If you’re planning to purchase a property as an investment, it pays to know how to attract and retain tenants. And it isn’t always straightforward or obvious – it’s a combination of buying the right property, adding the right features and treating your tenants well. Here’s how.
Buy a property that tenants want
- Get the location right: Location is the first thing renters consider. Being close to work or easy transport to work is their number one concern. If your tenants are likely to be families, they will also want to be close to good schools, or within easy reach of them. Proximity to shops, cafes and restaurants, parks, swimming pools and beaches all rank as considerations for renters.
- Cater to their needs: The right number of bedrooms usually ranks high on the list for renters; the house must be big enough, but they don’t want to pay for rooms they don’t need. Of course, the number of rooms depends on your target market. Families tend to like three to four bedrooms, whereas couples tend to prefer one or two An extra space for a study or playroom is also appealing. Other features that renters look for include lots of sunlight, a user-friendly layout, and a modern kitchen and bathroom.
- Include ‘extras’: Everyone likes to think they are getting a bargain or even a freebie. Not only that, most people don’t want to take on extra jobs, particularly when they are looking after your house. Consider including garden maintenance, pool maintenance, or free wi-fi or Foxtel; this can clinch the deal if renters are tossing up between several properties.
Keeping tenants and maintaining rental income
There are some things that may not have been obvious to your tenant when they signed the lease, but they can become tedious and annoying after a period. Things that tend to really annoy tenants include:
- poor (or lack of) heating and cooling options
- not being able to make changes to the property (such as hanging pictures, painting walls etc.)
- pet restrictions
- dark, damp or mouldy rooms
- not enough storage
- no access to a car park or hard-to-find street parking
- poorly functioning kitchen and/or bathrooms
- poor security
If you want your property to be competitive with other properties in the rental market, it’s a good idea to consider eliminating these bugbears. It is far more likely your tenants will stay longer term if they feel comfortable, and it also means you should be able to increase the rent in line with the market.
Depending on the climate, installing air conditioning is usually worthwhile, as is sufficient heating (gas is usually best) so that your tenants don’t spend the winters feeling cold.
Lack of storage can be a deal breaker, particularly for families who often have lots of ‘stuff’. Consider building storage spaces into hallways or under stairs, install built-ins in the bedrooms if there is space, or create an area under the house that is usable as storage.
Lack of sunlight and recurring mould can also be a major turn-off. Consider installing a skylight and/or fans, ensure the wall paint is a light colour, make sure there are good lights in the room and ensure windows can be opened to keep the air circulating.
It’s usually fairly easy and relatively inexpensive to purchase modular kitchens and bathrooms so if your property has an old kitchen or dated bathrooms, consider upgrading. Security can also be easily fixed. An alarm system and better locks on windows and doors needn’t be cost-prohibitive and may even reduce your insurance.
While these improvements all have their costs, remember you are still adding value to your asset. Most importantly, losing tenants is expensive in terms of the lost rental income and advertising fees required to attract new tenants. Keeping your tenants happy and comfortable usually means you save money over the long term.
While it’s up to you whether you allow pets, you are likely to be reducing the size of your target market if you don’t allow them. As for minor changes to the property, it’s best to be flexible. If tenants are asking, it’s a good sign they want to stay on in your property. Remember they just want to feel at home. Your flexibility in these issues is all part of the give and take of the tenant-landlord relationship. Read on to find out why this is important.
How to be a great landlord
When tenants feel unheard, frustrated or unhappy with the way the property is managed, the relationship may sour and this may have negative consequences for you as the landlord. Here are a few tips for building a good relationship with your tenants.
- Be prompt in replying to questions and requests. Even if you can’t action something straight away, let your tenant know you have received their correspondence and what you plan to do about it.
- Take their concerns seriously. Be reasonable, even if you feel they are not. Tenants quickly get frustrated if they feel they are not being heard, or if they feel like they are paying for something that isn’t working. If you respond favourably to all major (relatively reasonable) requests, you are building trust and consideration.
- Be honest. If you say you will do something, be sure to do it.
- Be fair about rent rises, and keep to the market rate. If you push the rate up more than is fair, you may lose your tenant’s trust – and lose your tenant.
- Empathy, flexibility and consideration go a long way. If you need someone to enter the property, give tenants plenty of notice and fit in with their schedule. If a tenant misses a payment, or breaks something unintentionally, don’t be too hard on them so long as it’s not a frequent occurrence. Again, aim to be reasonable in finding a solution.
When tenants feel you are being fair and reasonable, they are likely to return the favour. Trust and consideration go both ways; if you have a good relationship with your tenants, they will be more inclined to keep up their end of the bargain. That is, they will be less likely to quibble over small problems, more likely to look after your property and more likely to stay longer term. Don’t underestimate the value of a good long-term tenant; several weeks of lost rental income from vacancy will very quickly erode any savings you may have made from not paying for requested maintenance or from small rental rises above market value.
In the end, remember that your tenants are people who want the same comfortable living experience as anyone else. Treat them how you would like to be treated and you are more likely to have less vacancy, higher demand and higher rental income – which is basically the aim of the game.