Rental Property Management in Australia.
This is one of the key aspects we take into consideration. Rental demand and Supply. Property Management side of the investment is usually a concern for most absentee landlords. Whilst we no longer undertake this task ourselves we introduce our clients to the licensed property managers in the area their property is.
In fact you shouldn’t even know you have a property here, apart from receiving 2 or 3 times a year a property inspection report from the Property manager and your monthly commission statements.
Our South African clients don’t have rental problem or tenant issues but having been there since 2001 I have seen and heard some night mare stories about renting out property in South Africa.
As in line with most aspects Australia is very bureaucratic and there are rules and laws and policies on every document and legislation aims to provide consumer protection.
The property managers are held responsible under “duty of care Laws’. They need to take steps BEFORE they put a tenant in:
1) They need to check with TICA ( tenancy information centre Australia.) www.tica.com.au
This will identify if previous tenants have defaulted or done damage etc. Like a black list.
2) They need to check the tenants (CRA Credit rating Australia) to identify if they have repossessions, bad debts etc.
3) The Managers need to ascertain tenant’s capacity to pay. This is hugely important as if the tenant does default and they have to appear in court, down the track, the 1st thing the magistrate will do is to check what steps the property manager made to confirm they DID have the capacity to afford this rental amount.
4) Check personal and work related references including report from previous property managers from last property that the tenanted had rented.
5) If all checks out they will then approve the tenant and before the tenant moves in they must pay 6 week rent in advance. 2 weeks goes to the landlord’s account and 4 weeks goes into the Australian Rent bond Board
6) The tenant and the property manager will sign an Entry condition report before the tenant moves in and then an Exit condition report when they depart. If there is any damage or repairs required it will come from the 4 weeks rental bond to the landlord. In other words if the tenant wants their bond back they need to leave the place in same condition it was found.
7) Rent arrears. Also not the problem here as it seems to be there. Tenants pay their rent weekly here ( not monthly) which means that in 7 days the managers can identify the rent is not paid and not in 4 weeks’ time.
8) There are steps to be taken by the property managers, which again if and when the tenant has to appear in court, the Magistrate will check what steps the Manager took to resolve the arrears.
For example the 1st week the manager would contact the tenant and enquire what the problem is. If they haven’t paid up in 9 days they will send out A Remedy to Breach notice.
Each form is a different number in each state but you will see that Australia is big on form numbers.
Then 2 weeks if they haven’t paid up they will then issue another Notice Remedy to Remedy.
Then 3 weeks if they haven’t paid up they will issue then a Court Notice. Generally speaking it is within 30 to 40 days when they are in court allowing for weekends and public holidays etc. This form also cannot go out until 2 days after the 21st day.
At the court the Magistrate will have the file and check to ensure that the Property manager has complied with all regulations.
If they have then the Magistrate will evict the tenants. You will then receive the 4 weeks rental bond money.
If for some reason the managers did not comply in some way then the magistrate will extend another 4 weeks to remedy. So now the landlord will be 4 weeks out of pocket. There is 2 ways they can recover that. There is an insurance known as landlord protection insurance and we recommend you take do renew it each year. It is like all insurances a waste of money if you don’t need it but good to have if you do.
This insurance will cover you for the loss. If there had been any damage done, then it would also cover that and loss of rental during repair as well.
To look again at the worst case, which I find my South African clients like to do, if you had forgotten to renew this landlord protection insurance, you would still have one course of action and that would be to sue the property manager for failure of duty of care laws.
I can see no such system in place there with rental properties.
The tenants will be responsible for their own electricity and phone. (Unless it is a holiday rental which we do not recommend).These costs will be in the tenant’s name and with some properties they will pay a share of the water bill.
The landlord will pay the management fee, the body corporate fee if there is one, the rates & water, so it is all very clear who has to pay for what.
If it is a holiday rental then there are other costs to consider for the landlord but we do NOT recommend short term investments as they are a lot more risky.
Hopefully this will explain the role the Property Manager plays, so you are can have confidence in the system. The Managers are also very aware of the need to cross their t’s and dot their i’s as it will be costly to them to not do so.
The rental money will go into the Management’s Trust account and be paid to you monthly.
You will receive a monthly statement ( by email) indicating what costs have been deducted, indicating what the nett amount to be paid. If you are to borrow then the lender will organise a bank account to be opened for you for the mortgage to be debited monthly.
If you want the Managers to pay the costs such as Body corporates, Insurance, Rates etc then they will take that from the rental income. Some managers will charge a small monthly fee to do this. In the event you elect for them to make these payments then you will need to make sure that you have some surplus funds in the account so that in the month these payments are made then there is sufficient for the mortgage to be debited.
You can pay these fees by credit card from overseas if you prefer. This is common place. The notices would then be emailed to you and just have to follow the instructions for making credit card payment.
Any costs such as phone calls to Australia are all tax deductible so important you keep the statements showing such costs.
You will need to apply for an Australian Tax file number and lodge a return each year.
The tax year starts 1st July each year and ends 30th June then next year.
We will introduce you to an excellent accountant who understands the tax treaty between South Africa and Australia and will establish your account, so that the depreciation and fees you can claim are all accounted for. Important to remember that the Tax department will more often than not owe you money due to the deductions you can claim. These can be cashed in either when you sell the property or relocate to Australia and they are accruable.
You cannot open a tax file number on line as a non-resident you need to apply at an actual tax office in Australia or the accountant can make the application on your behalf for a small fee.
It is essential that our clients understand their responsibilities of Ownership; hence we will make sure you are introduced to all parties that you will need to assist with this.
For further information do not hesitate to contact myself on +61 418 752 582 or by email
Hope this goes some way to help you understand how the System works here in Australia.