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Investors should assess the net return and compare it to the average returns available on other properties when deciding whether to proceed.

Too low a return may mean that alternative investments should be reviewed, while a very high relative yield may mean there is an accompanying risk factor that’s higher than normal, PK Property Search and Negotiators advises.

 Areas that produce lower yields predominately have a higher capital gain, which might be the ultimate aim.

 The yield is calculated by starting with the purchase price. This is the denominator. The numerator is your net yearly income.

To figure out the net income you take your yearly gross rent and subtract your outgoings. Outgoings for residential properties include management fees paid to the letting agent, council and water rates for the year, estimated repairs, maintenance and strata levies and land tax if applicable.

You should set aside a yearly amount for repairs and maintenance, since big expenses occur periodically and not necessarily yearly.

When investing in property plan to hold the property a minimum of five years. This accounts for economic cycles and changing conditions.

Written By: PK Property Search and Negotiators

Source : Australian Property Investor (October 2009)

1. Make your property attractive to good tenants

“A rental property that’s well presented and easy to maintain is more likely to attract good quality tenants,” Majda says. “Tenants are also more likely to take pride in a well-presented property and treat it as if it’s their own. Nobody wants to live in a house that has shabby carpets, an unruly garden and is in need of repair.”

2. Appoint a property manager

“Property managers have experience in screening prospective tenants and know which questions to ask them,” Majda advises. “They also have access to databases that list tenants who have defaulted on rental payments, maliciously damaged a property or been evicted.”

3. Inspect the property regularly

“Regular property inspections can help landlords to identify potential issues,” Majda notes.

“If a tenant is causing damage to a property and regular inspections aren’t being held, the damage may go unnoticed and be more costly to fix later on. “The best way to do this is with the help of a property manager who should conduct an inspection around every three to six months and provide you with a written report.”

4. Obtain landlord insurance

“Tailored landlord insurance provides a safety net for landlords if their tenant does the wrong thing and maliciously damages their property or stops paying the rent,” Majda says. “Unfortunately even the best tenant can accidentally damage a property or fall behind in their rent. Landlords should choose a comprehensive and secure policy that covers them against malicious and accidental damage as well as loss of rental income if the tenant absconds or leaves a property unable to be re-let while damages are repaired. “The policy should also provide cover if a court orders a tenant’s eviction or terminates the rental agreement due to tenant hardship. “An insurance policy that covers these specific risks can assist landlords to safeguard their investment and ensure they continue to receive a steady flow of rental income.”

Source : Australian Property Investor (October 2009)

The rent is too high
The market and the tenants determine rent. Your agent should monitor the market rent to ensure that you are receiving the maximum return on your investment. High rents can lead to long-term vacancies, which ultimately affects your income.

High vacancy rate
If there is a high ratio of properties to tenants (more properties than tenants) it will have an effect on the vacancy factor. Tenants have more choices and are in a stronger position to negotiate on rents.

Poor presentation
It is important that the property is maintained in an excellent condition to attract the same quality of tenant. A tenant will often have a choice between a number of properties.

Accessibility to local facilities and transport
Often the property can be maintained in an excellent condition, the rent is at market value and it still remains vacant. This could be due to its location. Tenants may require a property that is close to town, shops, clubs, beach, transport, schools etc.

Your agent should make every reasonable endeavour to locate a quality tenant to suit your investment property and should keep you updated on a weekly basis on the progress in obtaining a tenant

A: Firstly, you can sell your investment property whenever you like if it is your property to sell. However, “lease rules”. By that I mean that regardless of whether you sell to and owner occupier or an investor, you cannot make the tenant move out before the expiry of their lease. You might find that a prospective owner occupier is happy to wait until the lease expiry. Sometimes the purchaser and the tenant can come to an agreement in writing to terminate the lease early. This is usually come about by the purchaser making an attractive offer to the tenant to entice them to agree to terminate the lease early, i.e.; pay for the cost of their removals, or offer a ‘free rent’ period.

A: Unfortunately, the changing of light bulbs is a “grey area” as far as the legislation is concerned. There is no legislation that insists that a tenant is responsible for changing light bulbs, halogen, and recess or other; however, a tenant is responsible to hand the property back in the condition in which it was given to them.

The Residential Tenancies Authority who administer the Act, do advise however, that it is best practice not to have tenants climbing up on ladders, due to the possibility of liability issues. For example, should the tenant fall from a ladder whilst attempting to change a light bulb, that is situated on a slippery bathroom tiled floor and injure them, it could potentially mean a claim on your public liability insurance.

You may insist that the tenant pay for a tradesperson to change the light bulb, however, should the tenant feel that this is unfair; he has the right to place the matter into dispute with the RTA for mediation between the parties. Should the matter not be resolved by the RTA, then the tenant has the right to file for a hearing with the Small Claims Tribunal and have a Magistrate make a decision. The costs involved for you should the matter proceed to Small Claims Court, would probably far out way the cost of having a maintenance man attend to the changing of a light bulb.

At the end of the day, the legislation deems, “what is reasonable” in these matters. The role of a managing agent, is to act within the legislation and pass on the advice from the governing bodies and hopefully come up with a “win, win” situation for all parties involved.

A: It comes down to the age of the item, wear and tear allowed and length of time the tenancy has been in place. Also, under the Australian Taxation Office guidelines there is a depreciation schedule which Magistrates refer to as well which shows the life of a particular item such as carpets 10 years, or curtains 6.67 years. Use the ATO guidelines in conjunction with all relevant factors.

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A: You can have the tenancy terminated if the tenants fall behind with the rent and don’t remedy the situation within an agreed time.

However, there are legal procedures you must follow:

If you want the tenant to remain but to pay rent arrears, then, you may give the tenant a Breach notice for non-payment of rent. This requires them to bring their rent up-to-date within the nominated days (different time frames in each state). If all outstanding rent is not paid within the prescribed days you can then issue a Notice of termination for non-payment of rent. This seeks to terminate the Tenancy Agreement and requires the tenant to vacate the premises usually within seven days.

Note should the tenant refuse to leave the property after this period, it is essential that you apply to the court for an order to have the tenant evicted. It is illegal to try to force the tenant out yourself. Even if the tenant brings the rent up to date, you can still go to court to have them evicted if the tenant has a history of continuously falling behind with the rent. Or, you can choose to let them stay at the property and rescind the termination notice.