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Managing and renewing a tenancy

 

2020 has had a significant impact on all aspects of the Australian economy, though the full ramifications are still playing out. Job losses and/or reduced work hours are pulling rental prices down as tenants are forced to find cheaper, or alternative accommodation. There’s also likely to be an oversupply of rentals on the market, which will also impact rents moving forward.   

 

If you’re one of the 2.5 million landlords who own a residential investment property, you and your property manager are going to need some measure of flexibility in dealing with the unprecedented challenges that 2020 brings. These include: 

 

  • Determining your own financial position
  • Managing tenants with financial hardship
  • Renewing tenancies in a tough market
  • Marketing your property effectively to limit vacancy

 

If you’re a Westpac customer and personally need financial relief, talk to us about this as soon as you can. Here at Westpac, we’re allowing our eligible investment property customers to make changes to their home loan or ‘pause’ their loan repayments. There are also concessions available for landlords in some states, with Victoria offering a $500 million Land tax relief package for landlords who offer rent reductions to their tenants. This is also the time to contact your landlord insurance provider for clarification around their policy criteria – and what exactly you’re covered for. 

If your tenants are struggling, you or your property manager should chat with them to explore a solution to their circumstances. This could be a short/medium term rental reduction, assuming your own finances allow this. Some tenants might even ask to end a lease due to financial distress. Evidence of this can be in the form of proof of job termination/stand-down, loss of work hours or proof of Government income support.

 

Overall, tenants not experiencing financial stress are generally expected to honour their rental agreements. You may want to reach out to them and make them aware of any government financial assistant packages designed to help with their short-term financial commitments, like rent payments.

 

If you are considering an eviction, ensure you’re aware of any temporary freezes (moratoriums) on evictions, which vary from state to state. 

Government financial assistance for tenants includes the:

 

 

Individual states and territories have also produced assistance packages specifically aimed at tenants. Check if your state has a ban on evictions.  

 

If your tenant’s lease is up for renewal in the near future, you need to be strategic and aware of the current dynamics of the market.

If you have model tenants who pay their rent on time and look after your property, it may be in your best interest to extend or renew the tenancy agreement, to avoid having your place vacant. After all, vacancy costs from loss of rental income and the cost of finding new tenants could add up very quickly.

 

If you’re unsure how to best manage renewing a tenancy in the current market, an experienced property manager with local market knowledge can help. 

We are in a renters’ market, with CoreLogic reporting that the number of rental listings have risen sharply in some inner city locations. With the wider market also expected to experience oversupply, it’s critical you market your property effectively.  

With an oversupply of properties on the market your listing really needs to stand out.

 

So the overall quality of your listing on Realestate.com.au or Domain is crucial to ensure your property impresses and features in the search results. This means having a premium listing, quality images – and a virtual video or VR walk-through inspection, to cater for viewers who can’t be there in person.

 

You could also consider offering a shorter-term lease (6 or 9 months), for the flexibility to review the rent sooner, rather than the standard 12-month term. In a renters’ market, your tenant may request for a rental price that’s under the listing price. Here, an experienced property manager can help you negotiate a fair price, so both you and your tenant achieve a win-win outcome.

 

One strategy is to focus on the quality of tenant, rather than achieving the highest possible rental price, and ultimately supporting your tenants through these uncertain times.

 

Things you should know

Westpac is not responsible for the content of any third-party website to which links are provided from this article. Westpac does not endorse or control these third-party websites and is not responsible for any products or services taken up with them.

 

This information is general in nature and has been prepared without taking your objectives, needs and overall financial situation into account. For this reason, you should consider the appropriateness of the information to your own circumstances and, if necessary, seek appropriate professional advice. © Westpac Banking Corporation ABN 33 007 457 141 AFSL and Australian credit licence 233714.

 

References:

https://www.corelogic.com.au/news/which-rental-markets-are-most-impacted-covid-19

https://www.fairtrading.nsw.gov.au/__data/assets/pdf_file/0006/832623/COVID19_Rent-Arrears-or-Charges_Flowcharts_v2.pdf

https://www.rentcover.com.au/info-centre/government-initiatives-for-landlords-covid-19

https://mcusercontent.com/5cba65f23d61f0ea1cea2d655/files/5c6f7a29-75a6-4d95-9d21-d86f7cbd1c20/PICA_Member_Guidance_on_Residential_Tenancy_Management_during_Covid_19_Pandemic.pdf