As a landlord that owns an inner city apartment you may have already received one of the 3 phone calls below.
- “Hi, your tenant has noticed that other apartments in his building are now leasing out for $50 per week less and the tenant has requested a discount.”
- “Hi, we need to drop the rent by $100 per week to find a new tenant”
- “Hi your tenant has requested rent relief due to co-vid, you will need to drop your rent by x”
You also may have had your property on stayz or Airbnb and were receiving a healthy return until co-vid cut off travel and migration so you’ve now had to put your property on the residential rental market and its now taking a very long time to even get an inquiry and your now wondering what to do and how long is this going to go on for.
As a director of a property management company who has fair amount of his portfolio in Melbourne CBD and surrounding inner suburbs ill provide an insight on how best to approach each scenario, you will be able to apply this information whether you are managing the property yourself or you can talk to your current property manager and see whether they are aware of what they can do.
Rent Relief Request:
Now that Melbourne is in stage 4 lock down its likely that your tenants potential to earn income has been impacted and as the government has put a pause on evictions due to rent arrears and a hearing at VCAT can take up to 2 months (That’s good timing in my experience) it really is in your best interest to enter into an agreement with the tenant for temporary rent relief.
Once a tenant reaches out to our agency regarding applying for rent relief we get them to fill out our tenancy hardship application form,this provides proof that the hardship is genuine and also helps establish a reduced figure without having to drop the rent too dramatically.
We’ve found most tenants have put forward that the rent relief agreement should for a long period of time 4-6 months however there is a lot that can change particularly in this current climate, the agreements that we have done are usually between 2-3 months subject to a review once they are over. Tenants are usually happy with this arrangement as it provides them with temporary relief and landlords are happy as the rent relief they have granted does have an end date and rather than get nothing they know income will becoming in.
There is a government rent relief grant and a saving on land tax once the agreement has been entered into that I will explain how to apply for.
Vacant Apartments & Townhouses:
In metro Melbourne under stage 4 restrictions the only work a real estate agent can do are as follows:
Services required for end or start of lease.
This can include final inspections, key collections, final cleaning and any other services directly related to the start or end of lease only.
The tenant may move in or out of the property.
All other inspections can be online only.
Knowing this our agency madly rushed around to all of our vacant properties to conduct virtual tours ( click here to view link to one of our videos) if your property manager didn’t do something like this it might be very tough to lease your property out until private inspections are allowed again under stage 3. (which wont be available until 14th of September.)
Firstly your agent needs to establish where the market is by providing you with evidence on what comparable properties are leasing out for within the past 2 months as any property that leased out even 4 months ago leased out in a different market to the one we find ourselves in. We provide our landlords with a Comparative Rental Market Report (Click here to request a copy) in order to establish a range within approx.. $20 per week that we believe the property needs to be priced in order to attract a tenant.
Now more than ever the presentation of your property is key as the tenancy market is the smallest its ever been and in order to capture an inquiry not only does the price need to be right but the property must be well presented. All of our rentals to have professional photos in order to really show the features and benefits of each property that is available for rent.
Its likely that you will take a hit on the rent that you were previously achieving however if you secure a tenant on a reduced amount in 6-12 months time there is no limit on what you can increase the rent to so long as you can justify that its market value.
Once we are on the other side of co-vid if the market has gone back to where it was there is nothing stopping you from increasing the rent by $100-$150 per week if that what the market indicates and being an apartment its very easy to prove what comparable rentals are leasing out for due to the abundance of them.
Rent Relief Grant + Land Tax Discount:
Once you have reached an agreement with the tenant on a discounted amount of rent you will need to lodged the agreement with consumer affairs Victoria, link -
They key criteria of registering the agreement are:
- Name of Landlord
- Name of Tenant
- Property Address
- Rent pre-agreement
- Rent for the period of the agreement
- Time period the agreement will be in place
Once the agreement has been registered you will be issued a reference number and receive an email from consumer affairs, (example - Case number: C2020/08/007889)using this reference number you can apply for the land tax relief by clicking the link and following the process, you can apply for a 25% discount, if you have given a rental discount of 50% or more then you can get a 50% discount on your land tax - https://www.sro.vic.gov.au/land-tax/claim-coronavirus-land-tax-relief
The rent relief grant is a $3,000 payment made by DHHS that gets paid directly to the estate agents trust account or landlords bank account that acts as payment of rent on the reduced agreed amount, this doesn’t act as a top up to cover any discount granted.
We’ve found that once an agreement has been lodged that this process can take up to about 5-6 weeks for the money to hit our trust account but we have paid out quite a few of our landlords so the process works!
For your tenant to be eligible they must show they:
- Have less than $5,000 in savings (excluding superannuation)
- Have an income of less than $1,903 per week before tax
- Be paying more than 30% of your income in rent
Should this be the case the tenant using the consumer affairs registration number can apply for the grant by clicking the link below:
I trust that this article has provided some insight on how best to navigate the co-vid market, we’d love to be of assistance should you have any questions, you can email meat firstname.lastname@example.org or feel free to give me a call on 0401 054 325.
This article is dated 20/08/2020.