Melbourne's Real Estate Blog on Residential and Commercial Property

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Renting with pets

By | Leasing, Pets | No Comments

As a tenant it can be an exciting time moving house, looking to upsize with a growing family or simply looking for change. You find the perfect property online plan your inspection then ask the all-important question- if your furry friend can live in this perfect house with you!

The agent replies ‘Sorry no pets allowed’, your heart breaks and now this is no longer the perfect house for you. Why is it so hard to find a property that accepts pets?

Unfortunately, most Landlords have already had a ‘badly behaved tenant/pet’ in their rental property and simply don’t want to take the risk again. Everyone has heard the stories, damaged carpet, scratched doors and floors, broken blinds caused from a pet. It’s these tenants that are few and far between that spoil it for the rest of the great tenants looking to move.

Some Landlords accept that their property is ‘perfect’ for pets and will accept them as there is ample garden space, usually with a performance clause written into the lease that the pets must be kept outside which can be quite difficult for some pet owners to manage as they love cuddles on the couch with their cat or dog. Sometimes properties are just not suitable for a pet and in some instances in apartment buildings Owners Corporations do not allow them at all.

Interestingly when a property is advertised as ‘pets accepted’ the property leases quicker than a property without, we also find that the tenants are prepared to offer additional bond to put the Landlords mind at ease that they will take full responsibility for anything that may happen as a result of the pet living in the property. A pet clause is included in the lease agreement requiring the tenant to rectify any damage caused by the pet and fumigation to the property to be carried upon vacating.

However, things could change soon, currently reforms to the Residential Tenancies Act will be introduced into the Victorian Parliament in 2018, and if passed, these reforms would be implemented in 2019. Tenants will have the right to keep pets, provided they obtain the landlord’s written consent first. Landlords will not be able to unreasonably refuse a request for consent.

In the meantime, pet owners, it’s always best to be honest about having a pet live in the property with you.

PS. That cute pup is our dog Layla

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Prepare your investment property to have a great 2019 financial year

By | Tax deductions | No Comments

This month’s blog looks at how you can prepare your property to ensure that your important asset provides incredible results for the new financial year.

Manage your expenses

This is an area where cutting certain corners can be good for you. Start with your greatest expense, usually it’s your home loan repayment and see if your rate is competitive, a 50-basis point saving on a $500,000 loan is $2,500 your pocket annually but be wary of honeytrap rates that appear low but catch you with annual fees and other charges. Typically, you are stuck with your Council and Water Rates, however with the former you can contest the rates if for whatever reason they are not in line with market, and potentially reduce the overall cost.

Look at your insurance as well, the level of cover and excess can be tweaked to adjust your annual premium but remember to not be underfunded as a small saving in premium is not worth a large loss in a potential claim. Other areas such as management fees and accountant fees can also be considered, being competitive is important however a good property manager or accountant can save and return you money far greater than the fees you pay as we will discuss a little later.

Increase your income

Having your rent at or above market levels is critical to growing your investment portfolio, a good property manager can guide if you are unsure what that level should be. Maintaining and investing in your asset to an appropriate standard is also important, whilst spending more money may seem counterintuitive, a well-maintained property ensures that you can command a higher rent and hold onto good quality tenants saving you in the long run. Renovating is a crucial way to stay ahead of the game, we have blogged previously here http://www.directpropertygroup.net.au/2017/06/ and can show you examples of how a small to medium investment can yield impressive results in circa three years. Look at your home to see what low cost way that you can improve it, see if you can create an additional bedroom by simply putting up a wall or by getting rid of an unused spa bath. This will turbo charge your returns.

Utilise a property manager/professional

As mentioned earlier, a good property manager or accountant are critical to getting the best performance out of your asset. With regards to an accountant, knowing what can be claimed, asking you to obtain a tax depreciation schedule where applicable and pre-planning are all extremely important to ensure that you get a great tax return. And don’t despair if you think you may have missed something in the past, you can go back up to two years to claim what you may have missed. With regards to a tax depreciation schedule, a skilled quantity surveyor can ensure you don’t miss any deductible item and this can really add up over the long term. Some people consider who is the cheapest to be the main criteria when selecting a property manager, but there are a number of reasons why nearly every time this is not the best strategy.

First of all, no business owner will give great enough attention to their cheapest client and they certainly won’t put enough their resources towards them either. It means that you usually will get an under qualified agent who themselves will be underpaid and when an employee is undervalued and unappreciated the work suffers. Understanding marketing and leasing so that your asset gets leased quickly is also important, a one-week delay in leasing means that the cheapest agent is no longer the cheapest.

Quickly undertaking repairs so that they don’t cause further damage and therefore a greater repair cost, understanding how to spot issues before they occur is a very underrated skill that is the difference between a planned work or an after-hours emergency that escalates the cost. Knowing market rates for repairs, using skilled tradespeople who fix it right first time and the list goes on for why a great property manager is key to your assets performance.

Talk to us about your investment and how we can help your asset have its best performance this financial year.

 

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4 key considerations for a Commercial Lease Bank Guarantee

By | Commercial | No Comments

A Bank Guarantee is a form of security that a Tenant provides to a Landlord to give surety that the Tenant will perform to their obligations under the Lease. The terms of a Bank Guarantee can often be overlooked during the negotiation of a Commercial Lease as usually the main focus is on the rent and in most situations rightly so but is there any point in having the highest rent per square metre in the street if your Tenant does not pay the rent and they default in substantial arrears with an insufficient, or even worse, no or an invalid security deposit to lean upon?

We take a look at some items to consider when negotiating and obtaining the Bank Guarantee –

Amount
It is important to have appropriate cover if the Tenant was to default and vacate leaving you with an arrears shortfall and potentially a significant make good. Circumstances may call for a 6 to 12-month rent plus outgoings plus GST equivalent if the Tenants finances or its make good obligations are of concern. If a net Lease, it is wise to include outgoings charges into the calculation as often if a tenant does not pay its rent, they typically do not pay their outgoings also. Further make sure that as rent increases, the amount of the bank guarantee increases also as the rent equivalent amount for the first and last year of a 10 or 20-year lease can obviously be quite different.

Expiry
The expiry of the Bank Guarantee can be critical to ensure that the Bank Guarantee can be called upon at the right time. For example, if a Tenant has a 5-year Lease term and the Bank Guarantee expires on the same day as the Lease term ends, if the Tenant promises to make good during the last week of the term of the Lease yet fails to do so to an appropriate standard you will not be able to cash in the Bank Guarantee after its expiry. Depending on the agreed dates to update the Bank Guarantee, minimum 6 months after the term ends is a fair date for the Bank Guarantee to expire.

Particulars
Always ensure that the details in the Bank Guarantee are correct including but not limited to property address, amounts and Landlord details. If something is incorrect, it could invalidate/cause problems when cashing it in.

Make sure its original
If you receive a copy of the Bank Guarantee and if for whatever reason the Tenant has the original, they could cancel the Bank Guarantee making your copy worthless!

We hope you found the above of value and please do not hesitate to contact us should you wish to discuss management of your prized asset.

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What happens when the leasing market cools?

By | Leasing | No Comments

We often hear lots of talk around the housing marketing relating to sales, clearance rates and sold prices but very rarely do they talk about the rental market. It’s interesting because the two are related and when we see a slower sales market we often see the roll-on affect in the rental market.

The start of 2018 went off with a bang and properties were being snapped up for lease in record time, with properties not lasting more than 7 days and generally being leased after one inspection. In many cases tenants were offering higher than asking rentals and longer lease terms so that could secure their dream home. Typically at this time of year however, things start to slow down, less people at open for inspections and properties taking slightly longer to lease.

So just how do Landlords prepare for a shift in the demand? As with all things preparing for the worst and having financial savings to assist if a property becomes vacant is one way to do it, however we want to look at a more proactive approach and one that keeps those funds in your pocket.

Let’s go back to the start, when we secure a lease we always try and time the lease end date for ‘peak season’ that is typically from October – March. If a tenant is offering a six-month lease in June, then this might be a time that we would consider a shorter lease so that if it does become vacant it does so at a good time of year.

Consider securing a longer lease if possible, so similarly to the above example if a tenant is after a 12 month lease we can try and negotiate an 18 month lease which will bring the end date closer to the ‘peak’ leasing season. This also reduces the risk of the property becoming vacant sooner if you only secured a 12 month lease which would incur you more costs.

Owners should also promote the property to those in the building and close by via a brochure, the reason this is an effective strategy is that often we see current occupants in the building having a friend or family member that would like to lease in the building, but they may not necessarily be looking online all the time.

We also recommend Landlord’s use the quieter time in the market to do renovations or repairs to their property in preparation for securing a higher rental in the warmer months.

It is not just about ‘reducing the rent’ which some agents use as the only tactic to lease a property in a cooler market, it’s about planning ahead and looking at all options, not just the easy ones.

If you would like to speak to us about our proactive approach and how we focus on minimising vacancy, then feel free to contact us.