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Tuesday, 9 July 2019

Turning home into a rental

Let's start with the obvious - turning your home into a rental is hard.

First, there's the moving out - we all know moving is hard, but add into that wanting to leave the place in perfect condition because any tiny smudges are still your problem.

Then there's sprucing the place up - this can start before you move out but some of it just needs to wait until you're out. Before we left we were able to patch up dodgy light switches, cracked walls and damaged door frames that we were used to but the tenants would definitely not tolerate.

Once we moved out we shelled out for a professional clean, painting, new lawn, fresh bark for the front yard and a new smoke alarm. To make things more exciting the cleaners did such a poor job that the rental agency got them back (at no cost thankfully) to have another go...

For the two months between moving out and having tenants move in I was at the property three or four times a week - watering the lawn, weeding the front yard to keep the curb appeal up, letting tradies in and out, flicking lights on and off to make it look like people lived there...

On the 24th of May the tenants finally moved in, putting an end to two months of stressful back-of-my-mind worry. Finally I had rent coming in.

Three days later I received multiple maintenance requests with an estimated cost of three months worth of rent.

Get yourself a good agent

This is my second rental and I cannot stress enough how good a good agent is. I rarely hear from my first rental property - the rent comes in twice a month, and every six months I receive an inspection report stating the property is in good shape. Each year we renew the lease, I offer a quality of life upgrade and then sink back into obscurity.

So far the agent for my new rental has been excellent. They've sent me multiple updates as the tenants settled in, negotiated a higher rent when the tenants requested pets, and organised quotes for the maintenance requests that came in well under the expected amount. Thanks to their actions I'm comfortable with the tenants (so far) and will be receiving a rent payment before the end of the financial year - after paying off all the repairs and upgrades.

Lock away your keys

Once the property handed over, lock away your keys. The agents were kind enough to send me photos of how the tenants have furnished the property, but now that I am comfortable it's in safe hands I want nothing to do with the property. It's not a passive investment if you are actively involved.

I still have a set of keys to the property if anything untoward happens, but unless there is an emergency, I don't want to think about it.

Paperwork and Necessaries

Disconnecting from a property is a pain in the... here's some tips:
  • Switch every correspondence you possibly can to email - it will make it easier next time
  • Pay for a mail redirection. It's worth it, especially to avoid paying late fees on bills that went astray
  • Switch your insurance, and then get more - you need landlords insurance and home insurance. It cost me a couple of weeks worth of rent, and it's definitely better to be safe than sorry.
  •  Call the utility company - turns out gas and electricity companies are useless at disconnecting a service. The idea that you might want to be connected for two properties at once is especially baffling to them. Get them on the phone, because their online services wont cut it.
  • Make the agent do it - everything you can possibly lump on the agent, do it. You're paying them for it, so make sure you get your moneys worth.

Automate everything, and enjoy

In hindsight, turning our home into a rental wasn't as much of a chore as expected. The hardest part was moving houses - especially since our new house wasn't quite ready on the only weekend we had free.

Once we had moved, the biggest chore was watering the newly installed lawn. If not for that task, I could have visited the house less often while waiting for a tenant to arrive.

Now that we've moved out, and the tenants have moved in, all payments are being funneled through the agent. They manage repairs, they pay my bills, and they collect my rent. Two a month they pay the rent into my offset account, and my mortgage payments are automatically drawn from there.

At the end of the year, the agents will send me a tax report. I already have a depreciation schedule arranged. All of the heavy lifting is now being done for me, and I just get to sit back and watch the money roll in.

For the 2019/2020 tax year, I'm expecting to bring in enough to cover the mortgage, and most of the bills. By the time of my retirement goal (February 2026) this house alone should be paying for itself, and covering 10-15% of my desired retirement income.

Not bad for moving into a nicer house and a couple of months work.

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