PROPERTY INVESTORS INFORMATION BOOKLET
CONTENTS Our Aim........................................................... Page 2 Tenant Selection ............................................. Page 3 Documentation........................................... Page 4 - 5 Rental Payments ............................................ Page 6 Marketing ....................................................... Page 7 Rental Statements.......................................... Page 8 Routine Inspections ........................................ Page 9 Repairs & Maintenance................................ Page 10 Property Management Information ............ Page 11 Responsibility of the owner................... Page 12 - 13 Benefits of Professional Property Managers............
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Insurance ...................................................... Page 15 Debt Collection ............................................. Page 16 Body Corporate Service................................ Page 17 TAX Information........................................... Page 18 Depreciation Report ..................................... Page 19 Body Corporate Management ...................... Page 20 Summary....................................................... Page 21
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OUR AIM
We aim to provide honest and reliable service that EXCEEDS our Customer’s expectations, now and in the future …..we want Customers for life. We will continue to give our Customers security and support by providing quality, value for money products and services second to none. We seek a satisfactory return on investment to continue the growth of our business and guarantee our Customers (internal and external) continued service and support.
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TENANT SELECTION
We have a philosophy at Mackay rentals of taking more time to select the best applicant for your property. Our stringent process ensures that the risk to your property is minimised by only approving tenants that have met our criteria. Once we are satisfied by the application tendered by the tenant, we will contact you, the owner, before finally approving the tenant. Our process of tenant selection includes: Detailed application form Proof of identity by photo ID and other to 100 points Checking with previous Lessors and Agents regarding rental history Obtaining internet report from the Tenancy Information Centre of Australasia regarding any court action from previous real estate agents Assessment of ability to pay rent by confirming employment and/or other sources of income Contacting personal references to obtain character references Liaison with owners regarding most suitable applicant All tenants at the sign-up are given a Tenant Information Kit including Tenant information booklet This information is sourced by requesting the tenant to complete an application form. The checks we use are the most stringent that are allowable by law under the Privacy and Anti-Discrimination Acts. Our record for avoiding problem tenancies through our stringent selection process is exceptional, with less than 1% of tenancies resulting in financial loss to the owner. This success rate can also be attributed to our Property Managers, who are all trained and experienced in tenant selection, and are well equipped to read the signs from a potentially defaulting tenant. However, despite this low percentage rate of default in tenants we still recommend that all owners have the added security of “Landlord Protection Insurance” as mentioned later in this portfolio.
We feel it is better that an owner has a vacancy rather than take on a tenant who does not meet our stringent criteria.
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DOCUMENTATION “A Continuing tenancy at a fair market rental will achieve a better return for an investor than a series of tenants at the highest rental obtainable”
It is our recommendation that properties be offered on a minimum six month lease basis. Most tenants are aware that rent will be reviewed regularly to current market rental. The Residential Tenancies Act does not allow us to insist that tenants enter into a new lease after the original lease expires. In this situation the tenant continues on a periodic basis and is bound by all the terms and conditions as contained in the original lease. At this point the market is assessed to determine rental adjustments. However, we prefer to have a new lease signed to provide security to the tenant and security to you our Landlord. The preparation of all documentation as required by the Residential Tenancies Act, throughout the duration of the tenancy, is completed by our office on your behalf. There are currently no less than 19 forms that are required by the Residential Tenancies Authority to be administered at certain periods during a tenancy. Each form has established procedures under which it must be completed and sent to the tenant. Failure to follow these procedures can result in substantial fines by the Residential Tenancies Authority and place your tenancy agreement in jeopardy. Our company ensures that these forms are completed and administered correctly to ensure that the tenancy at your property is not placed under any degree of risk.
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DOCUMENTATION Continued… Without argument one of the most important documents regarding any tenancy is the Tenancy Agreement. We ensure that this agreement is completed correctly in accordance with our owner’s instructions - so long as the instructions are not outside the act - and in accordance with the Residential Tenancies Act, to prevent any possible escape by the tenant due to poor document preparation. The other important document is the entry condition report. This means staff go out to a new property in to the rental pool and write a detailed condition report which is added to or amended in between tenants. This document is important to both landlord and tenant. We have listed below some of the documents which may be required during a tenancy: Entry & exit condition reports Bond lodgement form Transfer of bond Application for refund of rental bond Entry notice Notice to remedy breach Notice to leave Notice of intention to leave Dispute notice Abandonment termination notice Mediation notice Tenancy Lease agreement
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RENTAL PAYMENTS
Mackay Rentals is a cashless office; we have different systems for tenants to pay their rent. Every tenant is issued with either a Cosmos Rent or Rental Rewards Card allowing our tenants to make transfers in relation to rental payments by telephone or internet 24 hours a day. Not only does this give added flexibility in the local area, it means that payments can be made when the tenants are away out of town or on leave. All tenants on Centrelink payments are given paperwork to allow Centrelink to pay us direct from their payments or by direct debit. As well as being beneficial and more flexible for our tenants, it also means our Property managers have more time to devote to the management of your property, providing a better service to you. We take particular care and considerable time in our tenant selection process. By adhering to our strict policy of not accepting any tenant who does not meet our stringent criteria, we have minimised rental arrears by printing daily arrears from 4 days and over. However regardless of the care taken, occasionally tenants fall into arrears.
When this occurs a set procedure is instigated which includes: 7 Days Overdue – A Notice to Remedy Breach is issued and the tenant is given 7 clear days to remedy the breach and two days for postage. 16 Days Overdue – A Notice to Leave is issued. At this point we contact the owner by phone to advise them of the situation. If the tenant fails to pay rent and/or vacate the premises when the Notice to leave expires, an urgent application to the Small Claims Tribunal is made to seek a Termination Order and a Warrant of Possession.
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MARKETING
“Advertising in the daily newspapers is only one part of our marketing Programme to assist in obtaining tenant enquiry.” Mackay Rentals market your rental property to as many potential tenants as possible via: Daily updates of our website which includes photos of properties Comprehensive vacancy list with photos for tenants to browse through Tenant Rental Register – this register provides us with a continual source of prospective tenants High profile building ensuring that Mackay Rentals are at the forefront of all property matters Specific detailed advertising on your property when necessary at minimal cost Property Management advertisement every week to ensure that all prospective tenants call us for their rental needs Personal professional handling of all tenant enquiries by qualified staff
We believe that by maintaining a firm but pleasant approach to tenants they will be inclined to renew their lease thus reducing the level of turnover
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RENTAL STATEMENTS
At Mackay Rentals we do more than just collect the rent. We can also take care of payments relating to your property and account for them on your statements. These are some: Body Corporate Levies Insurances Repairs and Maintenance Your statements will be prepared after the last payment of each month. Payment of your rental funds fortnightly are made direct to your bank account by electronic funds transfer (funds are available immediately). An annual statement summarising all income and expenditure is prepared at the end of each financial year to help simplify you records for taxation purposes. By providing us with your e-mail address these statements and any invoices paid can be emailed to you on the same day.
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ROUTINE INSPECTIONS
Regular routine inspections are essential to the effective management of residential property. At Mackay Rentals we believe there must be a fair balance between regular inspections, ensuring the tenant is holding their responsibility to care for the property, but not to inconvenience the tenant who is displaying a high level of responsibility and care. Consequently, we have a program with the first inspection taking place three months after the tenants take possession. Then a follow up inspection is carried out every 14 – 16 weeks. This interval between inspections may vary slightly, depending on the requirements of the owner, and of course the nature and history of the tenancy. If we have concerns about a tenant we may inspect more regularly. If we have a long-term tenant in place who has proved to be maintaining the property well in the past, we may inspect less regularly, allowing the minimum of disturbance to the tenant, we guarantee to do a minimum of 3 inspections every year. A number of areas are addressed during our routine inspections, which can be summarised as follows: A report is sent to the owner outlining the general condition of the property and the manner in which the property is being maintained by the tenant Discussion with the tenant of any areas which require attention or improvement Any maintenance noted at the inspection will be discussed with owners within 48 hours Recommendations of maintenance for future improvements Regular feedback to yourself
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REPAIRS AND MAINTENANCE
To ensure your receive the maximum return on your investment, it is essential that repairs and maintenance are completed as cost effectively as possible. So whether you provide us with a limit of expenditure on your behalf, or you wish to be contacted before any maintenance is ordered, we will follow your instruction as detailed in our management agreement, as well as required by the Residential Tenancy ACT. At Mackay Rentals we are constantly monitoring the performance of our contractors, in terms of cost, service, and quality of work performed. We are therefore confident that the contractors we have selected are the best available for the maintenance of your property. Each contractor employed by our company is required to complete a Real Estate Institute Contractor Appointment Form. This agreement ensures that the contractor is licensed in his field of operation, carries the required insurance cover, and agrees to make good any defect or omissions from authorised work. Should you have selected contractors of your own that you wish to use, we can also accommodate this requirement, provided the contractor is able to provide us with the necessary documentation to complete the Contractor Appointment Form.
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PROPERTY MANAGEMENT INFORMATION Answers to Questions Often Asked by Owners Who are Considering Leasing Their Property. This has been compiled to give a general idea about what is involved in leasing your property, your responsibilities as well as that of the tenant and your agent. We hope you find the following information to be a useful guide for future references. Mackay Rentals would be pleased to manage your property. We pride ourselves on our standard and range of services. Should you have any queries, please do not hesitate to contact us. Selection Of Potential Lessees Potential tenants wishing to rent a property must apply by completing an Application for Tenancy Form. Information provided on this form includes current and previous rental history, employment history, next of kin and referee details. The applicants are required to supply proof of their identity and all information provided on this application is verified as completely as possible. Our policy is to advise the owner of all applicants for tenancy, to discuss our recommendations and receive your input in the selection process. Tenancy Agreement Once an applicant has been approved they are required to sign a Residential Tenancy Agreement prior to possession of the property. Security Bond A bond equal to four weeks rent is paid by the tenant prior to possession of the premises. The bond is lodged with the Residential Tenancy Authority and is released at the end of the lease. A detailed assessment of the condition of the property is completed by the property Manager prior to the release of the bond. Property Inspections An initial inspection is completed prior to the tenant occupying the property. An inspection is conducted after a “settling in” period to evaluate the tenancy usually at 3 months. Assuming all is well, then further inspections will be carried out in 14 – 16 week intervals unless otherwise agreed, we guarantee to do 3 Interims per year.
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RESPONSIBILITIES OF THE OWNER
The property should be provided in a state of cleanliness and good repair. The tenant is required to maintain this initial standard. Whatever expectations you may hold for your tenant needs to be evident from the start. For example, the carpets must be professionally cleaned prior to tenancy, and in return the tenant is responsible to professionally clean the carpets on vacating. It is unreasonable to expect the tenant to professionally clean the carpets when the premises were not originally supplied in this condition. Properties which are clean and in sound condition are more readily sought after by potential lessees, and generally will command a higher rental. The premises must also comply with all health, building and safety regulations. Mackay Rentals has a number of contractors and tradespeople who have proved to be competent, experienced and knowledgeable in their respective fields as well as timely in their reaction to our repair and maintenance calls. In authorising your agent to act on your behalf you stipulate an amount for repairs (usually $200) up to which the agent may perform without your approval. Mackay Rentals will endeavour to keep you informed of all work required prior to authorising the repairs. Maintenance and repair costs are tax deductible. Your accountant should give you more information on this.
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RESPONSIBILITIES OF THE OWNER Continued… Recommendations to assist in maintaining the value of your investment and assist the tenant to maintain your property standards: Gardening – if there is substantial lawn area the owner may consider whether contributing to the water consumption costs to ensure the lessees water the garden or alternatively supply a gardener to mow and edge the lawns on a regular basis. The garden must be maintained, any lapse is immediately noticeable and must be rectified before long term neglect has set in. The cost of the gardener is deductible. The gutters should be cleared prior to letting the property and then once or twice each year. Trees and shrubs that are over shoulder height should be pruned at least once a year, particularly prior to winter if there are any large trees close to the house. Where possible a percentage of the rental income should be set aside to cover anticipated future maintenance requirements. E.g. Painting. Instructions on the use of appliances and any valid warranty details should be supplied to the agent and communicated to the tenant to ensure correct usage.
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BENEFITS OF PROFESSIONAL PROPERTY MANAGERS
Our PROTECTION OF YOUR LEGAL POSITION with our knowledge of the Residential Tenancies Act & Regular Training. We have Market knowledge in respect to rent appraisals and rent reviews, which mean YOU get the best possible return on YOUR investment. Access to potential lessees and the means to effectively screen lessees through our network of available sources. Inspections – Our property managers are trained to report in detail the condition of the home and have the expertise and experience to help you maintain the property at a satisfactory standard. Accounting –Our office supply accounts and details of all income and expenditure relating to the clients property. Taxation Benefits – Properties purchased for investment can attract significant taxation benefits. Property management fees are tax deductible. Your time is valuable, No direct contact between the owner and lessee avoiding possible personal conflicts. Access to Landlord Protection Insurance.
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INSURANCE It is a requirement of the management agreement for all landlords to have building insurance which also includes liability or legal risk providing cover with a minimum of 10 million. The insurance company must be notified that the property is a rental, so therefore needs a content cover for inclusions e.g. curtains, carpet etc. Landlord Protection Insurance There are a number of companies who provide Landlord Protection Insurance. One we have found to be reliable is Terri Sheer. Leaflets can be found in your pack. Weighing up the risk associated with not having insurance cover on your property, against the cost of premiums per year leads us to recommend that all owners undertake the Landlord Protection Policy currently available through out agency. Examples of what a Landlord Protection Policy should have: Loss of rent by default, departure or extensive damage by tenant, to the value of between 6 and 52 weeks rent after the bond is exhausted. (Depending on the circumstances). Legal expenses relating to defaulting tenant up to $5,000. General contents cover to $50,000. Malicious damage and theft to buildings to $50,000. Legal liability of owner to $10,000,000 These policies cost approximately $250.00 per annum, with discounts available for five or more properties on the policy. Mackay Rentals receives a small administration fee for the sale of this policy and all details can be obtained from your property manager. As noted on the management agreement from July 04 the new FPA Act came into force which states that we are not allowed to answer any questions in regards to insurance.
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DEBT COLLECTION
BARCLAY MIS LANDLORD DEBT COLLECTION PLAN 1. Tracing and Location of Defaulting tenant 2. Raising of Court Summons 3. Serving of Court Summons 4. Obtaining Judgement 5. Raising of Oral Examination 6. Raising Garnishee Summons 7. Serving Garnishee Summons 8. Raising Warrant of Execution 9. Having Warrant Executed 10. Barclays Covers the Recovery of Debt
We find the above has a success rate of approximately 80%
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TAX INFORMATION “Tax Smart Investing” Property Investors, home buyers and sellers. (Extracts taken from a free brochure available from the tax office) Acquisition You can acquire a property: By Buying By Inheriting As a prize As a gift Of the breakdown of your marriage Ownership The following activities can affect your tax: Renting out your property Improving or repairing your property Subdividing your property Having a home office or business What you do during each stage of the life of your property can affect your tax for years to come. Buying Do you know? The names you put on the purchase contract determine who must declare any income and can claim the expenses. Costs associated with buying your property may be tax deductible or may be included in the capital gains tax ‘cost base’ (cost of ownership) when you sell the property. The date you enter into the contract, not the settlement date, is your date of purchase for capital gains tax purposes. You need to include all of your rental income in your tax return. Tax deductions on a rentals property can include rates, interest, insurance, management fees, depreciation and deductions for capital works. The difference between repair and improvement can affect the amount of your tax deduction. Running a business from home can make you liable for some capital gains tax when you sell. When you dispose of a property you could be liable for capital gains tax. If you have owned your property for more than 12 months you may be able to reduce your capital gain by the 50% discount. Simply transferring the property into someone else’s name may mean you have to pay capital gains tax. Capital gain is the difference between your “cost base” (costs of ownership) and your ‘capital proceeds’ (what you receive when you sell).
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TAX INFORMATION Continued… “Tax Smart Investing” Property Investors, home buyers and sellers. (Extracts taken from a free brochure available from the tax office) Rental Expenses You can claim a deduction for certain expenses you incur for the period your property is rented or available for rent. However, you cannot claim expenses of a capital or private nature – although you may be able to claim decline in value deductions or capital works deductions for certain capital expenditure or include certain capital costs in the cost base of the property for capital gains tax purposes. Types of rental expenses: Expenses you can’t claim Expenses for which you are entitled to an immediate deduction in the year you incur the expense, and Expenses which are deductible over a number of income years.
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DEPRECIATION REPORT
Maximise your Tax Deductions on your investment thought a Property Tax Depreciation Report compiled by a Qualified Person. What you will receive: A Property Tax Depreciation Report will include the following components: An executive summary of results achieved; A statement of qualifications and methodology; A detailed description of improvements; A schedule of Diminishing Value Method of Depreciation; Schedule of pooled items for the property – that is, items allocated to a low-value pool (which generally comprises items costing less than $1000); Division 43 building write off available for the property which will include, if applicable Common property items within strata or community title complexes such as lifts and swimming pools for a unit in a multi-unit development; A detailed 10 year forecast table illustrating all depreciable items (together with building writeoff) for both Prime Cost and Diminishing Value methods, see example attached; and Comparative tables of the two methods of depreciation.
The report will increase your Tax Deduction on your Investment Property.
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FOR COMPLETE BODY CORPORATE MANAGEMENT The Services we Provide: Financial: Budgets on which to base forthcoming levies Regular levy notices issue and follow up of overdue levies Prompt payment of creditors Annual income and Expenditure Statement Detailed Sinking Fund Budgets (As required under the Act) Banking of Income Accurate reliable accounting system Secretarial: Accurate reliable maintenance of the Body Corporate Roll Convening General Meetings Preparation of Certificates for Solicitors Attendance to Body Corporate Correspondence Arrange quotations for maintenance Attending Body Corporate General Meetings Maintain the body Corporate Roll Preparation and distribution of notice, agendas and minutes Preparation and distribution of financial statements and budgets Annual income & expenditure statement Attending to insurance claims Enforce the Body Corporate By-Laws Advise the Committee on matters relating to the legislation Carry out all secretarial duties in relation to the Body Corporate Pay all accounts and balance the books of the Body Corporate monthly Preparation and distribution of contribution notices Maintaining the Body Corporate bank account Preparation of Certificates Maintaining all registers required Attending to Taxation Returns Attending to Workers Compensation Policy renewals
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SUMMARY
We firmly believe at Mackay Rentals that the duties and tasks of your Property Manager as set out herein are a role for a specialised department with trained personal. **************** The competence of your Property Manager to carry out their job efficiently and effectively will have a dramatic effect on the profitability of any investment property. **************** We trust that you feel that Mackay Rentals can provide you with the best available service in the most professional and personal manner.
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