ACT Real Estate

0412 607 293

6156 0254
E: contact@actre.com.au
W: www.actre.com.au
M:
T:

SO YOU WANT TO BUY AN INVESTMENT

PROPERTY?

First thing is first, check out our buy page to grasp all the steps involved with
buying a property. After understanding this there are a few different things
you need to consider.
1. What have I got to spend and can I cover my mortgage payments if I
don't get a tenant or lose a tenant unexpectedly?

2. What is my motivation for an investment property? Do I want to buy

something that will pay itself off quickly (i.e. cash flow positive or has a
high rental return), do I want a property that will appreciate over time
or do I want something that I can move in to eventually?

3. How much maintenance do I want to do? If you are looking to not

spend much more than the purchase price (i.e. you don't have a lot of
discretionary income past the point of the mortgage repayments) then
something older is probably not ideal. This is also the case for people
that are purchasing for the tax deduction as these properties will not
depreciate to the same level as a new construction. However, if you are
looking to purchase something that you can invest a bit of money and
see your investment double then a solid built older home should be in
your sights.

4. How much do I have to spend on my investment property per month?

If you are counting on the investment property to pay its way be very
careful when selecting a property. Ensure you do not select a property
with body corporate fees, large trees in the backyard, a swimming pool,
old wiring or plumbing or excessive rates or land tax - all these
elements will deduct from your rental return.

ACT REAL ESTATE

To Be Considered When You Are Looking at a Property:

1. Get a rental appraisal from the selling agency's property manager not
the agent and compare it with your own analysis of the rental
market. This is important for you to understand the cash flow nature of
the property.

2. Pay extreme attention to the building report as anything that it

highlighted may need to be fixed prior to getting a tenant and
remember the little things add up.

3. Do a budget - Start with the estimated rent and multiply it by 4 - this

will give you your 'rental return'. Then take note of all your expenses
(rates, land tax, water supply, home insurance, management fees and
an estimate cost per month for maintenance [garden and home]) and
divide them all to get your monthly payment amount. Deduct these
monthly calculations from your rental return. If your answer is a
positive number then you are cash flow positive and if it isn't this is the
number you will be expected to cover from your personal finances.

ACT REAL ESTATE

ACT Real Estate

0412 607 293
6156 0254
E: contact@actre.com.au
W: www.actre.com.au
M:
T:

IVE BOUGHT A PROPERTY NOW WHAT?

The stressful part is almost over but first you have one important decision to
make - manage myself or employ a property manager? Ensure you understand
what is involved in self-management before you jump in as owners often find
out the hard way how litigious property management can be.
ACT Real Estate recommends that once you have exchanged on the property
but not settled ask your selling agent if you can use the photos for the
purposes of finding a tenant. You can then provide these photos to your
property manager or use them to create an allhomes advertisement on your
own.
Once your advertisement is constructed it now has to be put live and when you
do this matters. If you put it live to early (any earlier than 6 days before your
first inspection) you will likely lose tenants as other properties will be in the
forefront of their mind on inspection days because they have seen them more
recently. However, if you put the property live too late (i.e. Friday if you plan
on opening on the Saturday morning) people won't have the opportunity to
see it. It is also important what day of the week you put it live. Wednesday and
Thursday are preferable as tenants will have finished applying for properties
from the previous weekend and are likely to have heard whether they are
successful.
After your first inspection you will have a good idea if your property is
correctly priced as you will begin to receive applications. It is up to you (or
your property manager) to work through these applications and fact check the
information provided to you. Do not take the information provided to
be true. Once the information is verified you can decide which, if any
application, is best suited to you. If none of the applications are suitable or if
you receive none review your advertisement and make modifications as
necessary and then schedule another open home.

ACT REAL ESTATE

ACT Real Estate

0412 607 293
6156 0254
E: contact@actre.com.au
W: www.actre.com.au
M:
T:

REVIEWING RENT APPLICATIONS

When reviewing applications, the following things must be

considered:

Lease length: Do they want a short term lease (3-6 months) or a normal
lease (12 months), are they looking to rent long term or is this only an
interim measure (i.e. are they likely to leave after 12-18 months)?
Pets: Do they have pets? If so what type? Do you have secure fencing
for a dog? Do you have allergies to cats?
Availability: When do they want to start renting your property? 1 week?
2 months? Does this work with your timeline?
Groups: You can tell if you have a group applying as there will be more
than two applicants that usually are coming from different previous
residences or may have only been at their previous place for a year
Income: Does it look like with there income they will be able to cover
the rent. A general rule to work off is that if the rent is more than 70%
of their income you may face rental arrears.
Reason for Leaving Previous Residence: Common sense will dictate in
this area - if the reason they have provided is 'personal' or doesn't make
sense - pursue it further.

If you are going to trust this person to take care of one of your most valuable
possessions make sure you are comfortable with them.

ACT REAL ESTATE

ACT Real Estate

0412 607 293
6156 0254
E: contact@actre.com.au
W: www.actre.com.au
M:
T:

RENTING YOUR INVESTMENT PROPERTY

Once you have found a successful applicant the next step is to draft a lease.
Rental agreements can often be purchased online. Please note - you
cannot add in your own terms to the lease without approval by the
Australian Civil and Administrative Tribunal (ACAT) and if you
choose to they will not hold up if the tenant were to take you to
tribunal.
Once the lease is signed we recommend you take 6 weeks worth of rent
upfront (4 weeks for the bond (the most allowed by ACT legislation) and 2
weeks rent to ensure your tenant is always paid ahead. Once you have received
this money you may release the keys to the tenant and you must lodge the
bond (4 weeks rent) with ACT Rental Bonds. It is advisable prior to the tenant
moving in to conduct an ingoing report as well as take photos to note the
condition of the property when the tenants moved in so that you have a point
of reference to ensure the property is in the same condition (minus normal
wear and tear) when they leave. This document must be issued to the tenant
within 24 hours of them receiving the keys and they have two weeks to make
any changes/amendments, sign it and return it to you.
Inspections
You are allowed to conduct two inspection per year and we recommend
conducting the first a month after the tenant moves in. This allows you to
check for any damage that may have been caused in the moving process. If
such damage has occurred you may not fail the inspection instead you can ask
them to rectify any minor issues you see for the next inspection or issue a
notice to remedy for any major problems. Be aware you are only able to
comment on the condition of your property and not on the way the tenant
lives (e.g. you may ask them to clean the range hood exhaust as it may impact
on the functionality of the appliance but not ask them to move a basket of
folded washing).

ACT REAL ESTATE

Rent
Rent is most commonly paid fortnightly and we recommend via direct deposit
as it is easier to trace. You must issue a tenant a receipt for every payment.
The method you use to calculate rent must also be determined. Some tenants
are happy just paying two lots of weekly rent in to your bank account where as
other prefer a day by day method.
Example
If the rent is listed as $400 per week.
Method A = 2 weeks rent in advance
Tenant would deposit $800 into the back account
Method B = Weekly rent x Number of weeks in the year / Number of days in
the year x Number of days in a week x 2
= $400 52 / 365 7 2
= $797.81
Maintenance
If the tenant requires maintenance you are required to action any reasonable
request. Urgent maintenance must be actioned within a week and non-urgent
maintenance within a month.
Ending a Lease
Neither party should break a fixed term lease without cause if possible unless
via mutual agreement otherwise it can get very messy.
Landlord
The landlord has grounds to terminate a periodic tenancy if any of the
following are true:

ACT REAL ESTATE

Reason

Amount of Notice to be Given

Owner Moving
4 Weeks
Back into Property
Owner Selling
Property

8 Weeks

Major Works

12 Weeks

Other

26 Weeks

Tenant
The tenant may terminate a periodic tenancy with three weeks notice.
Bond & Vacate Procedures
On departure by the tenant an outgoing inspection must be conducted. This
inspection is to check that the property has been returned in its original
condition except for regular wear and tear. The original ingoing report and
photos should be taken as a reference point with any changes in condition
being noted and photographed. The tenant should be afforded the opportunity
to be present at the inspection and depending on your relationship you may
address any issues there and then. If you are happy with the condition of the
property or once any damages have been rectified both parties sign a bond
refund form and the bond may be released in part or full to the tenant.

ACT REAL ESTATE