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Landlords zero in on property repairs to boost their bottom line

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More landlords are gearing up to maximise financial returns through better planning for repairs and property upgrades, a property management specialist says.

Nelson Alexander’s head of property management services in inner-city Melbourne Grant Gifford says a planned approach to repairs and upgrades is more critical than ever in today’s letting environment.

With capital-city apartment markets facing increases in supply, he notes real estate agents need to provide landlords with regular reports on a property’s condition so they can plan ahead for upgrades and higher rental returns.

The sharper emphasis on planning for upgrades is fast becoming the driving factor in boosting the bottom line for many landlords whose investment properties are managed by Nelson Alexander.

Mr Gifford says the changeover periods between the end of one tenancy and the commencement of a new letting period is the optimum time to repair or upgrade a house or apartment.

“This is the best time to repaint and recarpet or to put in a dishwasher or new blinds,” he says.

“But planning for repairs and updates involves a lot more than just carrying out the works. A good, professional real estate agent, who conducts regular, routine inspections, will forewarn landlords that they need to consider undertaking an upgrade at the end of the tenancy.

“That could be one to three years away. But the subject should be approached well before the tenant gives their four weeks’ notice to vacate.”

Nelson Alexander’s team of property managers focus on keeping landlords fully aware of their property’s condition. They also point out the potential upside of making improvements at key times in the life of a tenancy.

The delivery of timely information is crucial in today’s competitive rental environment.

Nelson Alexander provides continual updates to the landlord during the tenancy period itself. This up-to-date information means property owners have more opportunities to match their property offerings to new and emerging tenant demographic groups, to increase rents and reduce vacancy periods.

The company’s property condition reports contain detailed information about how the flat or house is being maintained. Photos revealing the current state of play with the kitchen, bathroom, and external paint work and so on are also included.

When works need to be carried out, Nelson Alexander can link up landlords with a team of tradespeople and builders it has on its books, so that upgrades are completed in the shortest possible timeframe.

“In our detailed reports, we put in comments such as the carpet is becoming quite worn or that the property could not be released without A, B and C happening,” Mr Gifford says.

There’s a new spotlight on rental property standards in Victoria. A landmark Supreme Court of Victoria ruling this year found Victorian tenants have the right to expect their rented home to be maintained in “good repair”, even when it is initially rented out in poor condition.

Regular information updates also allow landlords to budget for and stagger repairs in ways that best suit them and their taxation arrangements.

With rental properties, repairs and maintenance are immediately deductible whereas improvements are regarded as capital expenditure and are not immediately deductible.

As the tax office explains, “repairs generally involve a replacement or renewal of a worn out or broken part” – such as replacing broken or worn guttering, fences and windows, and maintaining plumbing.

Improvements include landscaping, insulating, and adding a room.

Consumer affairs authorities in Victoria, NSW and other states and territories say there are many common mistakes that self-managing landlords make. These include accessing tenanted properties to make repairs without the tenant’s permission and not properly documenting tenancy agreements.

Mr Gifford says there are “never good outcomes” when landlords try to renovate properties with the tenants in occupation.

Tenants have been known to demand compensation because of disruption caused by building works. In one recent instance, a tenant requested that his family be put up in a hotel while the smell of fresh paint lingered in their rented home.

Mr Gifford says Melbourne’s pool of tenants is highly segmented and there are a substantial number of renters looking for cheaper properties.

“I am not convinced that tenants are expecting more in this market, but there is no doubt that there is better value for money on offer in the rental market,” he says.

“There are always tenants who want to be entry level – they would prefer not to spend a lot on rent and want an older style property.”

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