Turning your home into an investment property
Whether you bought a home to live in and now it doesn’t fit your requirements due to location or accommodation. Or you bought a property and your strategy was to turn it into an investment property after you’ve lived in it for a year (thank you first home buyer stamp duty concessions). We thought it might be helpful to compile a guide of things to consider.
First of all, emotionally detach yourself from the property. This is where we see a lot of people go wrong. They have lived in the property and loved it, but what you like and what others like may be different. What ‘quirks’ in the property you may tolerate, others won’t. We want to help you have a smooth transition from a place you call home, to a place which is for investment generating purposes. Let’s go.
Make it appealing
1. Is your place looking a bit tired? Tenants are very similar to all of us who scroll through eBay. The better-looking ads get more interest, and the more interest you get, the more demand for the product (or property) you will have. Give your property a coat of paint. Get rid of the yellow walls in the bedroom, or the eyesore mantel piece in the living room (if it has no real function). Minor tweaks like this mean you will attract more tenants – and possibly a better calibre of tenant!
2. Has your property got heating? Did you realise it is now a legal requirement to provide heating in the living room? Installing a reverse cycle in the living room can make a big difference when appealing to tenants.
3. Daggy and dated carpet? Consider replacing this before the tenant moves in. Tenants are legally required to steam clean the carpet before they move out, and sometimes having fresh carpet makes a property feel nicer and these little things can encourage tenants to stay on a longer term basis.
4. Have a garden? Make sure you have it looking good when the tenants move in. It is the tenant’s responsibility to maintain the garden, so having it in good shape when they move in will set a good precedence.
Interview PMs
Speak to a few property management firms and ask them a few key questions:
1. What minor tweaks would you recommend we do to the property to attract more applications and a higher calibre of tenant. This is crucial. A better tenant will respect your property more, and hopefully stay in the property longer.
2. What fees do you charge? Be careful here. There are often hidden fees like monthly statement fees. It’s not wise to choose a PM based solely on their fees, though of course it is a consideration.
3. Will you be the person managing my property? How long on average do your property managers stay at your company?
Speak to your team
This is very important. Call your accountant and let them know you will be leasing out your principle place of residence. There are big tax implications, and you need to be across these.
The next person to speak to is your broker or bank. Make sure the loan you are on is the best one for what is now an investment property.
Depreciation schedule
Depending on how long you are thinking of renting out your property for, and depending on the age of the property, it is sometimes a good idea to get a depreciation schedule for tax purposes. The best person to ask whether it is worthwhile for your situation is your accountant, and then call a depreciation company like BMT tax depreciation. For example on my first property (which was a 70s apartment, which had had a renovation) BMT said it would be worthwhile, and it definitely was on my tax return. However, with my next property which was also a 70s house but unrenovated, they said it wasn’t worthwhile.
I hope these tips have been helpful! We also wrote another blog around leasing out your property which has additional tips (like insurance!). Read it here.
Regards Tabitha.