Property Management Newsletter
What to Expect When Applying for a Loan
RLA 150557
August 2019
Banks have tightened their lending criteria and how they assess loan applications lately. They are focused on whether borrowers can service their loans and are going through a borrower’s transaction history line by line, questioning expenses that don’t stack up with the information provided. Applicants need to be prepared to justify their expenses and provide proof of their situation across a range of areas.
Service Your Heater | A Warning for Property Owners
The ongoing financial impact of maternity leave, children and pets is a particular focus at the moment.
Faulty, poorly maintained or misused gas heaters can leak potentially lethal carbon monoxide gas – an issue that has been highlighted in the news recently.
For example a purchase at a pet store could prompt a bank to clarify how many pets the applicant actually has. Considering one dog or cat costs about $25,000 over its lifetime, it’s a concern that may be justified. Banks have also questioned joint applicants over whether children would jeopardise their ability to repay loans and some lenders have requested proof that borrowers are returning to work after parental leave, even if the loan can be serviced on one income.
The five most important standard questions banks ask borrowers While home loan applicants can expect detailed and often strange queries about their spending habits, these five questions matter the most (according to Lendi) 1. What are your living expenses? Applicants are required to provide a highly detailed view of their monthly living expenses. Leaving out details will raise doubts and questions.
2. Do you have a good credit history? Borrowers who have been slack with credit repayments or slow to pay bills will have reduced borrowing power. 3. What is your employment history? Banks want to see a consistent and sustainable work and income history. For full-time permanent employees, most lenders like to see at least 6 months’ continuous employment in their current job. Applicants who are not permanent full-time employees will face more scrutiny. 4. Are you a good saver? Saving history is particularly important, especially for first-home buyers. Banks often want to see how a borrower acquired their deposit. The size of the deposit will also determine the loan-to-value ratio and affect the loan package offered. Lenders also like to see some extra savings that can be drawn on for unexpected expenses. 5. How do your loan terms fit with your broader plans? Increasingly, lenders are closely examining proposed loan terms so it’s important to explain the rationale behind the proposed length of the loan or interest-only period. Information sourced domain.com.au
The tenant in your property won’t be able to tell if the heater is leaking carbon monoxide, because they can’t see or smell it, it’s colourless and odourless. Gas appliances should be checked and serviced by a licensed gas fitter or service agent, as per the manufacturer’s instructions, or at a minimum every two years. If the appliance is over 10 years old, it should be checked annually. Please instruct your property manager to arrange a service if your heater has not been serviced in the last 2 years. Even if your property doesn’t have a gas heater, as the owner you still have a responsibility to maintain any other heaters in the property – all flues and chimneys should be cleaned annually, and reverse cycle air-conditioners should also be serviced yearly.
The Great Debate: Is it fair wear and tear or damage? 30 day Snapshot
We have leased 22 properties great and debate: Is it fair wear and tear or damage? And, what is damage? WhatThe is wear tear? What is wear and tear?
Normal wear and tear is damage that just happens Damage is caused. It is typically the result of negligence, carelessness abuse. Generally over Normal time, occurring due tothat normal use wear andnaturally tear is damage just happens over time, occurring naturallyordue to normal use there and ageing. It typically results from the tenant’s day-to-day use types of the of property, like walking on the are three tenant damage: and ageing. It typically results from the tenant’s floors and using the benchtops. It can also simply be the result of the property getting older and being day-to-day of the property, the intentionally, or by misuse or abuse. Because wear exposeduse to natural forces. It like has walking not beenon caused 1. Accidental – the result of sudden, unexpected or and tear is expected and considered normal depreciation, it is not covered by landlord insurance. floors and using the benchtops. It can also simply unforeseen events (such as wine spilled on carpets). be the result ofisthe property getting older and And, what damage? 2. Malicious – caused on purpose with intent to do being exposed to natural forces. It has not been harmcarelessness or damage the property Damage is caused. It is typically the result of negligence, or abuse. Generally there are caused intentionally, or by misuse or abuse. Bethree types of tenant damage: 3. Intentional – the result of an act carried out withcause wear and tear is expected and considered out permission but without malice, and knowing the 1. Accidental – the of sudden, events (such as wine spilled on normal depreciation, it isresult not covered byunexpected landlord or unforeseen action will alter the current state of the property carpets). insurance. 2. Malicious – caused on purpose with intent to do harm or damage the property
We have had 668 property enquiries 815 with an average of 24 days on the market
3. Intentional – the result of an act carried out without permission but without malice, and knowing the action will alter the current state of the property
A basic way to determine if something is wear and tear or damage is to decide if it is something likely to happen gradually time, based on normal daily that has been A basic way toover determine if something is wear anduse, tearor orsomething damage is to decide if it is damaged somethingdue likelyto to happenor gradually over time, based on normal daily use, or something that has been damaged due carelessness abuse (tenant damage). to carelessness or abuse (tenant damage).
HereHere are some examples of what is normal wear and tear (usually the landlord’s responsibility) and what is are some examples of what is normal wear and tear (usually the landlord’s responsibility) and what(the is damage (the tenant’s responsibility): damage tenant’s responsibility): Type of material
Normal wear and tear
Tenant damage
Carpet
Gently worn, flattened or moderately dirty (especially in high traffic areas)
Stains, rips or burn marks
Hardwood flooring
Fading due to sunlight or minor scratches
Badly scratched and gouged wooden floors
Benchtops
Scratches and light watermarks
Chipped, burnt, multiple stains or scratches
Tiling
Light scratches, minor chips and dirty grout Broken or missing tiles
Walls
Cracks caused by settling and dents from doorknobs, minor scuffs or chips
We have held 81 inspections with 380 prospective tenants through
Holes/damage from hanging pictures, drawings or crayon markings
is responsible? WhoWho is responsible? Fair Fair wearwear andand teartear is ais cost of doing business that landlords should expect. Repairing or replacing worn a cost of doing business that landlords should expect. Repairing or replacing fittings and fixtures the responsibility of the ofowner. worn fittings and is fixtures is the responsibility the owner. The bottom line The bottom line Disagreements about wear and tear vs. damage frequently occur between landlords/agents and tenants so it’s important make thatdamage the condition of the property well documented Disagreements about to wear andsure tear vs. frequently occur betweenislandlords/agents andat the time of tenants at the time moving in. so it’s important to make sure that the condition of the property is well documented Information sourced rentcover.com.au
Average rent $396 per week
of moving in.
Gary J Smith Real Estate Property Management 403 Marion Road, Plympton SA | (08) 8297 9323 Note: The articles contained within this newsletter are intended as information and opinions only and readers should not rely solely on its content. Whilst every endeavor is made to ensure the content is current and accurate, readers should always seek their own independent professional advice before making decisions. If your property is listed or managed by another agent, please disregard this communication. | RLA 150557