent and non-urgent repairs
• Executing an eviction correctly.

The legislation governing landlord responsibilities differs between the states and territories. It is important to check with your local fair trading or consumer affairs organisation for current policy information.

• NSW – Fair Trading
• VIC – Consumer Affairs Victoria
• ACT – Australian Capital Territory Civil & Administrative Tribunal
• QLD – Residential Tenancies Authority
• WA – Department of Commerce
• SA – Government of South Australia
• NT – Northern Territory Consumer Affairs
• TAS –  Consumer Affairs and Fair Trading

Be strategic, think big picture

While you may be able to save a few pennies by avoiding a paint job or not replacing old cabinetry and other fixtures, you could be seriously damaging your rental property’s tenant appeal and your ability to charge market rates. The better maintained your property, the easier it will be to rent and the more likely you are to attract quality tenants.

“It is important that the property is maintained in an excellent condition to attract a quality tenant,” Sanders says. “Good tenants will often have a choice between a number of properties so make sure your property maintenance is kept up to date. Items such as a reliable hot water heating unit, an easy-to-maintain garden that has an automated irrigation system and regularly cleaned gutters can all help keep your investment in a sound condition.

“You could consider allowing pets, subject to certain conditions such as size and breed. Not many landlords allow pets, so this might provide a positive point of difference in a tight rental market.

A flexible approach should also apply when it comes to determining rental prices and rental increases. A matter of $10 or even $5, can mean the difference between a vacant and tenanted property, and keeping your property tenanted is the best way to maximise returns. Additionally, if you have a good tenant, it is important to assess whether a rental increase is justified and reasonable. Always review the rental market in your local area in terms of comparable property rental prices and overall vacancy rates.

The longer your property sits vacant, the harder it will be to lease, as renters will assume there is a problem with the property. With this in mind, don’t rush to advertise your property. Make sure you have had time to inspect the property’s condition, undertake required maintenance and assess current rental prices in your area. You’ll have prospective renters lined up to inspect the property fairly quickly once it’s on the market, so it is important to ensure the property is ready for viewing and that the rental price is in step with the competition.