Not only have landlords faced years of stagnant rents, but the recent crash in rental prices as a result of COVID-19, has been particularly galling. As frustrating as the current circumstances are, the key for landlords now is to ensure that they make good decisions in bad times to help ease their financial burden.
To assist, we have put together 6 tips to assist landlords during COVID-19.
Tip One – Stay on top of changing legislation – many aspects of the Tenancy Act have been changed since March 2020, in order to deal with COVID-19. Most of the legislative changes have been aimed at benefiting or giving relief to tenants in their time of need. Before making any decision to accept a lease application, terminate a lease, sell a property or book a tribunal meeting to resolve a dispute, you should ensure that you and/or your Property Manager are familiar with the current legislation and how it relates to your circumstances. Your Property Manager is not responsible for the change in legislation, but they are responsible for remaining updated and keeping their clients updated of any changes in legislation.
Tip Two – Avoid leaving your property vacant – the main enemy of landlords in any market is vacancy, not a lower rent. Landlords that refuse to accept the market drop in weekly rents due to COVID-19, ultimately may have their properties sit vacant for some time. There is evidence that rents are down 15 to 20% in some segments of the housing market. The smartest thing a landlord can do now, is to accept and respond to this immediately. It is much better to receive 80% of a property’s former full value, than to receive 0% of its full value by holding out for a higher rent in the next week or month.
Tip Three – This will pass… – the rental market will improve and rents should return to normality sometime in the future – it is just a matter of when. The rental market acts a little differently from the sales market. In sales for example, if you drop the selling price of your property and make a sale, you don’t get a second chance to sell your property for a higher price in an improved market. For rental properties though, if you reduce your weekly rental price to secure a good tenant during COVID-19, you will be able to increase the rent again in the future when both the market and the economy improves. Lower rents are a ‘for-now’ thing, not a ‘forever’ thing.
Tip Four – Maintain maintenance and keep investing in your investment – tenants are more likely to vacate properties which are neglected, particularly in a soft market when there is an excess of available rental stock. Vacancy rates are currently at record highs in many suburbs. If a tenant vacates, the landlord may have to lower the rent when they re-let it. In addition, they will have to pay for advertising and leasing costs and may even have to accept a lesser quality tenant. It is best to try and avoid these situations by maintaining your property well.
Even in this current COVID – 19 climate, good maintenance is still a financially sensible thing to do. Treat the money you put into your investment property as an ‘investment’.
Tip Five – Renew the lease – when the lease term is due for renewal, update the lease and recommit the tenant. In a falling market, tenants are far more likely to vacate a property if they are in an expired lease. Many landlords are reluctant to enter into a lease renewal negotiation because the tenant may ask for a discount. This is an understandable concern. However, if you don’t maintain control of the lease term, Murphy’s Law says that the property will become vacant at the worst possible time. The worst possible time to have a vacant investment property is December. Not many tenants want to take up a new lease just before Christmas.
Furthermore, not every tenant will be looking to take advantage of the COVID-19 situation. The hassle of finding a new place and moving, in order to save a few dollars each week, is simply not worth it for many tenants. Many tenants will be happy to negotiate a lease extension in good faith.
Tip Six – Develop a good working relationship with your Property Manager – make it easy for your Property Manager to communicate with you and give feedback about your property, tenant and facts about any changed legislation. In this environment, landlords and Property Managers need an open and professional relationship in order to successfully navigate a way through the unprecedented challenges which have emerged from COVID-19.