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Publication last updated 7 April 2021
Buying a property to rent out is a popular form of long-term investment in Australia. Before deciding to take on a rental property you should consider its value, how much it can earn, the cost of managing and maintaining the property and make a commercial decision based on current and predicted market conditions. Many would be property owners routinely overestimate the potential income and underestimate the costs of managing and maintaining a rental property.
Under residential tenancy laws, property owners have to ensure the property meets minimum standards of safety and security for tenants. You will need to keep any items in the property inventory such as dishwashers, heaters, pool pumps and air conditioners in working order. You will also have to arrange emergency repairs within set timeframes as well as maintain and repair the premises in a timely manner. Property owners should ensure they understand and allow for the cost of routine and one-off maintenance and repairs, as well as any loss of income when there is no tenant renting the home.
If you do not properly maintain your rental property, it could reduce the income you can generate and/or be less attractive to potential tenants. While there are no set rules on monthly maintenance costs for rental properties, some lenders suggest a property owner allocate two per cent of the property value annually towards maintenance costs.
See ASIC’s MoneySmart website for more information.
Costs of owning an investment property may include:
Include expenses such as:
Tenants and owners have rights and responsibilities under residential tenancy agreements. These agreements are regulated by the Residential Tenancies Act 1987. Understanding your rights and obligations as an owner, will help avoid problems and better manage your costs.
It is unrealistic to think that you will not have to replace major cost items such as carpets at some point simply due to wear and tear.
Remember that should a tenant damage carpet or other item to the point that it needs to be replaced you can only ask them to pay the depreciated value – not the full cost of replacement. You can use the ATO’s effective life of depreciating assets taxation rulings to estimate the lifespan of fixtures and fittings.
In general, property owners are responsible for keeping the property in good condition and fit for a tenant to live in. The tenant is responsible for looking after the property and keeping it clean and free from damage. For a full guide to tenancy laws in Western Australia see Renting out your property – a lessor’s guide.
As a property owner renting out your property, you are required to ensure that minimum security is in place.
Ongoing maintenance by property owners is important as it can help prevent major works being required. Maintenance can help prevent health issues such as mould caused by water leaks or safety issues caused by corroded pool fencing or latches.
|Clean gutters of leaves/debris||Flooding and ceiling damage|
|Treat and fill rotten window sill||Window being replaced, carpet being replaced, wall being repainted|
|Flush and clean filters on evaporative air conditioners||Air conditioner being replaced prematurely and helps keep property free of mould spores|
|Prune large trees in the yard||Damage to roof and fences from fallen branches|
|Remove plants that can affect drains||Flooding, plumber being called repeatedly to unblock drains|
|Mend cistern||Damp walls causing mould to grow, needing to re-tile bathroom|
|Mend damaged roof||Carpet replacement, roof collapse|
|Reseal around kitchen sink||Flooding, cupboard damage, floor damage|
If you have a green title property, where there are no common areas that are shared, you will be responsible for the repair and maintenance of the whole property. In the event of external damage caused by natural disasters, such as flooding or storms, you may be able to claim on your insurance for repairs depending on your policy. Contact the insurance company as soon as you can if you think you will make a claim before the work is done. Make sure you take photographs of the works and damage to help when lodging the claim.
In a strata titled property, where you have ownership of cubic space and there is common ownership of land and buildings, the strata management company will look after most of the external maintenance. As an owner, you will be charged pro-rata for these works in your strata fees.
From time-to-time, a one-off payment (in addition to the strata levy) may also be charged. This may be to cover emergency or irregular maintenance work such as a replacing a lift or painting the external walls of the building.
The strata manager will communicate these charges at the annual general meeting of owners and you would normally have a set period to query the quotes before the works go ahead.
Generally, strata fees do not include any interior maintenance of the property. Interior wall painting, cleaning or replacing carpets, unblocking pipes, replacing locks, mending showers, replacing dishwashers, air conditioners or other appliances remain the responsibility of the property owner.
You must anticipate your investment property’s monthly maintenance costs. Owners should take into account the property’s age and set aside sufficient funds to cover emergency repairs, rental vacancies, and capital replacements for items such as air conditioners, heaters, pool pumps, stoves and hot water systems.
Consumer Protection encourages you to respond quickly when a tenant complains and reminds you that a qualified tradesperson should carry out all repairs. You can check if your tradesperson has the appropriate licence or find a licensed trades person in your area online. Be aware that if you do not carry out maintenance, or your property is empty for an extended period, it may not be covered for insurance purposes.
Fixtures are items that are attached to, or installed in the property, and include picture hooks, solar panels or a TV antenna. Inclusions are everything supplied with the property for the tenant’s use and include items such as a dishwasher or air conditioner.
The owner is responsible for ensuring their rental property is in a reasonable state of cleanliness and repair.
Usually tenants are responsible for small garden jobs, such as lawn mowing, edging and weeding. Major works, such as tree lopping, are part of the owner’s obligation to keep the property in good repair. You should list in the tenancy agreement any special arrangements about the maintenance of gardens and lawns, such as hedge maintenance.
The property owner is responsible for the property having a minimum level of safety and security in place.