Is being a landlord right for you?

Being a landlord can be a coveted title. For some, having an investment property is a sign of accomplishment and an intelligent and sensible means of managing finances, investments, and your future. For others, it may feel like a lot of work, high costs, and difficult conversations for a distant reward.

The nuances and pressures of being a landlord aren’t for everyone. If you’re wondering if being a landlord is right for you, read on. We’ve spoken to some of our best and brightest experts in the field to get their expert opinions on all the things you need to consider before becoming a landlord.

 Is Being a Landlord Right for You?

Tara Bradbury from Active Agents, a principal leaser, real estate expert, and professional speaker, is also an expert in the Hervey Bay region when it comes to property management. Tara says, “As a seasoned property management specialist with over two decades of experience in the industry, I’ve seen firsthand the rewards and challenges of being a landlord. This role is more than just owning a property; it’s about managing a business and nurturing relationships. If you’re considering stepping into the world of rental property, here are some key points to ponder.”

Understanding the Market: Knowledge Is Power

Tara explains, “Hervey Bay, like any region, has its unique rental market trends. Understanding these trends is crucial. What type of properties are in demand? What are the average rental rates? Being informed helps in setting competitive rent prices and targeting the right tenant demographic.” 

A great way to stay ahead of the market is to keep an eye on for sale and sold prices in the areas you’re considering letting in. Set up a Homely Alert to be notified as soon as properties are listed, or save a Collection of those that have recently sold to get an idea of benchmarks in the area. Pro tip: You can also add rental properties to these to ensure you have an idea of what you can expect to recoup in terms of rent every week.

Financial Preparedness

Tara emphasises, “The first step in becoming a landlord is financial readiness. It’s not just about purchasing a property; it involves ongoing expenses like maintenance, repairs, property taxes, insurance, and possible property management fees. Ask yourself, are you prepared for these recurrent costs and potential periods of vacancy?” A good idea is to meet with an agent and discuss property management fees with their leasing team. Not only will you get an idea of what to expect you’ll also be able to put the feelers out for a good fit. 

Upfront Costs and Ongoing Expenses

Owning a rental property requires a significant initial investment for purchasing the property, renovations, and costs to bring the property up to compliant standards, as required by individual state legislation. Before you borrow to buy, have a chat with a mortgage broker about all the costs you might be up for first. That being said, many people find buying an investment property easier when they have a lump sum upfront and can park the capital in an asset with long term growth potential. 

You’ll need to cover property taxes, insurance, maintenance, and possibly property management fees if you’re getting an agency to help you. Talk to your agent about what to expect in terms of fees. This will also become a deciding factor on the type of house you choose, for example an older build might return higher yield however maintenance costs might be higher, whereas a newer build may cost less to maintain but, if it’s an off the plan apartment, you might nee to compromise on capital growth. Your financial advisor is a great place to start here.

Time Commitment

Being a landlord involves dealing with tenant issues, maintenance requests, inspections, and administrative tasks. Sophie Lyon, ex-Director & General Manager – Property Management at Jellis Craig and industry expert, advises, “Consider if you have the time and willingness to handle these responsibilities and to educate yourself when the legislation changes.”

Emergency Situations

You may need to address emergencies or urgent matters, even outside regular business hours. Tara notes, “Being a landlord is time-consuming. From advertising your property, conducting viewings, handling lease agreements, to addressing tenant queries and maintenance issues, it’s almost a full-time job. Assess if you have the time or if hiring a property manager is a viable option.”

Legal Responsibilities

Being a landlord comes with extensive legal responsibilities. If you’re not familiar with the laws or don’t want the potential stress of legal matters, it might not be the right fit. Understanding legislation is crucial to ensure you remain compliant. This includes lease agreements, maintenance, termination processes, and fair housing laws. You may also need to attend a tenancies tribunal hearing at some point to address or respond to situations that arise. Tara advises, “Familiarity with QLD residential tenancy legislation is imperative. This includes understanding landlord and tenant rights, lease agreements, bond handling, and eviction processes. Non-compliance can lead to legal issues and financial losses.”

Risk Tolerance

Real estate markets can fluctuate. Be prepared for the possibility that your property’s value may decrease, or the rental return affected. There may also be periods when your property is vacant, impacting your rental income, so a buffer is essential to protect you during these situations. However, with increased risk comes the potential for increased reward. 

People Skills

Dealing with tenants requires effective communication. If you’re not comfortable addressing issues directly or negotiating with tenants, being a landlord might be challenging. Tara points out, “Landlords need excellent communication and problem-solving skills. Managing tenant relationships effectively is key to retaining good tenants and ensuring a smooth tenancy. It requires a balance of firmness and fairness, especially in enforcing lease terms and handling disputes.”

Emotional Resilience

Tara remarks, “Property investment isn’t always smooth sailing. There can be challenging tenants, unexpected repairs, or changes in the market. Emotional resilience and the ability to handle stress are vital traits for a landlord.”

Maintenance and Repairs

Basic maintenance skills can be beneficial, but more often a professional is required to attend to maintenance needs. You’ll need to make sure you can meet the maintenance and repairs criteria expected of you. If you’re amazing at DIY, then that’s good news for your wallet – otherwise enlist the help of a great property management team who’ll be able to make sure the maintenance and repairs are taken care of.

Goals and Long-Term Plans

Consider if real estate aligns with your overall investment strategy and financial goals. Being a landlord is typically a long-term commitment. If you’re looking for quick returns or flexibility, other investments might be more suitable.

Tara observes, “Property investment is typically a long-term strategy. It’s about building wealth through capital growth and rental income over time. Short-term market fluctuations should not deter your long-term investment goals.”

Understanding the local real estate market is crucial. Factors like demand, rental rates, and property appreciation can impact your success as a landlord.

Finally, have a Strong Property Management Team

Collete Rowston, business owner from Raine & Horne Atherton, agrees, saying, “Property is one of the largest investments we can make; that’s why it must be managed professionally to help maximise your returns. A good property manager can provide trained staff, together with state-of-the-art systems and technology to help guarantee your peace of mind throughout your property investment journey. Your property manager should be able to provide clear and consistent advice relating to the leasing and management of your rental property.”

Tara’s Takeaway

Becoming a landlord is a significant decision. It requires financial acumen, market knowledge, time, people skills, legal understanding, emotional resilience, and a long-term perspective. If these align with your capabilities and goals, then becoming a landlord could be a rewarding venture for you. It’s essential to do your research, understand your financial situation and really evaluate your willingness to take on the numerous responsibilities and risks associated with property ownership. If in doubt, a financial advisor or real estate professional is an invaluable asset to have on side, providing specific insights tailored to your personal wants and needs.

Ready for the challenge of being a landlord? Start your search on Homely