If you’re thinking of turning your home into a rental property, follow these steps to ensure your maximise your position.
You have long cherished the dream of owning your own home. One day you find your circumstances have changed and it’s time to move into another property, yet keep and rent out your current one. What now? If you plan well in advance and do your homework diligently, there is no reason why you cannot attract the right sort of tenant and earn a decent income from your property in any market.
Preparing your own home for other people to rent is not as simple as just moving out and putting a for lease sign out the front. There are several things you should consider before letting prospective tenants pay for the privilege of living in your former home.
So, why should you prepare your property to rent?
A properly prepared rental property will not only fetch a better weekly rent, and attract a better tenant, it will also help ensure the whole tenancy runs as smoothly as possible. There are things an owner occupier would be happy to live with, knowing they could be fixed in time, that a renter wouldn’t, and shouldn’t, have to deal with. And there are also some alterations that could make your property more appealing and stand out from the crowd or even get you more rent.
So here’s our checklist of what you should consider before renting out your home.
If it’s broke, fix it!
From the letterbox to the back fence, and everything in between, carry out any repairs to make sure your home is in tip top condition. This also applies to anything small that you’ve just grown used to living with, like mouldy bathroom grout, leaking washers, dripping taps, broken tiles or chipped paint. A small repair or some maintenance now could save you a bigger problem in the future.
Think about what you will be leaving behind or letting the tenants use and make sure it’s in good working condition. For instance, if your kitchen has space for a dishwasher, it’s usually best to leave it as it can add value. Or if your laundry has a particular sized or shaped space for a washing machine or fridge you might be better to leave it rather than expect a tenant to buy their own. Please note that whatever you leave behind becomes a part of the tenancy and the landlord’s responsibility to maintain or replace if it breaks down.
Prospective tenants are the same as prospective buyers – they’ll be more attracted to a well-presented property. So while you might not want to go so far as to get the property stylists in, make sure you do your best to have it looking great for the professional photos and that it is tidy for any viewings.
You want your property handed back to you in good condition, so set the initial benchmark high. Just as you would if you were going sell, before you rent out your property give it a good spring clean and make sure it’s sparkling. Don’t just do the basics – we’re talking a proper spring clean preferably done by a professional cleaning company including:
- carpets or hard flooring
- curtains and blinds
- flyscreens and shutters
- windows and mirror robes
- walls, ceilings and light fittings
- garage and paving.
Don’t forget the outside
Is the letterbox in need of repair? Are the gutters clean? Is the fence in good condition? Are there any pests or insects you need to deal with? And make sure you mow, sweep, rake, prune and have the garden looking tip top.
New paint, carpet and light fittings can be a cheap but effective way to update a property. Adding heating and cooling like reverse cycle air conditioning can potentially add value to a rental property. Likewise, a new bathroom or kitchen may be a great addition, especially if the old one is very outdated. You’ll need to do your own cost benefit analysis and work out how long it will take to recoup the initial outlay. There are also ways to do a cosmetic renovation that won’t cost the earth. E.g. just freshly painting the kitchen cupboards and changing cupboard door handles can make a huge difference to a tired looking kitchen. An experienced property manager can best advise you on your particular situation.
The fine print
Think about whether any aspect of your property might not meet current regulations, compliance or safety guidelines. For example, this could include pool fences, smoke alarms, stairs, railings, balconies, blinds and curtains, glass and windows. Does the property meet electrical and water efficiency standards under your local Residential Tenancies Act? Check the laws relevant to your state or chat with a qualified property manager about this crucial part of the renting process.
Determine how to manage your property
If you are a newbie to this, it is prudent to find a property manager to do the job for you. If you are planning to manage the rental yourself, then you will need to familiarise yourself with your state laws and research the best ways to source and screen tenants. You will need to prepare the relevant legal documentation for you and your tenant to use when entering into a rental agreement. If you’re not going to manage the property yourself, give yourself time to find a reputable property management company.
If you rent out part or all of your home, the rent money you receive is generally regarded as assessable income. This means you must declare your rental income in your income tax return, and you can claim deductions for the associated expenses, such as part or all of the interest on your home loan.
You may not be entitled to the full main residence exemption from capital gains tax (CGT), which means you’ll have to pay CGT on part of any capital gain made when you sell your home.
Goods and services tax (GST) doesn’t apply to residential rents, so you’re not liable for GST on the rent you charge, and can’t claim GST credits for associated costs. For more information about tax, rental income and allowable deduction please visit the Australian Taxation Office website https://www.ato.gov.au/General/Property/Your-home/Renting-out-part-or-all-of-your-home/
By following these few steps you will be well on the way to ensuring your property is looking it’s absolute best and will be giving yourself the best chance to maximise your rental potential.
If you would like to chat to us about how to best prepare your property for investment, contact John Gilmovich on 0418 600 806 or firstname.lastname@example.org. You can also contact us via our website at http://www.realpropertymanager.com.au/contact.