EP 27: Essential Tips for First-Time Landlords

 In this episode of the Property Investor's Handbook, host Adam Bell is joined by Colleen Sutherland from Sutherland's Property Management Group. Together, they delve into the crucial advice every first-time landlord needs to hear. From understanding the real market value of properties and setting the right rental price to thoroughly screening tenants and budgeting for maintenance, this episode covers it all. Colleen shares her invaluable insights drawn from over 20 years in the industry, helping new landlords avoid common pitfalls and make informed decisions. Don't miss this comprehensive guide to starting your property investment journey on the right foot! 

What is The Property Investors Handbook With Colleen Sutherland?

Discover the secrets of successful property management and investing on "The Property Investors Handbook" podcast. Join Colleen Sutherland as she shares expert insights and strategies for acquiring, managing, and maximising returns on real estate investments. Whether you're a beginner or seasoned investor, this podcast is your essential guide to navigating the world of property investment. Tune in and unlock the keys to financial success in real estate.

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  Hello, and welcome to another episode of the Property Investor's Handbook. I'm your host, Adam Bell, and today we're going to dive into essential tips for first time landlords. Now, whether you're just starting your property investment journey, or you're looking to refine your approach, this episode is going to be jam packed with valuable insights.

Joining us is Colleen Sutherland, the owner of Adam's Land. Sutherland's Property Management Group, here to share her expert advice.

Welcome, Colleen.

Thank you, Adam.

Okay. Now, over the years, you would have had plenty of first time landlords, property investors. Well, let's start with some of the common challenges that first time landlords face?

Well, that was part of how my portfolio started was, brand new properties and investors.

So there's groups of investors, investor sales people who go around to towns or used to, and, convince people to buy these properties. So they convinced them to buy it. And at the time, great idea. So not one of them have regretted buying it. Way back,

20

odd years ago, but what they weren't expecting is the price versus, what it's actually worth.

Okay.

Yeah. So those investors, jumped in, boots and all, and, when I give them a sales appraisal, say five years time. And it hasn't gone up or it hasn't gone up much. Those investors are sort of going, but I paid this much money and fair enough too. But what happens is that bought over the market, so they're buying and included in that purchase price is this person's fee and that insurance fee and this, solicitor's fee.

So there's a lot of fees, but that put it in as, this is how much your property's worth. Right. so that they can get the finance over the line. Yep. And then in five years time, it's too, it hasn't increased enough for them, what they expected. Today's market again is different. And whether it lasts another year, two years, I'm not sure.

Ordinarily, those would be the things that you would look at as to what the real market value of your property would be. So if you're buying in a new estate, From my experience, you're buying in a new estate, it's all shiny and new, and you think, Oh, I'm not going to have any problems. But that equity regularly, talking again on a regular market, will not increase for 10 years.

Right. Because of all the fees that are added in there, when you buy it. So you're paying all those fees as well as trying to pay the house off. So have a look before you jump in and buy it. Can I buy something the same or of equal value or similar value? Or is that just crazy? Ridiculous?

Sure.

Everybody goes bricks and mortar. I do get that. And in X years time it'll increase and I will be able to sell it at a bigger profit. And then, on an ordinary market, that doesn't happen.

Right. Okay. So,

so you've got to do your own valuation.

Right. Independent. Independent. And especially it sounds like for new estates.

That this is. Yes.

Yeah. That's for the new estates. Yep. Again, it'll be different for established properties. And also just do your homework to get an independent valuation or sales appraisal on what that is worth. Because Again in new estates, they've got the valuer and the valuer is saying it's this much money because they pay the valuer.

So we just have to be careful of we're not double dipping on the sale price.

Sure. Ok, so first time property investors, landlords, they get their property whether it be the new estate or whatever. Then comes the business owner. The time to get a tenant. So how important is it to screen tenants thoroughly?

And what should landlords look for? Now, again, let's, you've been doing this 20 years. What, you know, first time they're not, they don't know what should they be looking for?

So once you've done your own due diligence on the property, yes, getting the tenant is the next thing. Now it can be a simple process and cause there are great tenants out there.

Okay. Or it can be, you've put, listed the property with three agents, so there are three agents vying for your property and someone will just stick someone in there and they're not the greatest but I get the business because I was first. So you need to look at, just concentrate yourself on one agent and then that agent will do the due diligence for you.

So we need to prove who they are, that they can afford the property and that they can look after the property. That sounds simple, but there's a quite a whole

lot of things that go into that, isn't there? Into

every single due diligence of a tenant, if you're doing it right.

Sure. Cause just asking the question isn't enough.

I mean, people lie.

Yes. Yeah.

And you would have seen that a lot. Well they'll

conceal the truth. So, they'll conceal the truth just to get my difficult tenant out and move him out. Yep. So they won't tell you they're having lots of problems. Yes, it shows on a bit of paper on like on the ledger, but what won't show is that he's always revving his car in the driveway.

He's always, you know, disturbing the neighbors and all that sort of thing. So we really have to look into it.

Sure. And look, I want to come back on something you just said just, just before. Cause this comes up. Within a lot of, podcasts I do with various different businesses, but, and it's about choosing one, choosing an exclusive agent.

Now, I've had this chat with a recruiter who says, there's no point if you're going to go out and get five recruiters, we're all chasing the same, the same people. It becomes more about who's first rather than quality. And it sounds like that's, that's the same thing here with, with property management.

Is that a mistake you see a lot of, first time, investors do where they think, well, I don't know who I'm going to get. So I'll list this with three and see how it all pans out.

That's

right.

And what happens is this agent over here will rent it first. And I got 50 more than. That person, that has been, negated now.

We can't do that anymore, but they're first quick to put someone in because they want the business. Have they done the due diligence properly? Probably, maybe not. And if that tenant works out great. If the tenant doesn't work out, eh, you just made a huge mistake. To concentrate on one, agency, that one agency will do their best to put one really good set of tenants in there.

Yep.

Yeah, as opposed to I got it first.

And just Delving into this a little deeper, when these landlords do decide to list it with a few agencies, and let's marry this up now with the new legislation that you can't rent it for any higher than what you put, that you advertise it for.

When they go to these multiple agencies, are you then all going to be advertising it at the same rate? How does that sort of. Play out? Yes

we'll all be advertising it at the same rate. However, there's some agents who are a little bit unscrupulous.

Yep.

And will say to, you know, Mary and Jo, look, if you pay an extra, I'll make sure you get the property.

There's no, ability to stop that.

Right.

As in, we'll get you as a tenant.

Yep.

Where the liability will lay is with the agent and their management agreement.

Yep.

So, and then if they get audited, it's very complex. But no, you can't say if you pay an extra 20 bucks, I will rent it to you. And that agent's not, and that owner is not supposed to take that.

Okay.

How

do first time landlords set the right rental price for their property?

Well, again, that's quite, can be quite tricky because you're in a street and that one next door rented for 50 bucks more than mine. I'm going to ask for 50 more. And again, It comes back to the management agreement because we have to list when the rent was increased last.

But he's got solar and new paint, new carpet. He's done a bit of work to his. Where me, I've got the 1990 house expecting the 2024 price. So you can't just look on realestate. com and go, well, he's rented for that much. I'm in the same street. I want that much.

Yep.

You have to take into consideration the condition of your property at the same time.

Sure. Okay. And of course, you know, again, using a property management agent such as yourself, you would really be able to know what the conditions are. What the right rent is based on all of those factors, rather than a new property investor trying to work that out for themselves.

Yes, so when we're doing a market appraisal for rent, we've got a program that we can look into the back end of what things rented for.

So it makes a bit of a difference.

Absolutely. So we've talked about this in other episodes, but again, probably a key point for brand new property investors and landlords is budgeting for maintenance.

That's a whole nother podcast in itself, because you need to have an annual budget, and then you need to have a five year plan.

Right. So the annual budget, you can't expect not to spend any money on it whatsoever. You live there. It doesn't work like that, and especially now, because If you don't repair something in a timely manner, the tenant now has the right to take the matter to court.

Really?

Yeah, and then an order will go over your property and it will follow the property beyond the tenancy.

Really? So we have to nominate, well there is an order over that property to repair the hot water unit that keeps running out. Right. There's no hot water. So it's become quite a minefield and being a first time investor, there is no way known I would do it on my own, knowing the complex legislation that we're now governed by.

Well

we've talked about this in a number of episodes, haven't we? The legislation's gone nuts, the amount of new things that have come in and the things you've got to be aware of now, and it's so easy to put a foot wrong, which you can end up in all sorts of strife, which I look, I'm going to say it straight out.

The number one tip for a new landlord, investor is get a good property manager.

Absolutely.

I'm

advocating for all property managers here. And if you're watching this in far North Queensland, I don't go that far, but you will find a good one. You need a good one that knows the legislation and the pitfalls.

And I think I've said it before, Is that you begin with the end in mind.

Look, we've been, we've done a lot of episodes now and there's a lot of great stuff to listen back through in all the episodes and you've given a lot of great advice for landlords who do want to do it themselves. But the one thing it, I'm going to say it straight out, don't.

Just don't, it's not worth it, and the amount of trouble you can get yourself into, you're worth your weight in gold to get a good property manager to do this for you, you know, and it's worth the cost involved.

It's, our fees are tax deductible, but what we offer landlords is that we will take that stress off you, so we've got a system that reduces.

risk. There are some interventions required from the landlord, but if you're dealing with those stresses on a day to day and going, I don't know what to do. I might do this. I might do that. I might get myself into trouble. Just engage a professional property manager. The stress far outweighs the cost of a good property manager.

Absolutely. Absolutely. So look, I mean, if we're going to have a look at this now, I think the three top tips I've gotten out of this is I get a property manager. Don't do it yourself. It's not worth the stress. It's not worth the risk of something going wrong, doing the wrong thing. And the amount of work that goes into Having to do it yourself.

You've got systems. You've got processes. You've got staff. You've got software that does it all Can you imagine having none of that and just trying to do it on your own? Having

an Excel spreadsheet and

I know a

separate page for the maintenance. Yeah crazy

and madness so Get yourself a good property manager and the best one on the Gold Coast is Sutherland's property management group number two Budget for maintenance.

Yes Budget for maintenance, you buy a property, don't think, don't use your whole entire, have a budget, a fund there ready for emergency stuff, normal stuff, and for a five year, five year plan to keep the property up to good standard, to keep, to get your rental, your rental price at the maximum it can be, and Rolling right back to actually buying the property third tip being get it valued get a couple of independent Make sure you're not paying over the odds because it's going to eat into your capital growth that you thought you were getting from from Day one.

Yes, just talking about that budget Yes, have a budget for maintenance and I'm going to suggest 1, 500 a year.

Okay. So

that may or may not cover everything, but at least that's money set aside for you just for maintenance.

Yeah.

The other thing you need to have a budget for is, you know, If the tenant doesn't defaults on their rent and defaulting on the rent, you still have to pay your mortgage.

So I would recommend that you would have a, an account that has an extra month's mortgage in there while, you're claiming on insurance and things like that. So there's a whole plethora of. Scenarios and, if you need to know more, just give me

fantastic. Thanks, Colleen. I mean, every episode sharing your invaluable tips.

And today first time landlords, there's a huge amount of takeaways. If you're new to the game or. Even if you're experienced, but looking for a refresher, today's insights are sure to help you on your property investment journey. Now, please, we love to get comments, we love to get feedback. So whatever platform you're listening or watching on, please drop us a like, ask any questions.

We cover the, you know, the basics of these topics as we go, but there's always a lot more. That, is involved and Colleen is more than happy to chat with you and answer any questions you've got, you know, that, that come out of listening to these. So please do give us a comment, anything you'd like us to talk about in future episodes, please do let us know.

So look until next time, happy investing and, look forward to catching on the next episode. Thanks again, Colleen.

Thanks Adam.