PROPERTY MANAGEMENT INFORMATION BOOKLET 2011
SALES | PROPERTY MANAGEMENT | INVESTMENT |DEVELOPMENTS Passion, strategy and excellence in real estate
Ph: Ph: 08 9310 4406
Fax: 08 9310 4462
PO Box 7523 Cloisters Square WA 6850 email@example.com
We hope that the information contained will help answer some of the most frequently asked questions investors have when placing their property on the market for rent. Choosing a property manager is not as simple as comparing fees obtained from a number of agencies. There are a number of items to consider in selecting a property manager. 1. 2. 3. 4.
How experienced is the property manager; are they the best person for having the responsibility of managing your asset? Do they have a sound knowledge of the Residential Tenancies Act? Ask about the agentâ€™s portfolio and the types of property managed; are they a landlord themselves? Do you find the property manager easy to communicate with?
Why choose MACRO Realty to manage your investment property ? Skilled investors experienced in making profit from property.
We are owned and run by property investors who are also landlords, with over nine years of property management and sales experience Your property is managed by mature and qualified real estate professionals We know, from firsthand experience what is required of a good property manager Video footage and extremely comprehensive property condition reports are conducted with every new tenant Tenant applications are double reference checked Rent reviews are conducted biannually to maximize your return We have reliable, professional and competitively priced maintenance people and cleaners on call We minimise vacancy periods by having weekend home opens and showing properties to potential tenants after hours We will not tolerate arrears We notice and pursue all imperfections, issues or damage no matter how minorâ€”immediately, not just at the end of the lease 2
Our normal fee structure is detailed over the page and is quite competitive; however agent’s fees are deregulated and are mutually agreed when signing the Management Authority. It is important to remember that low fees usually indicate a lowering of service provided. You must ensure that you are receiving the level of service you are expecting for negotiated fees. SOME AGENTS ARE HAPPY TO REDUCE THEIR FEES THEY KNOW THE VALUE OF THEIR SERVICE SO DO WE – REMEMBER YOU GET WHAT YOU PAY FOR. Most costs associated with your investment property are likely a tax deduction; however please check with your accountant. After reading through the booklet, please feel free to contact the office should you have any further queries. We look forward to working with you in the management of your valuable investment property.
The type of service provided is based on what you the client have negotiated at time of signing the Authority To Manage. MACRO Realty can provide the following services or part thereof during the management of your property. 1. 2. 3. 4. 5.
Current rent appraisal Advise if any work/cleaning needs to be done to optimise rent return Advertise property for let Show property to prospective tenants Receive and process applications to: a. Check ID b. Contact place of employment and confirm (salary, employment status etc) c. Contact current and previous rental history d. Contact references provided e. Search tenant default database f. Contact owner to discuss suitable applicants
6. Prepare all documentation – Lease Agreement, Bond Lodgement Form 7. Lodge Bond with the relevant authority 8. Prepare Property Condition Report and Inventory if required 9. Take photos for management file 10. Sign Lease Agreement with tenant 11. Send letter to owner Property Let with lease term and tenants name 12. Collect rent and issue receipts on owners behalf 3
13. Conduct regular Routine Inspections 14. Pay accounts on your behalf – water and shire rates, strata levy etc. 15. Issue breach and termination notice 16. Arrange maintenance on owners behalf 17. Lodge application and attend Small Claims Court 18. Prepare monthly statements 19. Conduct Final Bond Inspection 20. Arrange any items to be completed from Tenant Bond 21. Prepare Bond Statement 22. Finalise outgoing tenant
FEES & CHARGES
LETTING FEE The letting fee is payable once a tenant has signed the Lease Agreement and is deducted from your first month’s rental payment. The Letting Fee is payable for each new tenant for the property and covers administration, tenant interviews and home opens. Lease renewals for the same tenant do not attract a letting fee. Letting fee is one week’s rent plus GST. This contribution is set by the Residential Tenancies Act. Calculation based on rent of $400.00 per week. Letting fee payable to agent Owners contribution GST payable TOTAL LETTING FEE PAID
$440.00 incl GST $400.00 $ 40.00 $440.00
MANAGEMENT FEE 8.25% incl GST (on going charge) The management fee is charged on all gross income collected for the property. Based on a three week vacancy factor gross rent collected per annum at $400.00 per week is $20,800.00. Management fee payable per annum would be $1716. PROPERTY CONDITION REPORT $155.00 incl GST (one off charge) The Property Condition Report is a detailed report of the property. It notes the features, colours and condition of all items contained within the property both internally and externally. It will note items such as paint chips to walls etc, the cleanliness of stove, bathrooms, condition of lawns and gardens etc. Video footage of the entire property is taken and held on, which the typed report is prepared from and then signed by both the tenant and agent at the commencement of the lease.
INVENTORY REPORT - FURNISHED PROPERTY ONLY $77.00 incl GST (one off charge) A full report listing condition of furniture and house hold items included in the rental agreement including listing and counting linen, cutlery, crockery, glassware and pots. ROUTINE INSPECTION CHARGE $ 77.00 incl GST (quarterly service) The first in inspection is carried out 6 weeks after the tenancy beings then every three months to ensure that the tenants are maintaining the property in a clean and tidy condition. During inspections we also note any maintenance items that require the owner’s attention. FINAL BOND INSPECTION AND PROCESSING $ 100.00 incl GST (vacate charge only) The original Property Condition Report is used once the tenant has vacated. The property at this time is compared to the report compiled at the start of the tenancy. General wear and tear items are noted on the report to be updated for the new tenant. Any cleaning or damage that the tenant needs to attend to will also be noted and arrangements made for the work to be done and deducted from the bond. NEW TENANCY ONE OFF CHARGES Title search Water Meter Reading National Tenancy Database Check Website advertising on reiwa.com.au and realestate.com.au Lease renewal Taking over existing private or agency lease Newspaper advertising in The West Australian and Sunday Times INCIDENTAL CHARGES Court Attendance Key Cutting Use of ‘To Let’ Sign Board Annual Financial Summary Competitive Market Analysis
$24.00 $15.05 $5.15 per person on tenancy applications $49.95 $49.95 $99.00 As charged by newspapers
$88.00 per hour to a maximum of $264.00 If required as charged by service provider Complimentary Complimentary Complimentary and prepared annually or upon request
OTHER SERVICES MACRO Realty can also arrange complete gardening, home cleaning, pool care and pre rental maintenance service upon request. Ask us about these services fees and charges. NEW LAWS From 9 August 2009, owners with rental properties will be required by state law to have two RCDs installed in the property being newly leased. For existing tenants where no new lease is required the RCDs must be fitted by the 9th August 2011. Hard-wired smoke alarms, not more than ten years old, are required to be installed in all residential properties being sold or made available for lease. The common battery operated smoke alarms will no longer be sufficient. In situations where a hard–wired alarm cannot be fitted (such as flats or units with concrete ceilings that won’t facilitate new wiring); a long-life lithium battery operated smoke alarms must be installed. 5
COMPARISON OF FEES Management Fee Postage & Petties Quarterly Inspections Property Condition Report Letting Fee Final Bond Inspection Lease renewal
MACRO Realty 8.25% inc GST Nil $77.00 *$155.00 One week $100.00 $49.95
Other Realty 9% plus GST $8.00 p/m $55.00 **$99.00 Two weeks $75.00 One weeks rent
An example of your saving Based on a rental property at $400.00 per week rent over a 24 months Management Fee Postage & Petties Quarterly Inspections Property Condition Report Letting Fee Final Bond Inspection Lease renewal TOTAL COST MACRO SAVING
$3,432.00 Nil $616.00 $155.00 $440.00 $100.00 $49.95 $4,792.95
$4,118.40 $192.00 $440.00 $99.00 $880.00 $75.00 $400.00 $6,204.40 $1,411.45
* Video Footage ** Photographs only, no video footage
REPAIRS & MAINTENANCE
During the period of tenancy there will be times when repairs and maintenance are required on the property. The property must be maintained to ensure that the property complies with building, health and safety laws. Some maintenance items that the owner is responsible for is cleaning of gutters and down pipes, maintaining fire breaks and any large tree pruning. General electrical and plumbing repairs must be attended to with in a reasonable time. There are several items that are regarded as “urgent repairs” and these must be attended to soon as reasonably possible. If they are not dealt with promptly the tenant is within his right to arrange repairs and recover costs from the owner if: 1. There is a likelihood of injury 2. Further damage could be caused to the property 3. Cause real inconvenience to the tenant Examples of urgent repairs are: • • • • •
Burst water pipe Sewerage blockage or broken sewerage fitting Broken lock or window Serious roof leak Gas leak
• • • • •
Electrical fault that may cause damage/ harm tenant Hot water not working Damage caused by flood, storm or fire Stove not working
Any damage caused by the tenant is the tenant’s responsibility to have repaired by a qualified tradesman, which MACRO Realty will oversee as part of their service to you. When a tenant contacts us regarding maintenance we will endeavour to contact you first before arranging for work to be carried out. However, in the case of emergencies if we are unable to make contact we will arrange for urgent repairs to be carried out. Should you wish to do your own maintenance this is perfectly acceptable. If repairs are of a nonurgent nature please note that you must give the tenants 72 hours notice or arrange a time with them if they wish for it to be done sooner.
FREQUENTLY ASKED QUESTIONS
Can I choose the tenant? YES! Once applications are processed the owner is contacted with the details, for a decision.
Can I inspect the property during the tenancy? YES! You may accompany the agent during Routine Inspections or alternatively arrangements can be made with the tenant if you do not live in the metro area and will be here during a certain time.
How much bond can I ask for? As per The Residential Tenancies Act 1987 no more than 4 weeks rent can be held, however if it is the owners principal place of residence and will be returning to the property then a higher bond can be held.
How often can I increase the rent? The rent can be increased once every six months. However, if you have a longer lease agreement in place without a rent review clause then it can only be increased at the end of the tenancy. Tenants must be notified prior to lease expiry. In the case of a periodic agreement, 60 days notice must be given. All notices are to be in writing.
What happens when my tenant falls behind in the rent? Once tenants are one day in arrears you have the right to issue a Breach or Termination for non payment of rent. Should they fail to pay on expiry of Termination Notice we can then apply to court for vacant possession of the property.
Do I have to attend court? YES! The Local Courts require that the owner be present at the court hearing if you reside in the metro area. Country, interstate and overseas owners must supply a letter to the court advising that they cannot attend and giving the agent permission to give evidence on their behalf.
Can I terminate the management agreement? The authority can be terminated with 28 days notice once the authority has expired. By mutual agreement, between the owner and the agent. However, the agent has the right to charge liquidated damages for the remaining term.
Can the tenant terminate the lease before expiry? A Tenancy Agreement is a legally binding contract, sometimes however there are unforeseen circumstances that require the tenant to break the agreement. • • • •
Job relocation Redundancy Personal or family illness Domestic violence
In these circumstances you need to be reasonable and assist the tenant in finding new tenants. You do not of course want to lose money. The tenant is to be informed that they will be responsible for:• Advertising costs • Rent until property is re-let • Upkeep of the property Under the Act you are required to “mitigate the losses”. This means finding a new tenant as soon as possible to minimize loss. 9.
Can I terminate the lease before expiry? NO! A fixed term agreement can only be terminated by the owner if a breach of the agreement has occurred, or the tenant has failed to pay the rent. Correct notices need to be served and if the tenant fails to comply a Termination Notice is issued. You can during an agreement place the property on the market for sale, however the purchaser must honour the lease agreement until expiry.
TIPS ON PREPARING YOUR PROPERTY FOR RENT
External presentation First impressions count, if it does not present well externally prospective tenants will not look internally. They will just drive past. • • • • •
Lawns to be mowed and edged Garden beds to be weed free (even if they have no plants) Paths to be weed free and swept Cobwebs removed from gutter etc Any items that require maintenance to be repaired, ie gutters falling off, gate hinges broken etc 9
Internal Presentation Presentation and cleanliness is the key in optimizing your rent income and attracting a ‘house proud’ tenant. It is important to ensure that the following items are attended to. This not only optimizes your rent return but each outgoing tenant must return it in the same state allowing for fair wear and tear. • • • • • • • • •
Clean all windows and tracks internally and externally Clean all window treatments Clean light fittings, exhaust fans, air conditioning vents, etc Remove cobwebs from cornices Clean carpets, sweep and mop all hard floors Clean hotplates, oven, grill, range hood etc Wash cupboards/drawers internally and externally Scrub sink, baths, basins, showers, toilets and bleach drains Ensure that all electrical and plumbing appliances are fully operational. If something is not working and won’t be repaired please inform the agent so that the information can be passed to potential tenants.
Arranging to have the above carried out may stop any disputes arising if something is not working when the tenant moves in. Never say an item will be repaired when the tenant moves in if you have no intention of doing it – this can create problems between the owner and the tenant resulting in an unhappy tenancy for both parties. Should there be a swimming pool or spa at the property you must ensure that all the equipment required for its day to day maintenance is supplied and in good working order. The Tenant is to supply the chemicals. It is also a good idea to have instruction manuals available. The originals should be retained by you and a photocopy supplied to the tenant for things such as: • • •
Hot water system Oven and hotplates Pool and spa
• • •
Air conditioners Built-in-barbeque Security Alarm System
Wear & Tear / Wilful Damage Wear and tear can be a very grey area, below are some examples of each. WEAR & TEAR
WILFUL OR NEGLECTFUL DAMAGE
Carpet wear in corridors and other heavy traffic areas A lock that broke because it was old and had worn out Paint flaking or wearing off because of poor application Curtains faded or deteriorated from the sun
Cigarette burns and stains to the carpet A lock broken by tenants because they forgot their key The tenant painted a room without your permission The tenant’s cat tore the curtain
We require that you have a Landlords Insurance Policy and building insurance in place before we begin management of your property because we only want the best for you and your investment. Please check with your insurer to know that you have full details of what can and what cannot be claimed if the need arises. We hope that the information contained here has been of some benefit to you. Should we not have covered anything that you would like further details about, please feel free to contact us. Thank you again for your enquiry and we hope that we can be of assistance to you.
RENTAL PROPERTY EXPENSES
You can claim expenses relating to your rental property but only for the period your property was rented or available for rent. Expenses could include: •
Advertising for tenants
Property agents fees or commission
Body corporate fees
Repairs and maintenance
Decline in value of depreciating assets
Gardening and lawn mowing
Travel undertaken to inspect the property or to collect the rent
This is a guide only and for your specific claims you should talk to your accountant.
CAUTIONS & TIPS
There are many advantages to owning property for investment- the returns from rent provide a steady income, capital growth and you can use the equity to purchase another property. There are however some drawbacks â€“ in property your asset is tangible and so is the time, effort and money needed to look after it. There comes a point when landlords realise that their property is beginning to look tired and run down â€“ maybe a new kitchen or bathroom is required but the cost will take years to recover from the rent income, even through increased rent, and by then it will be time to start over. Some property owners get by with little maintenance or band aid solutions, but this is the worst way of dealing with the problem. A run down property will attract only lower quality tenants, who will not look after the property causing it to deteriorate further. Even if the rental market is tight it will not remain that way for ever and then the property will be hard to let at any price. You have two options at this time â€“renovate or sell. The decision to sell will still probably result in you having to carry out some renovations to obtain the best sale price. Your accountant will be able to advise you on the best course action and MACRO Realty will support and assist you with whatever you decide.