What am I liable for as a landlord of a residential property?
One of the most common things we hear from new landlords is that they did not realise what they were financially responsible for with regard to their rental property. The costs for a rental property can be broken down into three categories mandatory costs, general practice costs and negotiated items. When purchasing an investment property it is important to factor in all of these expenses to accurately calculate your overall return.
The landlord is solely responsible to pay for the council rates, water rates and any Owner’s Corporation Fees. It is often a common mistake by landlords that the tenant is responsible for paying for the water bills. Tenants are only responsible for the water usage (and only if the water is separately metred) and the Landlord is responsible for the water rates.
There will also be the professional fees of your property manager to consider. This is usually a monthly percentage as well as charge for a new lease and other incidentals.
General Practice Costs:
If the property is not governed by an Owners Corporation, the landlord should also ensure they have a comprehensive building insurance policy. All landlords should also consider taking out a landlord’s insurance policy that covers items such as contents (window and floor coverings), loss of rent, damage by tenants and public liability. It remains the responsibility of the tenant to insure their own personal contents, and to ensure they have adequate cover.
The landlord is also responsible for maintaining the smoke detectors within the property and ensuring they are in working order as well as servicing gas appliances. We recommend engaging the services of a professional servicing companies for a small fee. There are various legal requirements pertaining to the safety of these things and they can ensure your legal obligations are met, moving this responsibility off the landlord’s shoulders.
If the property has a swimming pool, spa or large garden typically the tenant will be responsible for ensuring these are kept in a reasonable condition along with the rest of the property however it’s an option to include caretaking in the rent. This can attract more potential tenants to your property and will guarantee you that the gardens or pool are well cared for throughout the tenancy and not neglected by tenants.
If your property is partly or fully furnished, you are responsible for the maintenance of all white goods and/or electrical equipment left at the property, and to ensure these are kept in working order. If something breaks down and not repairable you must replace like with like which is another cost to consider for landlords.
Most of the fees and maintenance costs for an investment property are tax deductable along with the interest on your loan payment and it is always our recommendation to ensure you have an experienced tax accountant to ensure you maximise your return.