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How to ensure your home doesn’t get trashed while living abroad

how to protect yourself from dodgy tenants

One of my biggest concerns when I first started investing in residential property was that the tenants would trash my house.  And if the first time you rent out your own home is when you move overseas, then the stress could be amplified.

In this article, I share what I have learned after almost twenty years investing in residential property, how to make sure your house doesn’t get trashed while you are living abroad.

1. Rent Out Your Property

This is an ironic one to start with, but the best way to ensure your house doesn’t get trashed while you are working overseas is to rent it out.  Many people I meet leave their home empty while on expat assignment because they worry about it being damaged by tenants, but they forget that :

  • it is difficult or expensive to insure a house that is vacant for 60 days or more at a time
  • they need to maintain the property to ensure it looks lived in so it doesn’t attract unwanted attention
  • if the property is not being used for income generating purposes, then the interest on the home loan will not be tax deductible
  • rent can pay for the maintenance and wear & tear on the property
  • you can take out landlords insurance to protect against things like malicious damage caused by tenants

Many people also let friends or family live in their home at often a discounted rent and with no formal lease agreement in place.  We have all heard the advice about not lending money to friends and family, and renting a home is no different.  How will you respond when your friends or family are late with the monthly rent payments, their dog is digging up the garden, or they are not regularly cleaning the swimming pool. Would you insist on your friends and family paying a bond, or having to sign a property condition report before they move in?

Keep your life simple and don’t rent your property to family and friends, or if you must, have them rent the house through a property manager and stay arms length to the agreement.

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2. Get A Good Property Manager

When I first started investing in property I used to manage all my investment properties myself.  It’s hard work, and even more difficult when you live overseas.  A good property manager is a valuable member of your investment team, will protect the value of your investment and will also be able to deal with the other points I raise in this article.

3. Make sure your home appeals to a good tenant

Understand who the ideal tenant is for your home – considering the size and style of property, and the location.    Ensure your house is well maintained and will appeal to that ideal tenant.  If your home includes a swimming pool, and your ideal tenant is a young family with kids, then make sure there is adequate pool safety fences and the like installed.  If your home is in a hot climate, then make sure you have airconditioning, or if your home is most suitable to a busy single professional, then make sure your kitchen includes a dishwasher.

The advantage of making sure your home appeals to a good tenant is that you will also increase the average length of tenancy, you will reduce the vacancy period between tenants, and you will be able to charge a higher rent.

4. Get A Good Tenant

If you take care of step 3, then step 4 will be a dream.  An appealing home will attract a good selection of tenants.  Before selecting a tenant, be sure that your property manager conducts reference checks of your prospective tenants with their previous landlords, and phones their references.  Your property manager should also check the bad tenant databases which will highlight if previous landlords have had issues with them.  Note that these databases generally do not have information if the tenant was previously renting privately.

5. Collect a Bond

Tenancy laws in Australia allow you to collect a bond before the tenant moves in.  This is generally around 4 weeks rent and provides security for any damage or unpaid rent during the term of the lease.  If you have a premium property, then you may be entitled to ask for more than 4 weeks bond.  Each state has different rules about what constitutes a premium property, but it will be based on the rent for the house (eg. if the rent is more than $1000 per week, you may be able to ask for more than 4 weeks bond).

6. Sign a lease agreement and make sure you have a property condition report

A lease agreement serves to protect both the landlord and the tenant.  It protects the tenant by giving them surety that they have the right to live in the property for a minimum period of time at an agreed rent.  It protects the landlord by giving them surety that they will receive a given amount of rent for a minimum period of time.

A property condition report also serves both the tenant and the landlord.  It protects the tenant by ensuring the landlord doesn’t claim damage against the tenant that was already pre-existing, and protects the landlord against any damage the tenant may do to the property.  A good property condition report should include both a detailed written description of the property (including the conditions of all walls, curtains, carpets, appliances etc) and photos of the property.  A good property condition report in my mind doesn’t need to go overboard on the photos either (like the one we received when we returned to Australia and initially rented), but generally show the condition of the property and highlight any specific features or pre-existing damage.

7. Undertake Regular Property Inspections

The only way you are going to know whether your property is being cared for is if the property manager undertakes regular property inspections – I would suggest around every 3 or 4 months.  If there are any problems your property manager can seek to address them in a timely manner, including breach notice and termination proceedings if necessary.

8. When All Else Fails – Have Landlords Insurance As a Backup

Doing everything we have discussed above will reduce the risk of dodgy tenants and damage being done to your property, however you should also consider taking out landlords insurance to cover the unexpected.

When you move out of your home and rent it out, you will need to advise your insurance company that the house is now a rental property.  You can then adjust your contents insurance to cover the contents remaining in the property and also take out landlords insurance.  Most insurance companies offer landlord’s insurance, and there are many sub-options to consider.  You can take out specific cover for malicious damage by your tenants, rent default, loss of rent (in the event your house becomes uninhabitable through say fire or flood), and legal liability.

The terms of the landlord insurance policies vary greatly so be sure to read the fine print and understand the exclusions.  You can read more about landlords insurance here.

Woolworths in Australia now offers landlords insurance. You can get a Quote here.

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About the author

Craig

Craig is an Australian Expat and the founder of The Australian Expat Investor. Craig is passionate about investing, and while Craig cannot give personal financial or tax advice, Craig enjoys sharing investing, tax, and other tips for Australian expats to help them to build their wealth while living abroad and get the most out of their time living overseas. Get his free ebook on 9 Financial Surprises That Could Cost Australian Expats Thousands of Dollars

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