Rising Vacancy
Q: I’ve been reading a lot of reports that vacancy rates are increasing, and my property manager has just told me that my tenant has given notice, as they are moving out to a cheaper rental nearby. What should I do? Do I reduce my rent or stick with it and just try to find another tenant?
A: This is an interesting question and one that I am asked often, particularly as we have such a competitive rental market. My answer is that you shouldn’t reduce the rental price of your property, because there may be mitigating circumstances on top of the price that have caused their move. Importantly, this should never have happened, as your property manager should be proactively ensuring you are never caught on the back foot when it comes to tenants moving out.
A good property manager will contact your tenants two to three months prior to any lease renewal to find out more about the status of their tenancy. For example, are your tenants happy or not, and why? Are they planning on vacating the premises at the conclusion of the lease, or hoping to extend? It’s this kind of behaviour and resulting knowledge that will mean you are ahead of the game when it comes to changeover of tenants.
If by chance you become aware of your tenant’s plans to vacate your property, you have ample time to find new tenants and mitigate the risk of disruption to your rental income. Your property manager should also be able to shed light on any departing tenant’s reasons for leaving, meaning you can address any issues they may have had.
At the end of the day, it is important to remember that tenants will always come and go, more often for personal reasons rather than those of rental prices. By staying prepared and with the support of a good property manager, you’re putting yourself in the best position to minimise their impact on your income.
Firing a Property Manager
Q: I want to fire my current property manager, as he’s been constantly talking down prospects for my rental property, which I believe is his way of keeping my expectations low. I’m sick of it, but he’s currently looking for new tenants as my current tenant is about to move out. Should I just fire him now or wait until he finds a new tenant?
A: This is certainly a tough situation in which you find yourself, but I urge you to take your time before making any hasty decisions.
The job of your property manager is to manage your property in line with the Residential Tenancies Act and legislation enforced by state laws. Any failure to adhere to this legislation is a serious offence and could give you grounds for immediate termination at the very least.
Part of their duty requires them to forward to landlords any written application for their property, regardless of the property manager’s personal opinion. You should immediately check they have been doing this. In addition, they should be able to give you detailed feedback with regard to any applications made, so feel free to question them in depth. Finally, they should be able to give you accurate and practical information about the potential tenants, with regard to rental history and their lifestyle, allowing you to make an informed decision about your new tenants.
If you choose to fire your property manager, you should first review the management agreement to see if there is a notice period for terminating the contract – this is usually something like 90 days or a minimum of 30 days after written notice. In some cases you may be able to terminate the contract immediately, but always double check to prevent any additional and unnecessary costs to you.
I would also advise you to have the property transferred to a new agent as soon as legally possible. That way you will be able to set up with your new agent to start advertising and finding new tenants, while finalising any outstanding invoices with your current agent.
How to Choose the Best Landlord Insurance
Q: Do you have a cheat sheet on how to choose the best landlord insurance? I want to make sure I’m covered, but at the same time I don’t want to spend that much money paying for bells and whistles I don’t need. What do you look for when choosing insurance?
A: At Blink Property, we recommend landlord insurance to every one of our clients. It is critical when choosing insurance that you purchase coverage that suits your individual property’s situation. Costs of insurance can vary, with a huge range of options and inclusions available, so you need to ensure you get the right cover and service for your needs.
Kick off with some detailed research based on your knowledge of your property and area. Do not leave it up to anybody else. Remember this is your property and your livelihood, so a little bit of effort up front to ensure your coverage is correct may pay huge dividends in the future.
In terms of coverage, consider your local area and any potential risks that may come with it. Basic coverage elements to check for are rental defaults and tenant neglect or malicious damage, while more specific requirements include storm/fire/flood (look closely at the ‘type of flood’ covered as some policies may not cover flooding from rivers bursting their banks), earthquake, civil unrest and rioting. If you are unlucky enough to be in an area that may be prone to any of these, not having the right cover is a big risk. Ensure you are covered for acts of nature, as recent disasters like the devastating Queensland floods and Victoria bushfires irrevocably ruined the lives of many people who had not insured themselves against such occurrences.
Finally, be sure to read any product disclosure statements yourself and ask individual providers any questions you may have. By doing your own research, not only will you grow your own understanding of your different options, but you can ensure your cover meets your requirements. Speak to those you know who have experience with landlord insurance, and get their opinions too.
At the end of the day, the more time you invest in growing your knowledge of the market and the offers in relation to your property, the better informed your decision will be.
This feature is from Your Investment Property Issue #88. Buy the copy to read more!
