Acquiring a property that is already tenanted is certainly more attractive when your income will commence as soon as settlement occurs. However, with an existing tenancy and management in place there are questions that should be asked before you sign on the dotted line. Be fully informed so that you can budget for any upfront costs upon acquiring ownership.
If the property is managed by a real estate agency, they should be able to provide you with the necessary information for your due diligence. After all, you may well be their next client. If the property is privately managed, the owner should still have the information, but realistically, many private landlords are not up to speed with the admin. Be careful.
Following is a list of items for the property and tenancy that should be available BEFORE YOU SIGN THE CONTRACT upon your request:
1. Current smoke alarm compliance certificate and servicing schedule – This is a MUST, a landlord and agent have legislative responsibilities to ensure that the smoke alarms are compliant and serviced annually, upon commencement of a new tenancy and at every lease renewal.
2. Water efficiency certification – Required to charge the tenants full water usage. This may not be possible in older properties. Also if the existing lease in place does not allow for water charging, you may not be able to change this.
3. Has a rent review/increase taken place recently? – Regular rent reviews should be conducted either upon each lease renewal or annually. The agent should be ensuring your investment is achieving the maximum rent yield by comparing it with the current market.
4. Is there an entry condition report and photos? – No entry condition report could allow the current tenant to leave the property in a poor condition as there is no record for comparison upon the vacate inspection being conducted. This is potentially costly for you as a landlord to then get the property in a condition acceptable for the start of a new tenancy. You need to see this report – don’t just accept that one has been done.
5. When was the last routine inspection conducted? – Regular routine inspections should be conducted to ensure the tenants are maintaining the property to an acceptable standard. The agent should also be reporting any repairs and maintenance that is needed. Failure to provide this is an indication that the Property Management service may need changing.
6. Is there any outstanding maintenance? – You will most likely have a pest and building report for a sales contract. But this won’t always pick up other items that need attention, such as appliances that need replacing. Avoid the immediate expense of outstanding maintenance on handover by asking for a report on outstanding maintenance from the Property Manager.
If the existing managing agent falls down in any of these areas, appoint a new one. Efficient and effective management is a must to ensure you are achieving the best return from your investment.
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