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What is the point of a lease renewal?

By | Lease Renewal | No Comments

It may seem obvious to some, but for many Landlords and Tenants they can’t seem to understand the reasoning behind a lease renewal.

It’s not just a quick process that property managers do, it’s a calculated, thought out task that can benefit both the Landlord and Tenant.

Let’s look at the Landlord’s side of things first, from a Landlords point of view you would want a good tenant to stay long term and not move out after a year or so.

This is where discussing the lease renewal with the existing tenants is so important, if we can secure another year or more and possibly increase the rent* this is a great result for the Landlord. *Depending on market conditions, more on rent increases can be found on our previous blog http://www.directpropertygroup.net.au/rent-increases-and-getting-them-right/ Read More

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Make money from renovating your investment in three years

By | Maintenance, Renovations, Tax deductions | No Comments

For this month’s blog we take a look at renovating your residential rental investment and what value and financial benefit that can bring you as an owner. Each example includes the cost of our project management fee as we managed each of the renovations of these assets.

We take three different properties in three different suburbs and understand: –

– what their previous rental amount was;

– what value was added and the cost of the renovation (including our project management fee);

– what the current rental rates are and;

– what the payback period is for investing in the renovation*.

Example 1 – Three bedroom home in the Altona area

Property was being leased at $1,434 before Tenants vacated and a renovation was completed. We managed the renovation that included installing a second hand near new kitchen, painting, lighting upgrade and tiling. Total investment towards repairs was $14,210 and the property was leased after one open at $1,695 per month. Annual rental improvement is $3,132 combined with $972 in tax savings in year one brings the total annual benefit to $4,104, the payback for this renovation is approximately 3.36 years*.

Example 2 – Two bedroom apartment in the South Yarra area

Property was originally vacant however a similar two bedroom apartment in the building was leased at $1,217 and was in better condition. We managed the renovation process which included new kitchen, painting and various other repairs. Total investment towards repairs was $11,405 and the property was then leased after one open at $1,477 per month. Annual rental improvement is $3,120 combined with $780 in tax savings in year one brings the total annual benefit to $3,900, making the payback period approximately 2.84 years*.

Example 3 – Three bedroom home in the Brunswick area

Property was being leased at $1,950 before Tenant vacated and we undertook a substantial renovation. We managed the renovation that included installing a new kitchen, painting, landscaping and new guttering. Total investment towards repairs was $19,800 and the property was leased after two opens at $2,390 per month. Annual rental improvement is $5,280 combined with $1,354 in tax savings in year one brings the total annual benefit to $7,931, making the payback period just under 3 years*.

*The payback period factors a modest $5 per week rent increase each year and the tax saving is calculated on you having one rental investment and being in the 38% tax bracket with an 18% reduction in tax savings each year, these figures are estimated and your individual tax situation may be different so please seek professional financial advice specific to you.

Our calculations do not factor the time saved in securing a new Tenant as new properties generally take a shorter time to lease, we have done this to roughly offset the time taken to renovate the property.

As you can see from the examples, it’s clear that by undertaking a renovation you will in a short time frame have your initial investment paid back whilst reaping the rewards of a significantly higher rental for the future. Not only do you get the higher rental to begin with, you typically gain a better quality Tenant and a lower amount of repairs being needed during the year.

Contact us should you be considering the need to renovate your investment and would like a chat on how we can help you make managing your investment much easier.

 

 

 

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How to select the best property manager for your investment

By | Agent selection | No Comments

Some property investors do not realise the value of a good property manager until an incident or series of incidents occur that cost the owner time and money. To avoid the pitfalls of selecting the wrong property manager for your investment, we list the key areas that you should consider before selecting someone to take care of your valuable asset:-

Experience

What experience does the property manager have? Have they managed an investment similar to yours, how long have they been in the industry and what value do they bring to you and your asset? Property managers with varied experience across multiple forms of assets will usually have the right set of skills to provide you with a unique and holistic approach to dealing with whatever issue comes up with your property efficiently and effectively.

Who is looking after your asset?

Often the owner of the business, department head or worse yet the business development manager will initially meet with you offering all the bells and whistles of how great they are and will be, but who will be managing the property? Is it someone who is inexperienced or someone who is managing 125 – 200 other properties which does not allow them enough time to properly service you and your property? It is usually these time poor property managers that are under so much pressure that they take short cuts and eventually, issues creep up and cost you in the long run.

Value

Check with other agents and see how much their fees are and if they are competitive, however with all things in life be careful not to look at the cheapest possible offer as there is usually a very good reason as to why they are! Do they get multiple quotes for repairs, do they have trusted contractors, how often do they inspect the property and do they check after a repair has taken place? Does the agent have an online portal where can check on their last inspection, if rent is paid and if the property is in a great state of repair?

Reference

Ask the agent for a few references from local, interstate and international investors. It’s important to see how your property would be treated if your circumstances change and you need to travel. Often if an agent treats their interstate or international investors well and they are happy, local owners will be treated just as well but be careful as an agent will usually provide a contact who they know will give a great reference. Better yet ask your trusted friends and family if they know of a proven property manager that they could recommend.

What’s important to you

There are other important areas to consider such as what will happen in the event of an urgent repair, if a Tenant does not pay on time or how does the agent ensure that we are getting the best Tenant and rental possible. Is the agent honest, do they have integrity and are they across all legislation relevant to your asset etc. Whatever is most important to you, ensure that you communicate it to the agent to see how they deal with that situation or what evidence they can provide.

Direct Property Group will work with you on your priorities to give you the best service possible, for great value and most importantly you deal with the owners of the business direct, so you are ensured to get a level of treatment that very few agents can provide. We provide services across residential, commercial and industrial property.

Please contact us today if we can help you in getting the best out of your property investment.

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Is No News Good News?

By | Market View | No Comments

The answer we receive to this question is usually ‘YES’ but recently we have come across some situations that highlight that in Residential Property Management the answer should really be ‘NO’.

Recently we took over management from another agent, the owners comments were general but a few things he said got our attention such as he ‘never has issues’, ‘never hears from the agent’ and things seem to be ‘ticking along’. Wow it sounds like the perfect investment, no news from the agent, the tenants are ticking along and the rent gets paid on time.

For the past 10 or so years this has been the case for this owner, only a handful of new tenants throughout the years and very little maintenance made him feel at ease and that everything was under control. The owner decided to change management to us due to the previous managing agent changing property managers so many times and the first thing I suggested was that we inspect the property together, mainly as he hadn’t seen in for 10 years and things change over time and secondly so that we are both on the same page with the property.

Inspection day came, and we excitedly met the tenants only to be shocked with what was behind the front door.

Beyond repair, were the owner’s words! The carpet that was once cream was black, the bathroom was mould ridden and water damaged, light fittings were broken and not working at all, door handles were falling off (or not there at all), the list goes on and I’m sure you get the point.

On top of the disappointment with the state of the property, the Tenants names that were on the lease were no longer living in the property at all, the property had been turned basically into a short term share house.

This is one of the worst cases of ‘No news is good news’ we have come across and I wonder how much longer the property, its owner and tenants could be left alone in the dark without communication and management.

The property requires a full renovation of at least $50,000 and will be vacant during that time so you could say the cost of ‘no news’ could be around the $60,000 mark.

If you want to make sure this doesn’t happen to you, it might be a good idea to attend one of the routine inspections at least every second year and call your property manager for an update if things have gone quiet. After all you don’t ever want to be in this situation.

We’re great at getting things sorted and advising when things should be repaired or when items will likely need to be replaced, so please feel free to call us or email us if you have a property that needs to be taken care of now and into the future.

 

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Tough Times for Tenants Great Time for Investors

By | Market View | No Comments

Its the start of 2017 and the outlook for tenants is fairly grim. With vacancy rates sitting at a low of 2.4% during December 2016* it’s not looking like it will improve anytime soon.

January is usually a busy time for rentals, it’s the start of a new year people are moving interstate, overseas up-sizing, downsizing the list goes on. So what’s happening now, why are we not seeing the typical vacancy rates in Melbourne that we usually do at this time of year?

A few things have changed, the number one thing is that people are looking for houses. We could find you an apartment fairly easily however a good quality three bedroom house in Melbourne is being snapped up in record time. Last week we had one open for inspection of a three-bedroom house, and four application forms later and the property is gone.

Secondly, the rise of AirBnB is pushing the number of vacant properties to an even lesser level, in Sydney the number of whole houses/apartments on AirBnB is greater than the number of rentals on the open market according to the recent findings from the Urban Housing Lab at the University of Sydney*.

The reason for this is the Landlords can get higher returns for the short stay and holiday makers but it’s only going to push the price for a genuine rental property up more and Tenants will feel the squeeze. It’s only a matter of time before this trend continues here in Melbourne.

Take into consideration all of the above factors and Tenants that have a house are staying put, it might not tick all the boxes, they might well be outgrowing it, but given the open market they might just be onto a good thing with a reasonable rental rate and not having to spend every Saturday morning searching for their new home.

Landlords aren’t complaining however, low vacancy rates and consistent rental income is a win-win. It’s no wonder they can be selective when choosing from a variety of Tenants minimizing the risk of choosing the wrong Tenant. The bar is set high and Tenants as a whole are much more reliable than in previous times.

We are always interested in hearing your thoughts so please feel free to comment or get in touch if you would like to discuss the best way to maximize your investment property.

Source: *Real Estate Institute of Victoria
* AFR http://www.afr.com/real-estate/residential/airbnb-landlords-take-rental-properties-off-sydney-market-20161124-gswfbz#ixzz4WqAFJbTZ