Master Class:Managing your property to maximise financial results

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Portfolio Solutions Master Class

• Designed to share knowledge.

• Desire to provide extra value to our clients.

• Great for both new and experienced investors.

• Plenty of opportunity for Q&A

• Market leading industry partners invited by Real Estate Investar to present and educate.

Our special guest

Michael BanksCEO

Local Agent Finder

Local Agent Finder• Are you paying agent and property managers

the right amount and getting the best service?

• Local Agent Finder makes it simple to:• View average agent commission stats in every

suburb

• Request & compare quotes from 9,000 agents to sell, lease or manage your property portfolio.

• In less than 5 days you’ll know if you need to change your manager.

• REI have worked with LAF to customise their tools for investors with portfolios.

• It’s a free service.

Property management master classIn this session, we will cover:

1. The pros and cons of residential tenancy types.

2. How to find an A Grade property manager.

3. How to get property managers competing for your business.

4. How to easily compare the costs and services of each.

5. Tips that will ensure you have tenants queuing up.

6. How to select and retain the best possible tenants.

7. Things you can do now to boost your rental income.

8. How to figure out the best tenancy rental strategy.

Property Management

Property Management

No matter your investment, some level of property management will be required.

Property management involves:

• The letting of the property

• Management of Tenants

• Management of repairs and maintenance to the property

Property management options

There are 4 different options for property management:

1. Non-management (No one!)

2. DIY

3. Family member or friend

4. Professional property managers

1. How non-management occurs

• Buying property with existing tenant

• Existing tenant has no tenancy agreement – ‘Handshake’

• No bond.

• Former owner keeps no tenant ledger or other records.

• Former owner has no inspection records or ‘respects’ the tenant’s privacy therefore inspections are not done.

• New owner adopts that approach.

Benefits of non-management

• None to the owner

• Several to the tenants

This is a common approach by new investors

Negatives of non-management• Tenant can:

• Pay rent if and when they want to.

• Keep the property in any state they like.

• Leave whenever they are ready or wanting to.

• Rent arrears.

• Damage.

• Investor abandons the investor market “too hard, too much trouble’.

2. How DIY management occurs

• Generally first property investment for owner(s).

• Can be a new investment from a relatively new investor. Perhaps they have had another property ‘with no real issues’ previously.

• Could be owned by investor with the mindset ‘I’m a nice person so they will also be nice to me’.

• Owned by a typical ‘Tradie’ or ‘Handyman’ type. “I can sort them out myself” or “My old man owned property”.

Benefits of DIY management

• Hands on.

• Save fees.

• Something to do during the day.

Negatives of DIY management

• Investment in time.

• Investment in setting up systems.

• Learning curve.

• Costly errors.

• Increasing liability.

3. How friends/family management occurs• Owner goes overseas or is based

overseas.

• Buying a property with existing tenant.

• Might be a first time investor, investing local to friends & family.

• Could be owned by investor with the mindset ‘I’m a nice person so they will also be nice to me’.

• Owned by a typical ‘Tradie’ or ‘Handyman’ type. “I can sort them out myself” or “My old man owned property”.

Benefits of friends/family management

• None to the owner.

• Several to the tenants.

This is also a common approach by new investors

Results of friends/family management

• If done well: save on fees.

• If done poorly, tenant can; • Pay rent if and when they want to.• Keep the property in any state they

like.• Leave whenever they are

ready/wanting to.

• Estranged family or friends ‘when things go bad’.

• Can result in property damage and abandonment of investing by investor.

4. Benefits of professional management

• Full services are available:

• Finding tenants

• Managing tenants

• Record keeping

• Systemised: computers & software

• Not personal / less Stress for you as the owner

• 24/7 Service

• Leveraged time for owner

• State/national/OS coverage

• Avoid liability:• Current & future laws• Mediation/tribunals• Debt collection

And many more…

How to identify professional management

• Specialist company or department.

• City wide or large coverage/multiple offices.

• System based vs personality based.

• Key staff.

• Time in market = experience.

• Most important:

• Communication with the landlord.

• Treat the tenant as a customer.

Questions to ask a professional manager

• How many tenants on your rent roll are in arrears?

• How often do you make disbursements to owners?

• What is the vacancy rate across your managed properties?

• How often have you found malicious damage with tenants?

• How often have you been to the tribunal?

Handy tip: Get in touch before you invest in an area.

Who is the best professional manager?

Someone with systems and processes.

They are a career property manager.

They are happy to discuss plans and goals.

They are open with KPIs, and sticking to them.

Remember you still have obligations

• Provide the property in ‘reasonable’ state of repair.

• Provide it in a ‘reasonably’ clean state.

• Comply with legislation in respect to buildings, health and safety.

• Stay on top of reported maintenance issues or compensation may result.

• Know the Residential Tenancies Act. A professional manager can help you with this. It differs by state.

How to find a professional manager

• Local Agent Finder is a unique partnership for Real Estate Investar.

• Local Agent Finder provides a simple and free service that helps our clients find the best agent or property manager.

• Local Agent Finder is not a property management company.

Local Agent FinderDemonstration

The benefits of Local Agent Finder

Local Agent Finder helps you:

• Understand what agents and property managers charge, and why

• Gets multiple agencies competing for your business

• Enables you to easily compare the costs and services of each

www.realestateinvestar.com.au/LAF

Always treat your investmentlike a businessAnd remember tenants are ‘customers’

Treat your investments like a business

• Have a plan

• Have goals

• Businesses have costs

• Businesses manage risks

• Businesses are profitable

Create a business plan!

Set Targets & Goals

Measure results

Monitor your property

Make changes as needed

• Review your goals and targets.

• Make adjustments to your plan as needed.

• Don’t be afraid to make changes to rents, management, the property or method of renting it out.

• Monitor your investments closely, no matter what your property management strategy is.

• Don’t just wait for tax time to see how much tax you made or lost.

How to select and retain the best possible tenants

Finding a tenant

• Professional management has the upper hand here as they have access to people coming to them, and the various online advertising portals.

• However there are plenty of other options:

• Website portals that take direct listings.

• Major & minor local papers.

• Signage on site.

• Some agents will do casual letting or advertising for a fee.

• Even when using a professional manager, it pays to take your own photos and write up your own property (If you think you can do a better job).

• Promote the key items:

• Weekly rent.

• Number of bedrooms & bathrooms.

• Condition.

• Privacy, security, parking & transport.

• Any included furnishing or fittings.

• Outdoor living.

• Sell the features and benefits.

Think like a tenant when advertising

Tenant enquiries

• Keep a log of responses (name, contact details).

• Vet tenants over the phone prior to meeting.

• Run an open house if you are expecting a lot of interest;

• 20 minutes maximum.

• Multiple copies of documentation.

• Be punctual.

• Open windows, turn on lights.

• Take a vacuum.

• Promote the address, it encourages research and drive-bys for ‘pre-inspections’.

Tenancy applications

• Have formal application forms and a tenancy agreement available printed and digital.

• Request references:• Written (previous landlords, work, church,

school, personal).

• Verbal is great.

• Run a credit check.

• Run a tenant check (tenancycheck.com.au).

14 step letting process

1. Advertise

2. Take responses

3. Arrange appointments or open homes

4. Complete application forms

5. Check references

6. Do credit and tenant checks

7. Complete tenancy agreement

8. Fill out property pre-inspection form

9. Complete bond, bank and any other documents

10. Lodge bond

11. Make a folder or file

12. Make a computer folder or file

13. Send confirmation letter to tenant

14. Hand over the keys!

Handling inherited tenants

On or preferably prior to settlement, ensure that:

• You get a copy of the tenancy agreement.

• If there is no agreement but is occupied, get the tenants details.

• If the previous owner will be the tenant, get an agreement in place.

• You get a change of landlord/agent form signed if applicable.

• Collect a copy of the keys on settlement.

• Contact the tenant prior to provide management details, banking details etc.

Never cut corners

• Have a process and follow it.

• Always require references and check them.

• Be wary of the “need to move in today, here is the cash” syndrome.

• Always show the property yourself and never ask a tenant to do it.

• Some tenants have a past to hide.

Ensure the inspections get done

• Benjamin Watkins, of Ray White Real Estate:

• "I had a tenant growing marijuana in my own personal rental property, which ended up costing me $9,500 in damage.

• "I rented it out to a family whose house I had sold. They had kept their former home immaculate.

Ensure the inspections get done

• "The first time I went to do an inspection, they cancelled at the last moment saying their children had gastro.”

• "It turned out the tenants had put hoses through the walk-in wardrobes, installed exhaust fans and plasteredup the air conditioning unit all within a sixmonth period.”

Source: The Australian, October 2012

What makes a good tenancy applicant?

• Easy to deal with on the phone.

• Can and will provide references.

• Shows up on time for any inspections.

• Is open with information.

• Will complete an application formin full.

• Responds favourably when advised of a credit or tenancy check.

• Has money ready for initial rent and bond.

What makes a good tenant?

• Pays rent on time.

• Maintains property to a good standard.

• Allows access when planned and requested.

• Advises you proactively of any repairs or maintenance needed.

• Advises you of problems that may affect continuity of rent payments.

9 tips that will ensure you have tenants queuing up to rent your vacant property.

Ensure your property is:

1. Clean and tidy throughout.

2. Get carpets steam cleaned and rubbish removed.

3. Tidy, low maintenance lawns and gardens.

4. Letter box cleared, working and numbered.

5. Damage and maintenance issues repaired.

6. Ask a fair market rent.

7. Buy in low vacancy suburbs.

8. Buy attractive properties with unique features.

9. Appeal to the widest tenant pool possible.

So you bought a ‘cosmetic do-up’

Assess what really needs doing to maximise rent.

• Cosmetics make the most impact;• Painting (especially wet areas).

• Curtains.

• Light fittings & door handles.

• Kitchens and bathrooms.

• Appliances.

• If you have limited funds, attack the interior first.

• If you can’t spend money outside, make it neat and tidy.

Some of the catches with renos

• Allowing a decreased rent while ‘doing up’ a property can cause later problems.

• DIY renovations might save money up front, but can cost money when you factor in the time off the market

• DIY might also impact the quality of finish and therefore end value and rental potential.

11. Characteristics of high yielding properties

1. Burglar alarms & other security features.

2. Heating & cooling: relative to climate.

3. Fully fenced for children & pets. If you allow pets, charge a premium.

4. Car parking: especially in cities.

5. Low maintenance: exterior, gardens & lawns.

11. Characteristics of high yielding properties

6. Outdoor living areas.

7. Handy to schools, transport, shops.

8. Handy to highways, employment, higher education & hospitals.

9. Sleep outs, granny flats, dual income, studios and bungalows.

10. Quiet private locations / something unique and desirable.

11. TV aerial, telephone and network points.

Why do tenants leave?

The three main reasons tenants leave a property:

1. The landlord fails to fix things that break or need replacing in a timely or proactive manner.

2. The house is cold or damp in winter/hot and stuffy in summer.

3. They can rent for less somewhere else.

Good things to avoid in a rental

• Light coloured carpet.

• Carpet in wet areas.

• Vertical blinds.

• Big gardens.

• Swimming pools & spas (in cooler climates).

• Pets.

• Rough or noisy neighbours.

A handy tip

• Keep a copy on file of all instruction manuals and warranty cards for any of the appliances or other chattels in the property.

• Write down the remote control models and codes where available and photograph them too.

• Always provide photocopies of the manuals, the originals tend to disappear

Human rights & discrimination

• Race, religion, ethnicity, gender, marital status, presences of infectious disease, sexual orientation, children or employment status

• Never give a reason for not granting a tenancy.

• Never discuss any allegation of discrimination.

• Always deny and leave it at that.

• Always keep your thoughts on this matter to yourself.

Reasons for granting a tenancy can be based upon…

• Ability to pay rent.

• Provision of full details to you.

• Sustainability of references.

• Number and types of pets.

• Number of occupants and vehicles.

• Credit or tenant history.

• Non-smoker.

Setting initial rents and rent reviews

• Do your research on market rents.

• Rental appraisals can be done by a knowledgeable agent.

• Review rents no longer than annually.

• 60 days notice in writing is required if variable term or at the end of a fixed term agreement.

Monitor the market

The paperwork

• Application form: one for each occupant.

• References.

• Credit checks.

• Written tenancy agreement.

• Inspection report.

• Bond lodgement forms.

• Automatic payment forms.

• Keep rental payment records.

Compliance – ignorance is not a defense

• Do you know about the need for a smoke detector?

• What about the risks associated with carbon poisoning?

• Do you know about the new rules coming in in NSW in relation to pools and spas?

• Do you know what you need to advise your tenant if planning to sell or are under mortgagee action?

Residential tenancies act

• Varies by state.

• The Act gets updated every few years.

• Google: “Residential Tenancies Act” to locate latest documents.

Tenant unions are a good resource

• VIC: www.tuv.org.au

• NSW: www.tenants.org.au

• ACT: www.tenantsact.org.au

• TAS: www.tutas.org.au

• QLD: www.tuq.org.au

Not tenant unions, but handy resources:

• NT: www.dcls.org.au/tenants-advice.html

• SA: www.anglicaresa.com.au/housing/tias/

• WA: www.murdoch.edu.au/School-of-Law/Clinical-Legal-Education-SCALES/Tenant-Advice-Line-Western-Australia

Planning yourrental strategy

4 alternative rental strategy options

1. Holiday let

2. Short stay

3. Student accommodation

4. Boarding houses

Holiday let

• Renting out the property to holiday makers.

• Generally located in locations close to holiday destinations: sea change, tree change, local attractions.

• Plenty of ways to advertise a property like this and an opportunity to build a business in its own right.

• Your property ideally needs to stand out and be attractive to those trying to ‘get away’.

• Less than 2 hours drive from CBD ideal.

Holiday let – how it works

• You need to furnish the house and supply everything you might need in an ordinary house – think appliances (large and small), cutlery, plates, beds, televisions etc.

• You might provide a linen service, as well as other perks such as Wi-Fi and Pay TV

• Tenants will book for short stay periods, with peaks achieved around the holidays

• Your property might be empty for some time in the off peak

• You need to have a solution for security, cleaning and gardening.

The benefits of holiday lets

• An opportunity to make a business out of your asset.

• Generally higher yields vs. traditional renting.

• Better depreciation due to the additional furnishings.

• You can get access to it yourself in most circumstances.

• Great way to purchase a future family holiday home.

The negatives of holiday lets

• Involves a lot of management. This will cost you money and/or time.

• Your tenants are there for ‘a good time’.

• Generally the properties will be a long drive/flight from where you live, so harder to check, monitor and/or manage.

• More stuff to manage: cleaning, gardening, furniture, bonds and keys.

• If you get it wrong, you may have a property that takes up your time, doesn’t grow in value and is negative cashflow.

1. Keep the audience as broad as you can.

2. Research the competition.

3. Aim for good investment growth and high yield/returns.

4. Provide things like internet and pay TV.

5. Easy access to lakes/beaches.

6. Make it a home away from home.

9 tips for the best holiday let results

6. Think about who will use your property, and target where possible to meet their needs – think toys, playgrounds, computer game consoles, or tea and coffee, tea towels, bathmats.

7. Stay on top of the numbers.

8. Some factors such as local infrastructure may mean its easier and a better return to rent permanently as a short stay style property.

9 tips for the best holiday let results

Short stay

• Furnished properties available for short or medium term rent.

• Generally apartments, but houses and townhouses can be used.

• Generally cater for professionals, but also strong demand near hospitals and other health and aged care type facilities.

• You need to think like a hotel and provide what people need from a serviced apartment type accommodation.

Short stay – how it works

• You set up your property like a serviced apartment.

• Linen is optional, but more likely expected.

• Tenants will stay in blocks of time. Generally 1 week or more blocks.

The benefits of short stay

• More professional tenants.

• Higher yields than normal rent returns.

• Can attract premium prices as generally in sought after locations.

• Better depreciation due to the furnishings.

• You can get access to it yourself in most circumstances.

The negatives of short stay?

• Hard to predict occupancy

• Can be a more difficult to advertise vs. traditional residential and holiday lets.

• Can be long periods of vacancy.

• Need to stay on top of repairs, maintenance and wear and tear. Higher standards will be expected.

• Present it well and aim for a high level of finish. Think hotel or serviced apartments.

• As you will have professionals as a primary target, ensure you provide a desk or even office type area.

• Provide Wi-Fi and pay TV

• Keep the property low maintenance and very clean.

• Ensure good security, they may need to store stock or goods if travelling for work.

Tips for the best short stay results

Student accommodation

• Located near higher education such as TAFE’s and universities.

• Gives students the opportunity to rent at a lower cost.

• Generally it’s rented on a room by room basis.

• Basic furnishings

• Basic amenities, as well as cutlery, plates etc.

• Basic necessities are expected; Wi-Fi for example

Student accommodation – how it works

• Students book out on a term, semester or school year basis.

• You can achieve 100% occupancy, but depends on location and demand.

• Students will rent by the room and share facilities and common areas.

• You will need to provide internet.

• You will need to provide cleaning and gardening services for common areas.

The benefits of student accommodation

• Higher rental yields than normal residential rent returns.

• Lower cost to furnish due to lower expectations.

• Better depreciation due to the furnishings.

• Multiple income streams from one dwelling.

• May have periods of vacancy over the holiday breaks.

• Tenants are almost always young.

• Harder to have harmony; many people from different backgrounds.

• Can lead to tenant issues like over crowding and conflicts.

• You have to find more tenants each term or year.

• More rules and regulations than other methods.

• You will need to stay on top of cleaning and gardening

The negatives of student accommodation

• Provide clean and neat common areas that are low maintenance

• Provide all the basics to a good standard.

• Ensure each room has a study area.

• Have phone lines and network points in each room.

• Additional toilets and bathrooms will set you apart.

• Work with the local Universities and TAFE’s. Most have student accommodation services.

Tips for the best student accommodation results

Boarding house

• Boarding houses provide low cost accommodation to tenants generally on a mid to long term basis.

• Tenants may or may not have their own furniture.

• Boarding house’s can have individual cooking and washing facilities, but also can be shared.

• Generally cater to people that can’t or don’t want to access traditional rental tenancies.

Boarding house – how it works

• Boarding House’s have rooms or suites rented out.

• Generally there is a manager close by or on site.

• Rooms and suites generally are furnished with the basics.

• Similar to traditional renting in terms of paperwork and terms.

• Alcohol and smoke free buildings work best.

The benefits of a boarding house

• Higher yields than normal rental returns.

• Lower cost to furnish due to lower expectations.

• Better depreciation due to the furnishings.

• Can be located anywhere, so makes it a solid option to get better returns from large properties.

• Tenants can come from all walks of life, and generally have had troubles accessing other accommodation.

• Harder to have harmony – many people from many different backgrounds.

• More rules and regulations than other methods e.g. fire sprinklers.

• Tenant turnover can be a constant problem.

• You pay for cleaning and gardening

• You need good management onsite or regularly visiting.

The negatives of a boarding house

• Provide clean accommodation.

• Ensure any common areas are able to be shared easily without impacting others space and kept in clean and working order.

• Provide disabled access.

• Aim to provide a property near to transport and shopping.

• Have management visible and within reasonable contact as necessary.

• Have strict rules in place.

Tips for the best boarding house results

Which strategy is best?

1. Holiday let

2. Short stay

3. Student accommodation

4. Boarding houses

• Work out your numbers for each scenario.

• Be realistic about your time and expertise.

• If in doubt: simple is often best in the long term.

Next steps

• If you have existing property, consider how it is managed. Could you do better?

• If you have existing property, is the current method of rental right for you? Consider all strategies.

• Take control of your investing and know your numbers. Use tools like Property Analyser & Portfolio Tracker to stay on top of your business. Things change.

• Build a team. Whether you are a new or experienced investor, you need a team behind you to maximise your results.

What can I do next?

Plenty of resources available

Take the 21 day free trial at www.realestateinvestar.com.au

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Questions?