Tough times for Australia’s landlords

These are stressful times for Australia’s property investors. The popular image of property investors might be of the mega-rich, but the reality is that the majority are mum and dad investors who have worked and saved hard to buy an investment property for their retirement or to leave their children.
Meredith Williams

These are stressful times for Australia’s property investors.

The popular image of property investors might be of the mega-rich, but the reality is that the majority are mum and dad investors who have worked and saved hard to buy an investment property for their retirement or to leave their children.

So when tenants have stopped paying rent because they have lost their jobs and their income has fallen because of the COVID-19 crisis, it can hit landlords hard.

With a six-month embargo on evictions, many investment owners are facing a long period without any rental income, although it is questionable how many would want to evict their tenants in the current circumstances.

Plan for the future

The losses can quickly mount – six months without rent on a $600-a-week property comes to about $15,000.

At the same time, most property investors still have investment loans that need to be repaid. Many have the option of asking their lender for a six-month mortgage holiday, but they will have to make up the payments they have missed.

“At the end of that time there needs to be payment in some shape or form, whether that be increased repayments or an increased loan term, but the average landlord is going to be up for a few thousand dollars,” says uno mortgage broker Jay Ahluwalia.

Now is the time to start thinking about what happens once the six-month repayment freeze comes to an end.

It’s probably unreasonable to expect the tenant to repay the money. Even if their circumstances improve, they are unlikely to have additional capacity to make up the deficit and it’s unclear whether they will be required to.

Jay says the best approach is to talk with them and see if they’re in a position to pay some increased rent and help make up the difference over time. Many landlords are nervous about how to approach these conversations, but Jay says the best approach is to show the tenant that you understand things have been tough for them and to help them to understand your own financial situation.

“When we move beyond the dollars and cents to some sort of human conversation, we may be able to find a resolution to this,” he says.

Certainly, it’s best to try to hold onto tenants who can pay some rent, rather than letting them go and have to find new tenants who can afford the property and risk another period without any rental income.

Remember property is a long-term investment

The most important thing, says Jay, is not to default on mortgage payments if things get tough.

Talk to your lender about your concerns, because taking decisive action now rather than letting your repayments fall behind will be better in the long-run. Your mortgage broker knows what the different lenders’ policies are and will be able to help you with that conversation.

It’s important not to lose sight of the fact that property is a long-term investment and as difficult as things might be now, the position in the medium to long term may improve..

Opportunities to offset loss of rental income

During the tough times, making sure you’re on a great home loan rate is one way you can potentially offset some of the losses you might be experiencing.

The quickest way to do this is to check your loanScore. It takes 2 minutes and this can tell you pretty quickly if it is worth taking action and renegotiating or refinancing your loan. With the recent interest rate cuts and lots of new competitive rates on the market, there is a chance that it will be.

Click here to check your loanScore.

When you’re ready to take action, you should speak to your bank or broker – or if you want someone to do this on your behalf, you can reach out to one of our expert team who can help.

Click here to contact a broker.

Meredith Williams
* Three year fixed rate, owner occupier, P&I loan with a maximum LVR of 95% and a loan amount >$150,000. Lender rates and products may change. We cannot suggest you remain in or switch to any loan until we complete our assessment. Fees and charges apply. ^ WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. The comparison rate is calculated on the basis of a loan of $150,000 over a term of 25 years. ± All loan applications are subject to uno assessment and lender approval. uno does not guarantee that it will be able to find a customer a better loan than the one they currently have or to save them money.