You’ve invested in a property and you plan to rent it out. Congratulations, you can now add the title of ‘Landlord’ to your business cards!

But what does it really mean to be a landlord? In what should be a surprise to no one, the job extends far beyond simply allowing a person to live in a property that you own. It’s a role with real responsibility – in many ways your tenants are in your care. It’s vital therefore that you understand exactly what you’re getting into before you get into it.

To clear the fog, let’s take a look at everything that a first time landlord needs to know – the rules, the responsibilities, the perks and the pitfalls of renting out your property to someone else.

What are the key responsibilities of a landlord?

According to common law, it’s a landlord’s duty to guarantee the safety of their property and its contents. If a landlord neglects this duty, and harm comes to the tenants, the neighbours or the public, they can expect to be met with the full force of the law.

The general responsibilities of a landlord include:

  • Maintaining the property’s structure and exterior.
  • Ensuring all utilities are switched on and working (e.g. gas, electricity and water).
  • Ensuring all utilities and landlord-owned appliances are properly maintained.
  • Fixing potentially health-threatening issues as soon as they become apparent (e.g. mould, rising damp and asbestos).
  • Anything else that’s stipulated in the tenancy agreement.

Beyond these general responsibilities, each Australian state has its own set of requirements. Victorian landlords, for example, face strict guidelines as to when they are allowed to enter their rental property. The time and date of general visit must be agreed upon by the tenant seven days in advance, while a visit can be arranged within 24 hours in the following cases:

  • To carry out any duties listed in the tenancy agreement.
  • To value the property.
  • To show the property to prospective buyers or tenants (but only if the current lease terminates within 14 days).
  • To confirm a reasonable belief that the tenant has been remiss in their rental agreement duties.
  • To make one general inspection in any six-month period (excluding the first three months of the tenancy).

It’s vital that a first time landlord understands exactly what they are responsible for, and what the law states they can and cannot do, before they take on their first tenant. The first step for any first-time landlord should therefore be to check on the local rules and regulations with the appropriate government authorities.

Should I use a property manager?

While you can certainly manage the property yourself, many first-time landlords don’t realise exactly how much work is involved in doing so. Property managers are essentially professional landlords. They are hired by property investors to take care of the following tasks:

  • Finding tenants for your property.
  • Assessing the suitability of applicants.
  • Collecting rent from tenants.
  • Inspecting the property (and keeping a record of these inspections).
  • Acting as the tenant’s point of contact – answering questions, arranging repairs and settling disputes.
  • Acting as the intermediary between the tenant and the landlord.

The majority of landlords choose to use a property manager. Not only do they take care of the endless minutiae involved in renting out a property, they might also have access to high quality tenants, and can ensure that your property isn’t left vacant for extended periods. They generally charge between 6% – 10% of the rent for their services, but a good property manager will more than pay that investment back.

What costs are involved in renting out property?

Sure, by renting out your property you’ll receive a steady stream of income, but charging $500 a week for rent doesn’t mean you’ll make $500 per week. There are plenty of costs involved in renting out a property, and it’s important to crunch the numbers before you decide to become a landlord, as these costs may mean that renting isn’t economically viable.

  • Property management fees: 6% – 10% of the rent.
  • New tenant fee: Property managers often charge a fee to advertise an empty property to new tenants, generally 110% – 150% of one week’s rent. If you have a high turnover of tenants you could be paying this fee multiple times a year.
  • Landlord’s insurance: This insurance guards against disasters both natural and tenant-created. Policies vary greatly depending on the type of cover you need.
  • Maintenance: If your property is older, repair and maintenance costs can quickly add up. Appliance replacement, plumbing repairs, pest control, smoke alarm inspections; the list of potential maintenance activities is long. Many landlords put aside a percentage of their rental income to cover these costs.
  • Council rates: The rate will depend on the area. Usually charged quarterly.
  • Strata fees: Strata or body corporate fees apply to units or townhouses in a complex to cover the maintenance of the common areas.
  • Accountant: With so many incomings and outgoings, it’s wise to hire a professional to help manage your finances.
  • Tax: Positive cash flow means one thing: tax. Your accountant can help you navigate these often murky waters.
  • Travel: It’s important to realise that simply visiting or inspecting your property costs time and money. Travel expenses to and from your rental should be considered.

What is the process of becoming a landlord?

  • Buy a house.
  • Rent it out.

While that might be a slight oversimplification, the truth is that there’s no course, certification or licence involved in becoming a landlord. Apart from the responsibilities mentioned above, you simply need to own a property and find a tenant to fill it. There are however a few things that good landlords will do before they begin the search for tenants.

  • Find a good property manager: Look local, as knowledge of the area and its people are key in good property management.
  • Get landlord insurance: One overzealous cook can see your whole property go up in flames. Choose an insurance policy that will cover the actions of the worst possible tenant.
  • Pre-empt future maintenance: Your doctor said it best – prevention is better than cure. Before you rent your property out, go over it with a fine-toothed comb, fixing or replacing anything that looks likely to break.
  • Know your legal obligations: Understand what you can do, what you can’t do, and what you must do.

Becoming a landlord is an exciting prospect. But with plenty of responsibility and red tape, the experience can quickly turn sour if you don’t go about it in the right way. The most successful proponents will take the time to educate themselves on the job. They’ll speak to people who have done it before, and hire professionals to take care of anything that feels too complicated. They’ll clear the fog around property rental, rather than running headlong into it.

And only then will they reprint those business cards with ‘Landlord’ on the top.

Wherever you are on your landlord journey, the Castran Gilbert Property Management team is well-equipped to assist you. Visit our Landlord Services page for more information.