Property investment remains one of the best ways to create wealth but success depends on much more than just property selection and location.
As with most homeowners, there are bills to be paid and mortgage repayments to make, so what happens if the tenant does not pay their rent on time?
It can be one of the worst headaches for landlords and as equally frustrating for the real estate agent in charge. A tenant who either hasn’t paid rent for weeks or a serial offender, who week after week seemingly makes the same excuses.
The reason that the rent hasn’t been received could be something quite simple and easily fixed, such as; simple forgetfulness, temporary cash flow problems or a misunderstanding between joint tenants.
Or it could be something more complicated and long-term, such as; a loss of job or income, couple separation or a tenant in ill health.
Whilst there are ligament reasons why a tenant might not be able to make their rental payments, the same excuse can’t be said when bills and mortgage repayments still need to be made on time.
So, What Are A Landlords Rights?
A good tenant can quickly turn into a bad tenant and can leave property investors thousands of dollars out of pocket.
As a landlord, you have the right to expect that the rent for your property to be paid by the due date in the way that was agreed on the lease.
While the legislation does vary across the country, if tenants have not paid their rent by the due date, they are considered to be in “arrears”.
If they are more than 14 days in arrears, a landlord has the right to issue the tenants with the relevant notices to vacate.
It’s an all too familiar sign that some of the countries biggest debt collection agencies are seeing an increase in the number of claims, a tough situation when investors are dealing with an ever-changing market, tougher lending restrictions and harsher tax rules.
Are You Protected?
One of the countries biggest landlord insurance providers, Terri Scheer Insurance, claims that 40 to 50 per cent of claims handled were for a loss of rent, and it was an all too familiar situation that tenants are causing malicious damage to a rental property after an eviction notice is issued.
It is important for property investors to have landlord insurance and know that you are protected if in the event that you find yourself in this situation.
If you think it won’t happen to you, studies show it’s not just tenants in the lower socio-economic regions who are to blame. High-income earning renters in affluent suburbs are also leaving investors high and dry.
Research also showed that one in eight Australian home-owners - about 13% in 2018 - have committed the cardinal financial sin of missing a mortgage repayment.
How To Avoid Getting Yourself Into A Pickle
It all starts before you take on a tenant.
Ensuring that you have the right Property Manager is key. A good agent will make sure the necessary, and imperative, checks are carried out before a tenant signs their lease agreement. Having the backing of a good agent is just as important as protecting yourself and your property with the right insurance.
A thorough agent with not only check their rental history but make sure your potential tenant doesn’t overextend themselves. It is likely that most agents don’t want tenants rent to exceed 30% of the tenants’ combined income.
Ensuring that you have a good line of communication with your tenant, by using the right agent, is an important factor. It might be worth considering a boutique agent who’ll put your needs first.
Plus, Our Best Advice For Tenants
Here is a scary thought, if you’ve ever rented at some point in your life, did you know you could be on a tenant blacklist without even knowing it?
Tenancy databases are privately owned lists which contain certain people’s rental history. One of the main ones being the Tenancy Information Centre of Australia (TICA).
If you’re on this or a similar list, in most cases it means an agent or landlord has reported that you haven’t complied with the terms of a lease.
The most common reason people end up on a tenant blacklist? Late rental payments.
Our biggest advice for you if you ever find yourself in a situation where you cannot make a payment on time is communication.
Radio silence can be a worrying prospect for a real estate agent and can set a landlords imagination, about what could happen to the property, into overdrive!
If you know that you may default or be late on an upcoming payment communicate if before it becomes a problem.
DEPARTMENT OF FAIR TRADING >> https://www.fairtrading.nsw.gov.au/housing-and-property/renting/during-a-tenancy/non-payment-of-rent
FLATMATES.COM.AU >> https://flatmates.com.au/info/nsw-landlord-termination