What does renting out mean? To agree to allow someone to use something or occupy someplace temporarily for payment or a series of payments. Landlords and tenants must follow rules for renting out their home or property.
Common mistakes during the renting out of property include:
- Not running adequate checks on a potential tenant.
- Will properties always be rented?
- Underestimating the cost of repairs or ongoing property maintenance.
- Viewing it as a hobby.
- Not letting tenants sign a lease agreement
- Neglecting tenants.
- Not care regularly check in with your tenants and on the condition of the property.
- Not enforcing lease term
Renting Rules are listed in Residential Tenancies and Rooming Accommodation Act 2008 (the Act).
The definition of rental – is the sum or amount agreed in the lease or tenancy agreement to be paid by the tenant to the landlord for exclusive possession of the property leased for the period of the lease.
1. Write an Agreement with Tenant
A written renting policy agreement must include:
- Name, address, phone number, and registration number of the agent if one is used.
- The landlord’s name and address.
- Name of all tenants included in the agreement
- Address of premises.
- rent amount and how and when it is to be paid.
- the amount of the bond.
- how long the lease agreement last
- who pays for the water supply and uses
- a list of all domestic appliances in the property that require instruction such as the air conditioner
- Anything excluded from the agreement for instance the tenant’s use of the shed
- Any other terms like rules about pets
- The date and signature of all parties to the agreement.
2. Take the Security Deposits and Late Fees
If a copy of the proposed agreement and any bylaws have been given to the tenant. Under the Act, the only deposit that can be taken from tenants is a holding deposit. Once a holding deposit is accepted the landlord must give a signed receipt and ensure the property is available for tenancy.
If an agreed holding period was agreed and the prospective tenant does not proceed with the tenancy and advises the landlord then the full holding deposit must be refunded in three days. When a tenant signs a tenancy agreement after paying a holding deposit, the holding deposit becomes part of the rental bond. Any surplus amounts then become rent in advance.
Landlords and property managers can only impose penalties for overdue rent payments following the terms of a lease agreement. A “grace period” of at least five days should be considered before being rented late. Courts will only allow landlords to charge a late fee that is less than 10% of a month’s rent.
3. Agree on Repairing and Maintenance Fees
Before tenancy, a property condition report should be completed noting all defects, fixtures and services provided this should be recorded in the lease agreement. Take photos of all rooms, gardens and any problem areas.
Once the tenant has moved in the landlord or property manager must keep the premises in a reasonable condition and make sure it complies with all building, health and safety laws.
The landlord and property manager are liable for normal wear and tear for example replacing carpets that have worn out due to frequent use. Replace locks that are worn out of old. Replace curtains faded from sun exposure. Repaint areas that have flaked off due to them being old or defective applications.
The tenant is liable for damages for example stains or burns from things being placed or dropped on carpets. Locks are being broken due to the tenant losing the key. Tears in the curtains are caused by a pet. Mould formed because the tenant did not properly air the property.
4. State the Restrictions for Tenant
Landlords and tenants are encouraged to act and negotiate in good faith to agree on reasonable and workable tenancy arrangements, helping to create a safe and secure renting future for everyone. The Residential Tenancies Mandatory Conciliation Service (RTMCS) was introduced by the WA Government to help landlords and renters reach an agreement about renting disputes without going to court.
5. Specify Conditions for the Damage that Tenant Causes.
Tenants must not cause damage to the property, either intentionally or through lack of care or attention, including by other occupants or guests.
If the tenant causes damage to the property, the landlord or agent can ask the tenant to repair the damage or to pay for the costs of the repairs.
6. Read the Laws for Property Owners and Tenants.
Rental owners need to be familiar with the landlord-tenant laws in their state and locale. It’s important to understand, for example, your tenant’s rights and your obligations regarding security deposits, lease requirements, eviction rules, fair housing, and more in order to avoid legal hassles.
The basic responsibilities you can expect a tenant to fulfil include:
- Respecting the neighbours.
- Keeping the property clean.
- Respecting the details of the tenancy agreement.
- Respecting the neighbours.
- Notifying you of any maintenance issues.
The basic responsibilities you can expect a landlord to fulfil include:
- Ensuring the property is clean and secure upon move-in.
- Responding to tenants’ maintenance & repair requests on time.
- Keeping the property in the same condition as when the tenant moved in.
- Ensure constant utility supply.
- Respecting tenant’s rights.
7. Have a home property insurance
Have home property insurance to protect the property. A rental policy is required, this policy covers your home’s structure and loss of rental income if repairs are needed. Homebuilding insurance provides cover for your actual property, while contents insurance is designed to protect the belongings inside it.
Home property insurance may vary, it is important to read the product disclosure statement, to make sure you know exactly what is and what is not covered with a specific insurance plan.
What are the mistakes during renting out a home?
Mistakes Landlords make during renting out homes are listed below.
- Thinking the property will always be rented.
- Underestimating the cost of repairs or ongoing property maintenance.
- Viewing it as a hobby.
- Not letting tenants sign a lease agreement
- Neglecting tenants.
- Not care regularly check in with your tenants and on the condition of the property.
- Not enforcing lease terms.
What should a rental property owner know about tenants?
- Does the tenant have credit debts or other expenses?
- What is the tenant’s employment situation
- Why is the tenant moving?
- How much does the tenant earn?
- Can the tenant provide references from his employer and previous landlord?
- Does the tenant have any pets?
- Has the tenant ever been evicted?
- How many people will be living on the property?
How to write a proper rental and lease agreement as a property owner?
A written renting policy agreement must include:
- Name, address, phone number, and registration number of the agent if one is used.
- The landlord’s name and address.
- Name of all tenants included in the agreement
- Address of premises.
- Rent amount and how and when it is to be paid.
- The amount of the bond.
- How long does the lease agreement last
- Who pays for water supply and use
- A list of all domestic appliances on the property that require instruction such as the air conditioner
- Anything excluded from the agreement, for instance, the tenant’s use of the shed
- Any other terms like rules about pets
- The date and signature of all parties to the agreement.
How to calculate rental yield?
- Net rental yield
Income an investment property makes after expenses have been deducted. These expenses include costs such as legal fees, stamp duty, rental-related costs, building inspections, insurance premiums, repair and maintenance costs, and management fees.
Net yield is calculated by taking the annual rental income and then subtracting the yearly expenses. The difference is then divided by the property’s value and then multiplied by 100.
- Total return yield
The gain or loss made on an investment during a specified period and where the capital gain is included. Unlike yield, which is reliant on the property’s market performance, returns are focused on the investment’s future earning potential.
A balance between rental yield and capital growth plays a crucial role in helping investors achieve a sustainable portfolio. Investors should aim for a gross rental yield of above 5.5% as this shows stability in the rental income.
What are the rental laws that a rental property owner should know?
Rental owners need to be familiar with the landlord-tenant laws in their state and locale. It’s important to understand, for example, your tenants’ rights and your obligations regarding security deposits, lease requirements, eviction rules, fair housing, and more to avoid legal hassles.
Landlord and tenant issues are governed by each state´s Residential Tenancies Act (RTA).
- Australian Capital Territory: Residential Tenancies ACT 1997
- New South Wales: Residential Tenancies Act 1987
- Northern Territory: Residential Tenancies Act 1999
- Queensland: Residential Tenancies Act 1994
- South Australia: Residential Tenancies Act 1995
- Tasmania: Residential Tenancy Act 1997
- Victoria: Residential Tenancies Act 1997
- Western Australia: Residential Tenancies Act 1987
Bodies handling tenancy disputes are as follows:
- Canberra, Australian Capital Territory: Residential Tenancies Tribunal
- New South Wales: Consumer, Trader & Tenancy Tribunal
- Northern Territory: Consumer and Business Affairs – Northern Territory Department of Justice
- Queensland: Residential Tenancies Authority administers the RTA, and a Small Claims Tribunal settles tenancy disputes.
- South Australia: Residential Tenancies Tribunal
- Tasmania: The Consumer Affairs and Fair Trading administers the RTA, and the Residential Tenancy Commissioner settles tenancy disputes.
- Victoria: Victorian Civil and Administrative Tribunal (VCAT)
- Western Australia: Department of Consumer and Employment Protection administers the RTA, and a Magistrates Court settles tenancy disputes.