We all know that the water is included with the rent. However you may not know that detached houses and some apartments in more modern buildings have separate water metres. In this case, you can actually pass on the water usage charges to your tenant. Obviously the fixed charges remain the same, and landlords have to pay this component themselves. But they can claim these expenses back on their tax at the end of financial year.
But before you can actually pass costs along to the tenant there a couple of mandatory things you have to have in place.
A Functioning Water Meter
You have to have a function in water metre that keeps track of the tenants water usage. You have to make sure that your property has all leaks repaired so that there’s no water being wasted.
Water Saving Devices
You have to have special set water saving devices fitted to all your taps inside the property, which restrict the flow of water to under 9 litres per minute when the water is turned on. there’s a lot more than I can say about this but so obviously not going to go into further detail today if you have any further questions please give me a call I’m always here to help.
One of the most common questions we get asked by our clients is what to look for in a good quality investment property?
We obviously spend quite a bit of time focusing on this in our academy and break this down in a lot of detail, as so many property investors get this wrong.
Rent is very important as we discuss in the academy for two main reasons: first of all it can be a great passive income stream. Secondly, it is a great tool to help you hold onto investment properties long-term so that you can realise gains through capital growth. In other words, afford all the expenses associated with a property while the value goes up, making you wealthier.
In this article we’re going to talk primarily about getting a good rental return – what ticks all of the boxes for a tenant? Obviously to get the highest rent, we have to appeal to the most tenants. So we have to put a marketing hat on, look at things from a tenant’s perspective and think about what they are going to want in a property.
Features that achieve a higher rent, and appeal to tenants make a quality investment property.
Room Size
One of the most common mistakes investors make is buying a shoebox because they think that it will ‘just be rented out’. The problem is that like most other people, tenants don’t like to live all cramped up! In Sydney, we see a lot of people who are used to living in a house downsize and move into apartments. They’re used to space, so apartments with good size bedrooms and living areas will be more attractive.
Don’t forget however, this is very area specific. Many inner city suburbs in Sydney will generally have smaller dwelling sizes, designed this way to accommodate for the bigger demand to live in those areas. Think about areas like newtown, redfern, rozelle, camperdown and randwick, areas with a high percentage of student population for instance. Studio apartments and sharehouses make good sense here but these would not be as practical in more suburban or Western Sydney areas.
Close to infrastructure
This is my issue with investment properties that are in fringe Sydney suburbs too far away from major urban centres and infrastructure. In some cases, these investors are better off owning properties in other markets if they cannot afford a proper investment grade property in Sydney.
If renting and not owning your own home, you’re normally less likely to make lifestyle sacrifices. Think about a young person moving out of home, a young couple or an elderly couple.
Young people may be less able to afford to buy, but they would elect to rent in a more premium area in an apartment or sharehouse than the more suburban area where their family home is.
A young couple has normally the combined savings of two people, their common behaviours are to rent in an area to try it before buying or rent in an area they can’t afford to buy in.
The same can be said of an elderly person if they want to rent. Why would they do this rather than buy? Affordability, and perhaps needing to be within walking distance of the shops and transport if unable to drive?
So a property that appeals to these types of renters will create a lot of demand, and drive a good rental return. Good infrastructure includes being close to lifestyle amenities like gyms, cafes and pools, schools, train stations, ferry wharfs, shopping centres and business parks.
A good tool to use is walkscore but infrastructure is pretty easy to observe.
Internal modern Features
Things like air conditioners, dishwashers and storage cages are becoming more mandatory for renters rather than extra luxuries. Just because a property doesn’t have these doesn’t mean it won’t make a great investment property, as you can normally put these in! They will also add to the purchase value of your property.
Again, think about yourself. If there are lots of new dwellings in the area that have modern features, what will that do to the demand of a property without these features?
Another example is kitchen size. A small kitchen might be adequate for a renter who lives alone and is on the go, but would potentially alienate a family from living in the dwelling.
Why it’s important to consider these features? What if the market is hot?
I see your point.
Like the market for selling and buying property, the rental market fluctuates. It is very seasonal year on year, and can be very erratic over the long-term. Several years ago in Sydney, tenants would compete and bid in $50 per week increments to get into properties. Now the market is a lot slower.
In a slower market, vacancies get larger as there are more properties sitting on the market and less tenants to soak them up. Tenants get more picky under these circumstances as they have options.
The properties that suffer are older properties that present poorly, where rents drop. These are not quality investment properties; whereas some properties we rent out that are newer and within 100 metres of a shopping centre still hold the same rents over a number of years.
You want to find a property that will rent well in a slow market, so that you ‘plan for a rainy day’ which is one of the tenets of our Sydney Listings Investment Philosophy. If a property has these features it will tend to make for a better investment property anyway.
An agent in control of the sales process tells you to get a pest and building inspection done before you even hit the market. This will give you the ability to identify if there are any problems with a property early, before you start showing to buyers. It is much easier and less costly to address these before you actually hit the market.
The alternative is to get this done after signing up with an agent and hitting the market. However, in this order, a major problem found during the inspection will halt your progress and devastate your campaign – some issues can completely halt the sales process and require a property to be withdrawn from the market.
This will ultimately hurt the price you achieve. If you need to begin and execute the sales process, please begin here.
When to get a Pest and Building Inspection done?
In our opinion it is better to get it done first and out of the way. This is a small expense to save time and hassle and even streamlines the closing of a sale at the back end of the process. Savvy buyers will always insist on a pest and building inspection, so to have this done before hand makes your property stand out on the market.
It says that you and your agent are professional, definitely here to sell and have nothing to hide. There is no message that is more appealing to an investor or someone looking for their new home.
Pest and Building Inspections for Buyers
Pest and building inspections are also a great idea for buyers to complete when purchasing a property. This can be useful as the last thing any new buyer wants is a nasty surprise after settlement that could prove costly.
Should you have one or multiple agents? Should you sign an exclusive agency agreement or should you opt for a conjunction agreement with multiple agents?
There is only one answer to this question. You should always engage agents on exclusive agency agreement, the reason being that your exclusive agent will work wholeheartedly towards achieving your goals.
If you engage multiple agents in a conjunction agreement, your sale will only be a race to the finish line. That is, a race to beat the other agent without the result in mind. This does not make for a genuine and authentic approach to realising your goals, and the risk is that a focus on commission will be at the forefront of the agent’s mind.
Discouraging
Or, the opposite effect is that it discourages agents. If they have a series of listings and buyers looking at properties, why are they going to refer them onto a conjunction rather than a property they have an exclusive selling right over?
Don’t get caught in the crossfire between too many sellers! Tread carefully!
Most owners think that it can be worthwhile having several professionals competing in the sale. We can understand why it makes sense on paper. But in reality, this is not always the solution.
In some cases having multiple representatives is normal in real estate, but often on larger projects or in commercial real estate transactions. Here more contacts or inquiry volumes might demand this. But for the sale of a single home or small collection of properties, choose the agent who best suits your campaign.
Bill Evans is Westpac’s Chief Economist, and has been so since 1991. As identified in our video, he is known for being clear and fearless in his predictions.
I was fortunate enough to hear Bill speak at this morning’s Westpac Property Breakfast. This article is intended to pass on the insights gained in order to help our community make better decisions in the short to medium future.
Rate Cuts
Evans pointed out that the RBA Governor is willing to cut rates down to 0% eventually. This will depend on the reaction from other central banks around the world, such as the Fed. We are already seeing negative interest rates in Europe!
In Australia, further rate cuts are expected in October 2019 and February 2020 by Evans.
In the USA, Evans believes we will see cuts in September, October and November!
Recession
“I don’t see a recession happening in the USA” was the opinion. Obviously this has been discussed a lot lately with so much happening across the world and in the US. “Those people who say there is a 40% chance of recession… if a recession happens they say they predicted it. If it doesn’t, they say ‘well that wasn’t even my major position”.
Thank you Bill Evans, for your directness.
“Those people are useless”.
Many look at the US’s inverse yield curves as a sign of trouble, but Mr. Evans interpreted this as the attractiveness of US bonds to international investors. As he puts it, these look a lot more promising than other alternatives internationally.
Currency and the Dollar
The Australian Dollar is predicted to continue to lower in relation to the US Dollar, down to around 0.66 in 2020. This is making attractive commercial property investment in Sydney and Melbourne. As valuations are favorable on these markets, a weaker Aussie Dollar will create incentives for foreigners here.
The Euro is also expected to fall in relation to the US Dollar. Sounds like a good time to stock up on some USD!
Australian Economy
Two big areas of concentration are poor wages growth and unemployment numbers.
Wages growth is required for consumer spending to rise. Consumer spending increases business confidence. This in turn drives the economy.
The savings from interest and tax rate cuts will bolster household incomes, but this is likely to be allocated towards debt. Consumer spending will not be bolstered Evans believes – in fact consumer spending will continue to be weak.
Housing
The sharp increase in auction clearance rates post election in Sydney and Melbourne is very predictive according to Mr. Evans. It indicates the recovery is likely stable and here to stay.
Sydney and Melbourne prices have steadied since May, and increased by 1%. Some outlets are predicting 10% increases in prices in Sydney over the next 12 months. Evans strongly disagreed with this idea, and few could doubt this stance. Increases of this size would not be sustained as affordability thresholds would hamper these gains.
The consistent story for price changes is a period of steady growth, which seems highly likely. The downturn does appear to be behind us.
Population Growth
Population growth remains strong in NSW and will remain a positive driver. The economy is driven by productivity and population growth. For NSW, this migration comes internationally of course.
Interestingly, Evans predicted when the impact of migration on prices would really be seen. Forecasts at the moment are that construction completions will level off in the middle of 2020. After this we can expect to see stronger demand as a result of strong population growth.
Rental Market
Sydney’s rental market is in it’s worst state since the early 2000’s. Vacancy rates are at 3.3%, and we are noticing this directly in our office. Despite this our property management team have had some properties leased off first inspections. But this is only when prices are correct at the start of a campaign.
Otherwise we’re seeing old apartments in particular suffer from longer vacancies and days on market. Based on the insights from the Breakfast, we see this picture changing once construction completions level off in the middle of 2020.
Summary – what does this mean for me?
If you are looking to buy in Sydney, the next 12 months seems like a great time to do so. Particularly if the rental market is rectified to help with those holding costs.
This doesn’t shift my opinion in terms of what to buy though – check out our resources at Sydney Listings for guidance on good area features and property features.
If taking advantage of low interest rates, make sure you allow a buffer but we don’t expect a sharp rise any time soon. It never makes sense to be fully leveraged, especially when there is uncertainty in other areas of the world economy.
Should you display a price or not when advertising your property for sale? In this day and age, speed and convenience are more important than ever before, shaped by a digital and consumer world where everything is faster and more optimised.
Buyers don’t want the headache of trying to track down an agent that usually doesn’t answer their phone. They want to know straight away without the hassle or headache. They want to know the price immediately so they know whether they will come to the Saturday inspection.
List your price to the market when advertising your property for sale
You should list your property to the marketplace. If an agent is telling you not to display the price, it may be because they don’t have the confidence in the actual price point. Sometimes, they may even be misleading you with the price. One of the cheapest tricks in the book to get listings is over-quoting.
At times the thinking is to display ‘contact agent’ in an attempt to drive inquiries. This is because buyers will have to call to find out the price. But when a price is listed, we know that any phone inquiries or attendees at an open home are already interested in this property at this price range.
If the price has disqualified them, why would they show an interest?
Obviously there is an exception for those who are just browsing or at the earlier stages of looking at the market.
How to get your property priced accurately
Before you reach a price when advertising your property for sale, it is important to price cautiously. Pricing should take into account:
Pricing your property to achieve the best sale price
Your property will always be sold in competition with other properties and never in isolation. This is why it is important to be pricing your property to achieve the best possible sale price.
You and your agent need to carefully consider where you place a property in the marketplace.
Going too low
Going too low is never ideal. You don’t want to miss out on the opportunity to maximise your sale price in the market. Even if needing a quick sale, the right agent can tailor a strategy for your needs and balance speed with a great result on price.
Going too low can also make some buyers wary that there might be an issue with the property, and scare off their interest.
Going too high
There is a downside when going too high and not being priced competitively in the marketplace. This fails to get enough buyers through the front door to be able to create competition. Competition between buyers gets them bidding against each other and is what creates the best sales results!
To do that buyers need to be attracted to the property, and not scared off by a high price. Many counter this by saying that ‘we only need one buyer to buy a house’ but really, to price your property to achieve the best sale price, you need multiple buyers.
Psychologically, seeing other buyers competing for a property draws attention away from any shortcomings in the property, and creates a fear of missing out, as well as validating the price for the property.
Think about urgency like competing for the girl (or guy) next door…
Think about your days chasing a romantic partner. What happened when you heard that your friend was making a move on your long time crush? You realised it was time to make a move and not sit on your haunches anymore! Competition creates urgency, which is desirable for your sale.
Overpriced properties that sit on the market too long invite negotiation when an interested party sees that no one else is bidding.
How to price the property correctly
Work with an agent who compares sales and comparables in the marketplace, to understand them and the differences between these and your property. Agents are constantly talking to sellers and buyers to get raw feedback on demand in the market.
It is better to use an agent with negotiation skills who can then achieve the best price, rather than simply list the wrong price. At Sydney Listings, our goal is always to cover our fee through our negotiation skills alone, understanding how much a buyer wants your property so that we can extract the best offer possible out of them!
It’s not necessarily feasible for landlords in certain circumstances especially if they own a lot of properties. This is because continually paying lots of premiums will be more expensive than any out of pocket costs that can just come out of the excess rent.
But if you’re a landlord who owns a small number of properties it is generally quite important for you to have landlord’s insurance in place.
The first defence against any issues in the property caused by the tenants is of course the tenant’s Bond, but once the Bond is exhausted then that’s when landlord insurance kicks in.
It covers you as a landlord for anything that goes wrong above the tenant’s Bond.
What is covered?
Loss of rent
Property damage from storms
Damages from certain types of illegal activity
It is worth noting that landlord insurance will generally cover you for everything that home insurance covers and more, as it is specific to landlord needs.
How much does it cost?
Of course landlord insurance ranges depending on the individual circumstances, but we have seen cases starting from as little as $350 to $380 per year. For most rental properties, a policy in this sort of range is an inexpensive solution to the range of potentially very expensive problems that can happen in a rental property.
But what about my property manager? Don’t they protect my property and find me a good tenant?
Arguably the best ‘landlord’s insurance’ is a property manager in many respects. At Sydney Listings, we take this perspective of our service particularly under our Contemporary Property Management model.
We take effort to screen tenants before securing them in our landlord’s properties. This is by conducting reference checks and gathering a wealth of supporting documents on an application. We also place an emphasis on pre, post and mid tenancy education of our tenants. Check out some of our videos here for instance to learn more.
Conducting routine inspections is also vital to this process. But for anyone who knows people, knows that they are unpredictable. People change – in my experience I’ve seen tenants never be late in rent for years. Then suddenly everything changes and they fall behind following a change in circumstances!
I’ve seen perfect tenants turn and suddenly let things go at the end of a tenancy and present properties horribly when moving out.
But why?
It’s a little thing called the human condition I’m afraid! Accountability goes away. Then people fall back to their own standards, rather than yours. We try everything we possible can to instil our high standards on to tenants for our landlord’s benefit. But it is impossible to do this completely, people remain too unpredictable.
In my opinion the goal of Property Management is to reduce stress, reduce risk, and cover our fees so that we’re not really getting paid. We rather ‘take a commission’ from the money we save our landlords. If we’re not doing that, then what is the point of having a property manager? You’re better of doing it yourself!
You may be someone who can’t withstand up to 2 months without receiving rent. Or settle a bill of more than $10,000 following storm damage. Then be aware that there are some things that a Property Manager or Contemporary Property Manager cannot protect you against!
It is a good idea to understand how we’ve designed Contemporary Property Management to be a semi-landlord insurance policy by downloading this fact sheet.
Who to use for landlord insurance?
Our official landlord insurance partner at time of writing is PI Plus who have a pretty strong commitment to protecting our landlords. But we are equally happy to discuss some other options who we don’t share a commercial relationship with.
Terri Scheer for example position themselves as one of the forerunning brands in landlord insurance. If you have your own insurance broker, speak to them about what policies they can recommend as they will likely be the most aware of your individual needs.
Should you do property styling, and is it worth the money? Property styling can be one of the biggest competitive advantages you have in the marketplace.
A property stylist’s job is to create that attraction or warm fuzzy feeling for buyers as they walk through the door. If you can create this atmosphere, you almost guarantee that you will get a sale away a lot sooner and at a premium price point.
It is a sure way to get good value on investment, and attract buyers.
Why is property styling so effective?
Take a look at this Volvo ad campaign for example for the Volvo V60.
What do you notice? The advertisers use visuals, a soothing voice and music, all to reinforce the theme of family. They trigger a response in the viewer, and create an association between family and the model.
Advertising and sales take nothing for granted, and don’t bank on customers having imagination. They make it as easy as possible for customers to see themselves using the product or service.
Your product or service is not a house, it is a lifestyle and a home. So you need to make it as easy as possible for potential buyers to see themselves living in the home. Avoid presenting your property sparse or bare. This will take the buyer away from picturing their new life in this home, and onto small defects and features.
If two identical apartments hit the market, and one is staged and styled whilst the other is bare, which one do you think will sell first?
Do I require full staging? How much will this cost me?
Cost and how much effort should go into this will vary from property to property. If you’re selling a mid range residence, this can be as simple as a tidy and freshen up like new lights, a fresh coat of paint and item rearrangement. De-cluttering, making the property look minimal to finish up, and you’ve done some cheap and easy things to improve your property’s value.
There are some more exotic examples. Check out this video from Coldwell Banker Real Estate for some more examples and a discussion of how important presentation and styling is.
In short, it is pretty clear to see the ways property styling adds value to your home. Your agent can help you organise this and determine what is most cost effective for you.
How long should it take you to sell your property? That’s a difficult question to answer. Really, you should look at some of the factors relevant to your suburb.
Look at your suburb and work out what the average days on market are, which can be accessed on domain.com.au or realestate.com.au. Your goal should be to match or beat the days on market you see here.
You should price your property competitively to reduce the time it takes your property to sell. As we explore in this article, pricing high generally leads to a blown out days on market and takes your property longer to sell.
The most popular methods of sale are auction and private treaty. In Sydney, auctions are very popular and can be a great way to create competition and encourage emotional bidding among buyers. Private treaty sales on the other hand are less visible and can create uncertainty amongst buyers.
Choosing the right agent helps reduce the time it takes to sell your property. Make sure they have the perfect sales process, and a sound strategy for selling your property that they will execute well.
If you need to see an example of a strategy session, just click the link below to request an easy, no commitment sneak peek all done online. Here you can run through campaign elements such as social media tactics, breaking down buyer source and activity as well as presentation.
Another example is kitchen size. A small kitchen might be adequate for a renter who lives alone and is on the go, but would potentially alienate a family from living in the dwelling.
Interestingly, Evans predicted when the impact of migration on prices would really be seen. Forecasts at the moment are that construction completions will level off in the middle of 2020. After this we can expect to see stronger demand as a result of strong population growth.
We take effort to screen tenants before securing them in our landlord’s properties. This is by conducting reference checks and gathering a wealth of supporting documents on an application. We also place an emphasis on pre, post and mid tenancy education of our tenants. Check out some of our
