Many of the property owners we work with tell us how much they appreciate the guidance we provide when it comes to understanding their insurance requirements, general wear and tear as well as major refurbishment expenses and other items they should allow for that may not have even occurred to them.
Budget planning is important as landlords are required to have sufficient funds to meet their obligations for repairs on their rental property, without needing to recover the costs prior, such as via an insurance pay out or claim against a tenant.
Understanding the costs and expenses for property repairs that you need to cover as a landlord, and those which your tenant is liable for, helps to ensure that you don’t get caught with a budget shortfall.
A tenant is only liable to pay for damage to a rental property that was caused intentionally or carelessly. This means that as a landlord, you will need to pay for repairs that fall outside of this, such as fair wear and tear e.g., worn carpet through use over time.
If the damage was caused carelessly by a tenant, and your rental property is insured, a tenant’s maximum liability is limited to the lesser of the insurance excess or 4 weeks rent. However, the landlord must prove that this loss has occurred, and whether the repairs were an improvement on the previous state (betterment) will also be considered. For example, if a patch of wall is damaged by a tenant and needs to be painted, you cannot claim repainting the whole room, or the whole house, as a cost of damage against the tenant.
Generally, damage is checked with the use of condition photos and lists, which prove the state of the property and any provided furniture or appliances before the move in date.
At Quinovic, your property manager will manage all of this for you, which will help to keep your budget on track for anticipated property maintenance expenses.
If the property can still be let while repair work is being completed, such as if the property repairs are cosmetic and the property is still functioning, the landlord is not able to claim for loss of rent. It is expected that there will be down time between tenancies, and this is a cost that a landlord is expected to be prepared for and have budgeted for accordingly.
Like your own home, there will be times, even with the best tenant in place, that you need to budget for maintenance. From small things, like gaps in doors and windows caused by normal use that need draft stopping, through to a hot water cylinder or dishwasher repair or replacement, you need to budget for these events.
It’s important for landlords to ensure they have insurance cover for their property and that this cover is specific to a rental property. Paying the insurance premiums is the landlord’s responsibility so they will need to factor this into their budget. Insurance policies will differ as to what they cover, but they may cover items such as damage by tenants or periods where their property is vacant. It’s best to carefully review your insurance policy so you are clear on what’s covered. While landlords should have insurance to protect their property against damage, tenants need to take out their own insurance to cover their personal belongings.Tenants may also want to consider personal liability insurance which is often included in tenants contents insurance and should cover the landlord's excess.
It is beneficial to have a good understanding of your tax obligations and deductible expenses in regards to your investment property.
Since 1 October 2021, new interest limitation rules apply that relate to phasing out the ability to deduct loan interest from rental income, which may impact you. Conversely, if you purchase a new build rental, the interest limitation rules do not apply and they are transferable when you sell to a new owner and there is a shorter brightline period.
Trusted with over 100,000 tenancies for the last 35 years, we have helped many of our property owners with advice on how to effectively plan their rental property budget, and what their responsibilities and obligations are as a landlord. Get in touch with your local Quinovic office if you would like to speak to us more about this.
