Blog

August 25, 2017

2 easy ways to Maximise your Rental Return during a Tenancy

Jennifer Norcliffe | Investment Manager, Harcourts Packham

Leaving renovations aside, as an astute investor you must be aware of all opportunities to maximise your rental return.

Granted, most of this will rely heavily on your Property Manager (see last month’s blog: The Perfect Property Manager – What’s on Your List?), but you must be aware of every strategy available to best equip you for a successful investment journey.

0% arrears policy
This one’s obvious, isn’t it? If your tenant’s not paying on time, you’re not getting your rent when it’s due. Worst case, you may end up spending money and time in the Tenancies Tribunal trying to get it back.

From experience, thorough tenant screening, an educational and detailed tenancy sign-up/meeting plus a strict arrears policy leaves little room for this to become a problem.

Thorough background checks on tenants is a must. On top of the standard references, if you’re not checking Facebook and doing a Google search, you’ll be kicking yourself if 2 months in you’re having troubles and notice that they quite openly express their disregard to society and their obligations on their social media pages…

Getting a reference from a tenants’ previous landlord/agent and seeking a rental ledger is a great way to identify any former discrepancies. If a tenant is consistently 3-4 days late, the chances are that’s a reflection of the agent not having educated them on transfer delays and automatic payment schedules rather than the tenants not managing their money. A good Property Manager will explain all of this at the tenancy sign-up to avoid this issue.

Once a tenant is secured, if arrears become a problem; consistency is key. Here in South Australia, we have a limit to how much contact we can make before it’s considered harassment, but if anything looks out of the ordinary, it’s usually worth picking up the phone and explaining the problem in more detail to your tenants. Sometimes they just need a good visual breakdown of money owed and due versus rent received to get their heads around the structure.

Regular Rent Reviews
As your tenant’s lease comes up for renewal you (or your agent) should be reviewing the current market conditions to ascertain if there’s any room for a rent increase. I know there’s a few lovely Landlords out there that don’t like increasing rents for good tenants, but you’ve got to remember to protect yourself. Think with your head, not your heart when it comes to your investment.

Should anything unexpected pop up in your life, creating a need to re-mortgage, draw from your property loan, or even sell it’s always in your favour to be receiving a premium rental price.

If these prize tenants decide to break their lease for whatever reason (buying a home, relocating for work, etc.) you will not be able to advertise at a higher asking price unless there’s substantial evidence of the market improving. Even if you do get the higher rent when re-letting, in South Australia landlords cannot profit from a break lease, meaning any extra rent up to the last date of the original tenant’s lease must be paid back in compensation to them/taken off their break lease fees.

At the end of the day, there will always be some tenants that try to negotiate their way out of a rent increase. If you have a good property manager that knows how to justify this (and it is in fact a reflection of the current market value), 99% of the time this should be an easy way to see an increase in your rental return.

With periodic tenancies, (in SA) you must provide 60 days’ notice of an increase in rent. The tenant in return only needs to provide 21 days’ notice to vacate (or a month if paying monthly), but the reality is, moving is not only annoying and takes up a lot of time… it’s expensive!