Looking to become a landlord - info needed

[Matt]

Hi all,
I'm looking to become a landlord for the first time.
Is there any information anyone could direct me to?
i.e. how to manage the rental payments, lease contracts, maintaining property, earning above cost of capital etc ...

The process will be one where I will buy and then rent out.

Thanks in advance.

[bluelabel]

Hi Matt,

I actually came to ask the same questions, and a few more.

I was wondering though, what expenses are involved in being a landlord.

I was wanting to do a budget and wanted an idea of what to include, ie agents fees, what is a good amount/percentage to allow for repairs, contract fees, insurances, and anything else i may have missed.

Any help appreciated.

:bier:

blue

[jbocker]

Hi Matt,

I actually came to ask the same questions, and a few more.

I was wondering though, what expenses are involved in being a landlord.

I was wanting to do a budget and wanted an idea of what to include, ie agents fees, what is a good amount/percentage to allow for repairs, contract fees, insurances, and anything else i may have missed.

Any help appreciated.

:bier:

blue

Gday Matt and Bluelabel
Been meaning to respond for some time, but was not a member and havent got back to answering since joining.
Budgeting I do with a XLS spreadsheet table with expenses listing down the side and the months across the top. Listing I would put Land Rates(~$1650), Land Tax, Landlord Insurance ($681), Water Rates and thats about it for regular expenses and put the amounts in the relevant months. These work out to be $3000 to $3500 per house per year. I would attach a spreadsheet but not sure if Iam allowed (or can). Agents fees is dependent on where your property is (in Vic I pay 6.5 % and a weeks let fee for a new tenant - nothing else). Locally (Perth) I find fees way too expensive and manage myself.
Dont skimp on insurance and read the fine print, and quiz them. I had 1 policy that burnt me badly.

Maintenance costs fluctuate a lot, and are sometimes high when the tenants are easily prone to complain about things. I am not saying to not have maintenance -I usually get things seen to rather than say no. But I appreciate those who are not 'heavy wear' on a property. Maintenance has been around 2500 to 3000 per property per year usually with some necessary improvement like smoke alarm or electrical fix up or plumbing cistern change out (best has been about $500 and worst $12000! with a damage from a tenant)
Properties are 4x2 and one 5x3.

Get to you state agency that administers landlord and tenant legislation they have some very useful publication (in WA it is consumer and employment protection). Plenty of info on the net.

There are some really good publications around, a monthly mag I absolutely treasure Australian Property Investor - great content with relatively low advert ratio. (I hate mags full of ads) Subsribe gives excellent discount.

Have any other more specific questions please ask.

[turner]

Hi,

I'm not an expert in being a landlord but I've found a post that I think might help you. Here is the link.

http://www.pinneysestate.com/2009/06/some-tips-on-investing-in-apartment.html

[alyna]

* Find a property and calculate the costs involved - mortgage payments (use the bank's money!), levies, rates and taxes (and agents fees if you are not doing it yourself).

* Investigate the expected rental income (allow for a 4% vacancy rate per year), and calculate the shortfall, if any. If you can afford to subsidize the shortfall comfortably, you're in business to become a landlord. All things being equal, every subsequent year your shortfall should reduce because of the annual escalation in rent and if you calculate the Best Rental Price.

Calculations are easy to do if you only have a couple of properties in your property investment portfolio. Once you've grown your real estate investing, you may have to buy rental property software to keep track of cash flow, return on investment etc.

[adrianm]

Hi Matt and bluelabel,

Good on you for deciding to become landlords and get into the real estate investment game!
Its a great place to be and at a great time too!

Not sure where you're at in the process of research and budgeting etc but I thought I might share my experince about when I started. I hope it may help you. The best advice I got was to work out what I wanted to achieve out of investing in a property. ie. to have a goal.

People buy property for one of three reasons:
1. Growth
2. Income
3. To Live in

If you are buying an investment property, then option 3 is off the table, meaning you eaither want income or growth. If you can work out which one it is, then the process of budgets and research will be so much easier.

Personally, I invest for growth (this is my goal), so all my calculations are then centered on how much I need to pay out of my own pocket after tax. The less the better of course, but the focus is on the growth of the value in the property. I can then use that growth to buy more investments (that also grow) or to enjoy a lifestyle of my choosing.

Hope this helps out. Happy to help as needed.

Happy investing!
Adrian

[james700]

Hi Matt,

I actually came to ask the same questions, and a few more.

I was wondering though, what expenses are involved in being a landlord.

I was wanting to do a budget and wanted an idea of what to include, ie agents fees, what is a good amount/percentage to allow for repairs, contract fees, insurances, and anything else i may have missed.

Any help appreciated.

[adrianm]

Hi Matt

Sample expenses... with some example costs (for a new property) that I use when doing an analysis on a property purcahse for myself / client

Interest payments - depends on loan and interest rate.
Letting Fess (the fee to get a tenant first up) - about 1 weeks rent
Rental Agent commision (if you use one...).. the ongoing fee.. about 7.5% of the rent average
Rates - average $1500 per annum (depends on area council)
Insurance (building & landlord protection.... 2 diff policies) - $700 per annum average
Maintenance - $200 per annum (new property).... much more older prop.... perhaps up to $2000 per annum
Body Corporate - depends on property and number in the complex.... perhaps $1200 - $2000 per annum. $0 if you own a free standing house on land... unless it is part of a specialised estate (ie. with a golf course or a communal gym etc)
Pest Control - $250
Cleaning & Mowing - about $200 (this cost is for between tenants). It woul dbe $0 for any given year if you have no change in tenants (unless you want to pay for cleaning and mowing for your tenants).

So, if the rent you get is greater than the sum of the above, your property in positive geared.
If the rent is less than the sum of the above, it is negatively geared.
Bear in mind that your rent can be less than the sum but with tax deductions / depreciation etc you can actually end up positive geared... (you need a good property specialist tax accountant to maximise these benefits for you!!)

Hope this helps.
Happy to clarify anything if you need.

Cheers

Adrian