Post

Things to Consider Before Becoming a Landlord

Becoming a landlord can be a smart financial move, a passive income opportunity, and a strategic step toward long term wealth. But like all investments, owning rental property comes with its own set of complexities, risks, and responsibilities. Many first time landlords enter the world of property management with high hopes, only to discover it’s not as “passive” as they imagined.

In this blog, we’ll explore the key things to consider before making the leap, share different perspectives on landlord life, and hear from Emily, an award-winning Business Development Manager (BDM) at Remax United, on what separates successful landlords from struggling ones.

1. Assess Your Financial Readiness

The very first question you should ask yourself is: Can I actually afford to become a landlord? Owning a rental property isn’t just about collecting rent every month—it’s about managing a business. And like any business, it comes with upfront costs, ongoing expenses, and the possibility of financial loss.

Costs to consider include:

• Deposit and mortgage repayments
• Council rates, water, strata (if applicable)
• Insurance (landlord and building)
• Repairs and maintenance
• Property management fees (if outsourcing)
• Vacancy periods with no rental income

If you're relying on rent alone to cover the mortgage, you may be cutting it too close. It's recommended to have a financial buffer of 3–6 months’ worth of expenses saved before you start.

Emily from Remax United advises:

“Many new landlords think that once they’ve bought a property, the rest takes care of itself. The reality is, you need to treat your investment like a business. Having a clear budget and contingency plan separates the successful investors from those who get stuck.”

2. Understand the Legal Obligations

Being a landlord comes with legal responsibilities, which vary by state and territory. Ignorance of the law isn’t an excuse and failure to comply can result in fines, lawsuits, or reputational damage.

You need to understand:

• Tenancy laws and lease agreements
• Notice periods for entry, rent increases, or eviction
• Health and safety requirements
• Bond lodgement and dispute resolution processes
• Fair housing and anti-discrimination laws

Whether you choose to self-manage or use an agency, the responsibility legally falls on you. Take the time to familiarise yourself with local tenancy legislation or seek legal advice if needed.

3. Choose the Right Property

Not every property makes a good rental. A stylish penthouse in the city might appeal to you, but could sit vacant for months if it doesn’t meet renter demand? Conversely, a modest suburban home near public transport and schools might offer consistent tenancy and long-term growth.

Things to evaluate:

• Rental yield vs. capital growth potential
• Proximity to amenities, transport, schools, shops
• Demographics of the area
• Vacancy rates and market demand
• Potential for future infrastructure or zoning changes

Run the numbers. Look at the rental return in relation to your purchase price and expenses. Speak to local agents or property managers who understand the rental trends in that area.

4. Self-Management vs. Property Management

One of the biggest decisions you’ll face is whether to manage the property yourself or hand it over to a professional.

Self-Management Pros:

• Lower fees (you save on management costs)
• Direct control and communication

Self-Management Cons:

• Time-consuming
• Emotionally draining if disputes arise
• Requires understanding of legal obligations

Using a Property Manager Pros:

• Expert guidance and support
• Tenant screening and rent collection
• Handles inspections, maintenance, and disputes

Using a Property Manager Cons:

• Ongoing fees (typically 6–10% of rent)

If you’re time-poor or live far from your investment, a property manager may be the wisest choice.

5. Tenant Challenges Are Real

Let’s not sugar-coat it: tenants can be unpredictable.

Late payments, property damage, noise complaints, or even abandoning the lease early are all part of the game. Although most tenants are responsible, even one difficult situation can leave you financially and emotionally drained.

To protect yourself:

• Screen tenants thoroughly
• Ask for references and check rental history
• Conduct regular inspections
• Maintain a good relationship, but stay professional

Also, be prepared for the unexpected. If a tenant stops paying rent, are you financially able to cover the mortgage while the issue is resolved?

6. Prepare for Vacancies and Maintenance

No property is immune from wear and tear, and no tenant stays forever. Every landlord will face vacant periods, whether due to tenant turnover, renovations, or market conditions.

Smart landlords:

• Set aside a maintenance fund
• Schedule annual property health checks
• Budget for at least 1–2 months of vacancy per year
• Keep the property well-maintained to attract good tenants

If you own an older property, expect higher ongoing costs; roof repairs, plumbing issues, electrical updates, etc.

7. Understand Tax and Deductions

Owning a rental property comes with tax implications—some good, some bad.

You may be able to claim deductions on:

• Loan interest
• Council rates
• Repairs and maintenance
• Insurance
• Property management fees
• Depreciation (on new fixtures and fittings)

However, rental income is also taxable. Plus, when you eventually sell the property, you may be liable for capital gains tax (CGT).

It’s wise to consult an accountant experienced in property investment to ensure you’re maximising your returns and staying compliant.

8. Lifestyle Alignment: Is This the Right Fit?

Being a landlord can affect your lifestyle more than you expect. It requires time, attention, and a level of detachment when dealing with tenant issues or financial hiccups.

Ask yourself:

• Are you emotionally ready to treat tenants like customers?
• Can you stay calm and professional during disputes?
• Are you comfortable with risk and uncertainty?
• Do you have time to manage a property or vet a property manager?

If your lifestyle or personality isn’t suited to hands-on property management, you may want to explore other ways of investing in real estate (see below).

9. Consider the Alternatives

Not everyone wants the responsibility of being a landlord. If you like the idea of real estate but don’t want the hands-on involvement, consider these alternatives:

• Real Estate Investment Trusts (REITs)
• Buy shares in property portfolios that pay out rental income without owning the property directly.
• Managed Funds or Property Syndicates
• Join a group of investors managed by a professional firm who handles property purchases and management.
• Short-Term Holiday Rentals (e.g., Airbnb)

Each option has its own risk and return profile. It all comes down to your personal goals, time availability, and risk tolerance.

The Flip Side: Opposing Opinions

For every landlord singing the praises of passive income, there’s another regretting the stress and strain it brings. It’s worth hearing both sides:

In Favour of Being a Landlord:

• Long-term equity growth
• Tax benefits and cash flow potential
• Inflation protection
• Leverage to build wealth faster

Against Becoming a Landlord:

• Time-consuming and emotionally draining
• Risk of bad tenants or legal disputes
• Financial exposure during vacancies or repairs
• Real estate markets can fluctuate

Summary: What to Keep in Mind Before Becoming a Landlord

• Understand your financial position and set realistic expectations
• Know your legal responsibilities as a landlord
• Choose the right property in the right location
• Decide whether to self-manage or hire a property manager
• Be prepared for tenant-related challenges
• Have a contingency plan for vacancies and maintenance costs
• Understand tax implications and deductions
• Evaluate whether property investing aligns with your lifestyle