19 Sanity saving tips for
smart property investors
Welcome Starr Partners Liverpool was ﬁrst established in 1990.The previous owner commenced the business with himself and a receptionist. After over 15 years, of hard work and continual success, in 2005 he decided to part with the business. In November 2005, Simon Perri, a local resident of Liverpool’s outer suburb Rossmore, and Michael O’Sullivan the current real estate director of Campbelltown Starr Partners, decided to join together in the purchase of Starr Partners Liverpool. Between the two, they have in excess of 35 years real estate experience. Both partners decided to rebirth Starr Partners Liverpool. In doing so, they committed to some basic principals. They are, to provide the highest possible customer service to their clients, and achieve the best possible outcome for all. We believe Starr Partners Liverpool has now achieved that. Today, we are a major force within the Liverpool area. We have seen great success for all of our clients, and regardless of the market conditions, have been able to achieve record sale prices. Over time Starr Partners has been able to amalgamate a further four ofﬁces together with their current ofﬁce. In early 2008, Starr Partners Liverpool’s success was recognised by the public, with less than 2 year of operation, Starr Partners was the recipient of the Small Business Award based on the performance and professionalism voted by their clients. The director Simon Perri goes forward to say “standing on the basic principals of providing high quality service and ensuring the best results for our clients, we will continue to do our utmost regardless, our main priority is that we ensure that our clients always come ﬁrst”. Starr Partners Liverpool stands for the highest quality service, with honour, respect and honesty in our daily dealings with all of our clients, associates, work colleges and members of the public. This booklet is designed to assist you by offering advice and our professional service when purchasing or selling your property. Starr Partners Liverpool endeavours to be recognised by the community which we serve as being caring, well respected and an efﬁcient real estate agent within the Liverpool area. We would be happy to assist you with your enquiries. Please phone our ofﬁce on 9822 5999.
Director & Licensee In Charge
19 Sanity Saving Tips For Smart Property Investors Make More Money & Have Less Headaches As A Landlord If you own an investment property, you’ll probably agree that, in the long-term, two things are likely to happen. One, if you stick with it and use your common sense you’ll end up reasonably wealthy. And two, there are times when the whole thing can drive you to the brink of insanity, when you feel like holding your hands up and wishing the whole thing would just go away. Here at Starr Partners Liverpool we know how you feel. Most of our staff have been or are currently landlords, and we know how annoying, how upset you can get when
things go wrong. And that’s the reason for this SPECIAL REPORT. For years we’ve known how to (logically) work our way around the problems of owning an investment property. Unfortunately, we haven’t always been able to ﬁnd the ways and means of telling our story - until now. All of us at Starr Partners Liverpool hope you ﬁnd the following ideas proﬁtable - after all that’s the name of the game, isn’t it ?
Insure against loss or damage
Many landlords are not aware of the fact that they can insure against such things as ; • Loss of rent caused by the tenant defaulting on their obligations to pay rent • Malicious damage caused by tenants This type of insurance is generally referred to as LANDLORD INSURANCE. There are only one or two companies in Australia that carry this type of policy and the costs can vary up to $450.00 per annum per property. But ask yourself this question . . . “Is your peace of mind worth $6.00 per week, because that’s all it costs to have landlord insurance ?” If you would like more details about LANDLORD INSURANCE contact our property manager on 9822 5999.
2. We do more than you think When you employ Starr Partners Liverpool to manage your rental property you probably expect that we collect all the rent, conduct inspections and look after repairs at your property. But we do much more than just these basic tasks – and at no cost to you. Here’s just a few; • Starr Partners Liverpool will pay your council rates for you at no extra cost • Starr Partners Liverpool will pay your water rates for you at no extra cost
Know where you money goes
Every month Starr Partners Liverpool sends an itemised summary of transactions relating to your rental property. It takes about 5 minutes to scan the contents of your monthly summary, noting the relevant aspects such as total rental income and disbursements. Smart property investors make it their business to carefully scrutinise their monthly summary.
• Starr Partners Liverpool will pay your strata rates for you at no extra cost So, when you ask us to manage your rental property be sure to get your money’s worth by asking us to attend to some of these additional payments for you – all at no extra cost. The best part is that when it comes time to see your accountant at the end of the ﬁnancial year you’ll have all your payments recorded on our statements. In this way you’ll be sure to maximise your deductions and your accountant will be able to process your return much faster.
They ensure they understand every entry, every line and every dollar amount. And when they don’t, they call and speak to one of our property management staff who are happy to take time out to explain any part of their summary. So, what should you do ? Play it smart and make it your business to understand your monthly summary. You’ll save yourself a great deal of worry and you’ll have a much better understanding of how property investments operate.
4. What is the value of professional advice? Sometimes tenants fail to pay the rent - this is a fact of life ! When a tenant fails to pay rent, it’s the agents’ job to ensure things are corrected as quickly as possible. Because of the way current legislation is framed the most effective (and sometimes the only) weapon an agent possesses in these circumstances is a TERMINATION NOTICE. A termination notice gives the tenant 14 days to correct their rental position or else have their Residential Tenancy Agreement ended by way of an order from the Residential Tenancy Tribunal.
Sometimes when it comes to making a decision about whether to take the matter of the tenant’s failure to pay rent to the tribunal some Landlords ask us to “give the tenants a second chance” This request is fraught with danger. Remember Murphy’s Law - the moment you give a tenant a second chance may be the moment you begin to lose a great deal of money on your rental property. Smart investors know their agent knows best in these circumstances and are prepared to take the advice of a professional rather than “follow their heart”.
Maintain your own privacy One of the most common mistakes made by ﬁrst-time property investors is giving their home phone number to their new tenant and saying “call me if anything goes wrong” Here’s what happens. For the ﬁrst few months everything goes OK. Then something goes wrong - there’s a repair required - and the tenant remembers your home phone number (and it’s always at night - often after midnight !)
A property manager’s job is to manage investment properties for their clients. This means a great deal of their day is spent out of the ofﬁce inspecting properties. They are rarely in the ofﬁce. Smart property investors are aware of this and know that the best way to see their property ofﬁcer or property manager is to make an appointment in advance rather than simply turn up at the ofﬁce.
From this point forward, the tenant will call you ﬁrst rather than the agent - over and over again. Many new Landlords who have made this mistake in the past have been forced to change their home phone number in order to stop the phone calls. Smart property investors value their time at home and would much rather let the agent do the job they are being paid to perform.
What to do with a new tenant
Every week we meet dozens of prospective tenants. Every week we show these same prospective tenants through our available rental properties. And every week we assist these same prospective tenants to complete their applications for tenancy.
will look after your property. That combined with the rigorous checks we undertake prior to submitting the tenant’s details to you for your approval means we generally know how they will act as your tenant.
We spend time with dozens of tenants every week and, over time, we develop a sixth sense about people in general.
So, when we recommend a tenant to you for your approval it means we’re as sure as we can be that they will meet their obligations to you as your tenant.
When a tenant submits an application for tenancy we have usually spent some time with them and have a good idea how they
Your agent knows the prospective tenant - trust their judgement and you’ll be surprised how your cash-ﬂow will improve.
8. Save time by being organised Every month we send our Landlord’s a summary of all the transactions relating to their rental property. Attached to this summary are copies of any accounts we have paid for them during the previous month. Smart property investors keep all these monthly summaries together in one ﬁle. Consequently, their summaries for the year will be in one place, one month after the other,
providing a coherent and well-organised history of their rental property. And when it comes to tax time their accountant’s bill for preparing their tax return should be much less because everything relating to their property for the year will be in one ﬁle. Sounds a simple idea, and it is, and it should save you a tidy sum each year.
Save money on repairs
When a quote is required for a repair at a rental property most tradesmen will charge a call-out fee. This situation has developed over the years because so many people would attempt to obtain multiple quotes for small jobs around the house that tradesmen were quoting for many jobs and doing only a few. As real estate agents, we arrange many, many repairs each week. And in recent years it has become harder to obtain quotes for repairs without incurring call-out fees. We have remedied this situation by arranging a zero call-out fee with a few select tradespeople on the strict basis that their
costs are maintained at a reasonable level. Our landlords are then in a win-win situation - no call-out fees, and low repair costs completed by trusted tradesmen who depend on work from our ofﬁce to survive. Smart property investors know it’s usually a waste of time to obtain multiple quotes for small repairs, especially when you consider call-out fees.
10. New technology means instant cash We all know how banking has changed in recent years. These changes have radically effected how high-volume banking users like real estate agents conduct their business. Nowadays almost every banking transaction is done electronically. We collect rent electronically by reaching an agreement with our tenants to directly debit their bank account for the rent each week. We also pay most of our landlords electronically - and the advantages are enormous. In the past we used to post a cheque to
our landlords at the end of the month. By the time the cheque arrived in the post, was banked and then cleared as much as 10 days could have elapsed. Today, we bank our landlord’s money prior to 3.00pm one day and by 6.00am the following morning the money is cleared funds in our Landlords bank account. Our Landlords can take that money out of their account in cash that same day. Smart investors understand the value of new technology and appreciate having their money as cash within one day.
Let the tax man pay off your bad debts Every investment has its risks and property is no different. If you own an investment property there will probably come a time when your tenant leaves owing you money. If you have Landlord Insurance, this type of circumstance would be covered under your policy. If you don’t have Landlord Insurance, you will be stuck with a debt. Some Landlords, despite their agent’s best advice, insist on chasing the tenant and the debt to the ends of the earth - including the use of debt-collectors and appearances in District Court to secure a judgement against the tenant. (Even if you secure a judgement
the tenant will probably be offered a deal where they can pay off the debt at, say, $5.00 per week - and then you have to sit back and hope they pay) Sometimes a large debt is worth chasing. But generally, chasing a debt that amounts to the equivalent of a couple of week’s rent is a waste of time and effort. You’re right, it doesn’t feel right to let the tenant “get away with it”, but in the end it’s often the wise choice. Remember that a loss such as this is a tax deduction. And sometimes it’s wiser to let the tax man pick up this debt rather than waste time and effort chasing money you have little chance of recovering.
Play smart with regular maintenance
Every couple of months your property ofﬁcer will conduct an inspection of your rental property. After the inspection they will usually phone or write to you reporting on their ﬁndings. Sometimes they will report on an item that needs repair or alert you to something that will require maintenance in the next few months. Smart property investors’ look after these items
of repair or maintenance immediately. They are aware of the consequences of failing to maintain their property and act quickly to arrest these problems. And what are the consequences . . . In the short term, if a repair becomes a problem, the tenant may refuse to pay rent until the repair is ﬁxed. (Mind you, this is a
breach of their agreement . . . but refusing to pay rent is often the ﬁrst way a tenant vents their frustration). If the repair is regarded as “urgent” the tenant can undertake the repair, order their own tradesman and then send you the bill. In the medium term, little repairs often develop into major problems and the cost escalates well beyond what it might have cost if you had acted as soon as the problem arose.
In the long-term failing to correct repair and maintenance issues quickly causes your weekly rent level to decrease and the overall value of your property to decline. And suddenly your investment property is not such a great investment. Smart property investors attend to repairs as soon as they occur knowing that the cost of the repair is a tax deduction and by doing so the value of their investment is maintained for the long term.
13. You should see what we see We all lead busy lives and every year it seems we have less and less time for almost everything. Part of being a property investor means making the time to have a thorough look at your rental property at least once every year. This once-a-year inspection should be conducted with your property ofﬁcer in attendance. This way you can both agree on any maintenance matters that need attention. Most importantly you can take an objective look at your property and ask yourself this question . . . “Given the current state of my rental property,
how much rent would I be prepared to pay each week to live here” If your honest answer is less than the current rent then you may need to consider undertaking a few improvements to protect the declining value of your property. Smart property investors hate to be surprised by the state of their property. If you fail to inspect your property for, say, 5 years it is almost guaranteed you’ll get a surprise - despite your property ofﬁcers best efforts the property will look nothing like you remember.
Two things that never happen
There are a number of urban myths that have developed over the years regarding real estate agents and rental properties. Here’s two . . . Our regular tradesmen do not give us a “kickback” for providing them with regular work. The only reason some tradesmen get regular work from us is because they maintain a high standard of work delivered on time and at very competitive prices. Apart from our desire to ensure a good job for our landlord clients there is no other reason we favour one tradesman over another. The fact that we favour one tradesman over another actually results in much lower repair costs for our landlords.
We do not receive interest on rental funds held in our trust accounts. Current legislation holds that our trust accounts must be interest bearing accounts but the interest is paid to our industry ﬁdelity fund to protect against client losses when estate agency businesses collapse - fortunately this happens only rarely. Subsequently, we receive no value from holding on to our landlords funds for any period. In fact, it’s in both our clients best interest and ours that our accounts are cleared every month.
15. Solve problems before they become problems So often, we see problems crop up with rental properties. Often these problems could have been avoided if landlords had taken action at the very beginning. Here’s an example. A seemingly good tenant stops paying the rent. When we inquire from the tenant he or she answers that the landlord has been promising a particular repair for a long time
and the repair (although not urgent) has not yet been corrected. Smart property investors know that protecting their cash ﬂow is one of the most important aspects of property investment and always follow through with their promises - especially with regard to repairs. Remember that consistent cash ﬂow can be affected by how you treat your tenant.
We have to act within the law Sometimes property investors ask us to evict their tenant. Often they have very good reasons ; They want to move back in to the property after being interstate for several years; They have promised the property to a relative or friend - or any number of other good reasons. What many landlords forget is that we have to comply strictly with the law and when it comes to terminating a residential tenancy agreement there are speciﬁc rules that apply - especially when it comes to giving tenants a notice that terminates the agreement. If, for example, a landlord wanted to move back in to their property they would ﬁrstly have to wait until the term of the agreement
was ended - and then they would have to provide the tenant with a 60-day notice to vacate. And unless the tenant is prepared to move earlier than 60 days the landlord will be stuck with a two-month wait before moving. There are a number of different noticeperiods that apply to terminations - each one dependant upon circumstances. More speciﬁc details can be obtained from your property ofﬁcer. Smart property investors make it their business to be aware of the basic legislative requirements governing rental properties, especially those parts dealing with terminations.
How delays can cost you big bucks
One of the most common mistakes made by inexperienced landlords is the time they take approving or rejecting an application from a new tenant. These days everything seems to be “instant”. And tenants expect answers on applications almost as quickly. Certainly, landlords should take time to consider the particulars of an application - but that time should be no more than overnight. So often, we have seen a landlord lose a
good tenant because their answer on an application took too long. Often a tenant has an application on more than one property at a time. Invariably the tenant will take the ﬁrst property where their application is approved. Smart property investors know that any delay on their part in approving or rejecting an application may affect their cash ﬂow. They listen carefully to the advice of their property ofﬁcer, consider all the details of the application and provide a answer within a few (business) hours.
18. Sometimes we need to contact you quickly Here we are in the midst of what many are calling the information age and yet we can still have difﬁculty contacting one another. Occasionally we even have difﬁculty contacting our own landlords. This situation is exacerbated when an emergency crops up with one of our landlord’s rental properties. On the other hand, it may not be an emergency. Perhaps we might have an applicant to rent a property waiting on an answer or a repair matter to discuss with you. No matter the reason, our ability to contact our
landlords is very important. Smart property investors rely on their property ofﬁcers for up-to-date information about their property. As such, they ensure that their property ofﬁcer has all their telephone numbers - home, work and mobile. And these days smart property investors are beginning to rely more heavily on e-mail to maintain contact with their property ofﬁcer. Either way, smart property investors do everything in their power to keep the lines of communications open at all times.
Get expert advice
Right now our federal Tax Act is literally hundreds and hundreds of pages long. And every year there are dozens of amendments to the Act. And more importantly to us is the fact that some parts of the Tax Act relate to rental properties. Smart property investors employ a good accountant - preferably an accountant with an interest in investment properties. A good accountant will ensure you obtain every possible advantage from owning a rental property.
use of a 221(d) deduction. If you are a property investor and your accountant has not discussed with you the idea of reducing your weekly tax by using a 221(d) deduction then be sure to call him or her tomorrow.
A good accountant can also assist you in legally reducing your weekly tax installment (if you are a PAYG tax payer) by the correct
Smart property investors rely on the advice of a good accountant to legally reduce their tax each year.
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This Special Report was provided to you free of charge by Starr Partners Liverpool. If you would like to take the next step on your path towards buying a property simply call our ofﬁce, 7 days a week, on 9822 5999 and speak with a member of our sales team – they will be happy to answer all your questions. If you would like some further information regarding buying, selling or renting property, we produce a range of Special Reports on different subjects – simply call us on 9822 5999 to arrange to have a full list of available reports posted to you. If you liked what you read in this report we would very much appreciate it if you would mention our name to your friends, relatives, neighbours and co-workers – you can be certain we’ll look after them, their property and their future. PLEASE NOTE : Recipients of this report are reminded that, although due care has been taken in the preparation of the within contained material, prospective property buyers and sellers are always best served by making their own independent inquiries before the sale or purchase of a property. © M. O’Sullivan 2001