Becoming a landlord is like taking on a completely new job. Naively going into the role unaware of your rights and responsibilities could land yourself in a tricky dispute.
To save yourself the time and money that can be wasted on a dispute, we’ve summarised the pros and cons of the role as well as some of the obligations you will need to make sure you carry out throughout your experience of being a landlord.
The Pros of Being a Landlord
You’re your own boss
When you’re a landlord, you make the rules! This means that you will be able to determine factors such as how much rent you charge, the terms of the contract and the length of the lease. Not only do you have the benefit of being in control, but this also means you have a great deal of flexibility and can tailor your agreement with your tenant to suit your needs.
You get extra income
An obvious plus is that the rent money that you acquire will act as an additional form of income for you. This can go towards your savings, your pension and can even assist you to pay off any outstanding mortgages that you currently have. As well as this, your property is bound to increase in value over time. The growing equity that your property accumulates will also give you additional money to spend.
An opportunity to learn new skills
Like any new experiences, the journey of being a landlord is one that will teach you a range of skills. From developing your interpersonal skills and your ability to liaise with a range of tenants, to teaching you skills on repairing and maintaining your home- you will be sure to walk away from being a landlord with an abundance of new knowledge.
You can enjoy tax benefits
Did you know that can actually claim tax deductions on expenses relating to your rental property? Be sure to keep any receipts for these deductions handy so that when you complete your tax returns, you can be reimbursed for them. You will be able to claim things such as gardening expenses and even some legal expenses. For more information, you can visit the ATO website here.
The Cons of Being a Landlord
You will have to available around the clock
Any landlord will be familiar with the following scenario: It’s late night and you’re ready to wind up the day, when you receive the dreaded call from your tenant informing you that there’s a leaky pipe at your property. At times like this, you will be expected to take responsibility and attend to the issue. These problems can pop up at anytime, so expect to put in a substantial amount of time and effort into the maintenance of the property. A handy tip is to live close by to your rental property so that it is easy to attend to these issues or consider hiring a local handyman to do the work for you.
The costs of maintenance and repairs
Maintaining your rental property can also be extremely costly, so be prepared to allocate a portion of your rental income towards these expenses. Some common examples of things you might have to pay for include:
- Roof leaks
- Water damage
- Furniture and decoration for the property
- Broken windows
- Gardening costs such as plants.
We’ve all heard the horror stories of tenants who don’t pay rent on time, damage your property or cause havoc in your neighbourhood. These stories are surprisingly common and can even escalate into messy legal disputes. Not only will you lose money because of the damages or unpaid rent, but you will also have to pay costly legal fees in order to settle the dispute.
To avoid this situation, consider adopting a good screening process when choosing prospective tenants and also consider hiring a property manager who can oversee aspects such as the tenant’s rental payments.
You may have to pay tax on the rent that you earn
Like most forms of income, rental income will be taxed in Australia. Your rental income before deductions will be added to your income before tax, and the sum of these two figures will determine how much tax you pay in the financial year. For instance, if you were to earn $30,000 before tax and incur $8000 in rental income, you will have to pay $4612 in tax according to the resident tax rates for 2019-20.
State regulations for landlords
The last thing you want is to find out you’ve been fined or broken the law unknowingly. To avoid this, you should familiarise yourself with the state regulations and laws that are relevant to landlords. The laws will differ from state to state, so ensure that you are familiar with the laws that apply to you.
Laws against discrimination
There are fair housing laws in place with the purpose of preventing discrimination from occurring. For instance, in NSW theAnti-Discrimination Act 1977dictates that you cannot indirectly or directly discriminate against against tenants on the basis of race, sex, pregnancy, marital status, disability, sexuality or age.
There are laws in other states which dictate the same thing, such as Victoria, where the Equal Opportunity Act 2010exists and similarly asserts that tenants can’t be discriminated against based on these factors.
Safety and Health Codes
The common law states that every landlord has the responsibility to ensure the safety of their tenants. This means that they will be liable if their neglect directly results in the injury or harm of tenants. There is also legislation which defines the standards of safety which landlords must uphold. For instance, the Swimming Pool Act 1992 in New South Wales requires that there must be a fence that separates the pool from the house, and landlords must ensure that this requirement is met.
Other aspects of your house that you should make sure are compliant with your state’s safety standards include:
- Windows and balconies
- Smoke alarms
- Fire safety
- Gas water heaters
- Security and locks
- Rainwater tanks
Rights and Responsibilities Landlords should Consider
The rights and obligations of Landlords and tenants has been enshrined within every state’s legislation. Each state and territory have its own booklet which outlines the rights of tenants. This booklet must be provided to the tenant by the landlord before the tenancy agreement commences.
The responsibilities of landlords and the rights of tenants are extensive and can be hard to ensure that you comply with all of them. Below is a quick summary of some thing’s landlords should be aware of:
Bonds will be paid at the beginning of the tenancy and are paid to the state as a safety net for the landlord in case the tenant breaches the agreement. The process of paying the bond and how it can be paid will differ from state to state. For example, the protocol in the ACT is that tenants will pay their bond to the Office of Rental bonds within two weeks. Access to the property may be refused by the landlord in the ACT until they see proof of this payment.
In an ideal world, landlords would be able to increase rent as they please. However, there are restrictions on when you can increase rent and any rent price a tenant believes to be too high can be challenged at a tribunal. For instance, the Residential Tenancies Act 1997 in Victoria stipulates that tenants must be given 60 days of notice for rent increases and these increases cannot be increased more than once every 12 months if the agreement was entered into on or before 19 June 2019.
Rights of the Landlord to Enter the Premises
While you may have the mentality that you own the property and therefore can enter whenever you like, this will not be permitted by law. The landlord’s rights when visiting properties can be found within local legislation such as Division 4 of the Residential Tenancies Act 2010 in NSW. According to this legislation, a landlord can only enter the premises when giving consent by the tenant. However, there are a few circumstances where there may be an exception, such as in the case of emergencies.
In the worst-case scenario, you may have to evict a tenant. In cases of this, it is important that you comply with the state’s procedures and uphold the tenants’ rights so that you can reclaim your property in the most drama-free way. Be sure to check the reasons for which you can end a tenancy in your state and the type of notice that must be given, and how much notice must be given.
An example of this is in Queensland, where a specific form must be used to create the eviction notice. This notice must be provided to a tenant within a reasonable amount of time. If a tenant fails to comply with the notice, the landlord can take the matter to court or even have a warrant of possession issued in some states.
Words by Vidya Kathirgamalingam
Thinking about turning your home into a rental property? Contact eChoice today. Our brokers will ensure your heading in the right direction as a landlord.