Guides

Ultimate Rental Guide

Renting a property can be a daunting process and without the correct knowledge (and rental guide) people can often feel overwhelmed.

This guide provides you with everything you need to know about renting.  Its various tips, checklists and calculators all help you to navigate the market and secure your ideal rental property.

Contents

  1. Renting vs Buying
  2. How To Maximise Your Chances Of Securing A Rental Property
  3. Key Questions To Ask Before Signing A Tenancy Agreement
  4. All You Need To Know About A Bond & Upfront Rental Payment
  5. The Responsibilities of Your Landlord
  6. Things To Do Before You Move In
  7. Your Rights as a Tenant
  8. Sharing a Property

Renting vs Buying

When it comes to property, the age-old question has always been: should you rent or should you buy? There are strong arguments for both so it is important to look at the facts and your own personal circumstances before making a final decision. Part 1 of our guide will assist you to weigh up the facts to make an informed choice.

Pros

Buying Renting
Investing in your own asset. You can live in an area that you may not be able to afford to buy in.
Your investment can grow in value over time. Easier and more cost effective to move between properties.
Flexibility to add your own personal touch to the property and accelerate its capital growth. Fewer financial commitments, which may suit younger singles and families who are free to move for jobs.
Use the value added through renovations to open up usable equity. Property maintenance is the responsibility of the property owner.
Once your mortgage is paid, your monthly expenses decline significantly. In many cases, weekly / monthly rental rates are cheaper than paying off a mortgage.
The repayments of your loan act as a compulsory saving plan. Flexibility on the term in which you wish to live in a particular property / location.
You can borrow against equity to diversify your investments. Lower start-up costs (bond vs stamp duty).
Creating property portfolios can bolster your retirement plans.

Cons

Buying Renting
You are putting all your capital into a single investment rather than a diversified portfolio. Your money is not being put towards an asset (the old adage: rent money is dead money)
Your budget might restrict where you can live. You don’t have any control over renewal of your rental agreement.
Property maintenance is your responsibility (RBA estimate of 2.6%) Paying off someone else’s asset.
With property values rising, saving a 10% deposit can take years. Lack of flexibility to change the property to suit your individual taste.
The purchase process is a costly one – with the need to pay 10% deposit, stamp duty, legal fees, loan establishment costs and mortgage insurance. Renting is a constant monthly payment.
Affordability of the loan during major life events – i.e. pregnancy / job loss. Limited by landlord guidelines – i.e. no pets, guests, smoking etc.
Mortgage insurance companies are free to chase you for any losses they incur if you cannot meet your repayments. Threat of eviction / or lack of ability to renew lease.
Interest rate fluctuations can impact your weekly budget and disposable income. You do not have control over rent increases.
You cannot claim tax on your personal home. You need to be just as diligent and active in your saving to grow your wealth rather than passively saving through capital gains.
If rent payments can be seen as 'dead money' then so can interest payments. Rental increases can grow beyond that of what you would spend on a mortgage.
Opportunity costs: this is the loss of not being able to invest elsewhere, such as your own business.

Calculate The Cost of Renting

There are various costs involved in the buying and renting process. These must be individually calculated and examined in order to determine which option is more suitable for your personal circumstances.

Use the following chart to establish the costs you will incur by opting to rent a property.

Expense
Frequency
Amounts
Notes
Upfront Rental Payment Once off payment In most instances you will be required to pay a month’s rent in advance, however this payment amount differs from state to state. For more information about the upfront costs you will incur by state refer to “All You Need to Know About a Bond & Upfront Rental Payment”, of this guide.
Bond Once off payment The rate of the bond will slightly vary from state to state, but is generally equivalent to 4 weeks rent. For more information about the upfront costs you will incur by state refer to All You Need to Know About a Bond & Upfront Rental Payment, of this guide.
Rental Application Fee (if applicable) Once off payment You may be requested to pay a rental application fee which is used to cover the cost of a credit check or other costs related to processing the application.
Monthly Rental Payment Monthly payment Cost of rent will vary from property to property and depends on the location. Research the cost to rent properties in your preferred area online to calculate costs.
Utilities Quarterly payment You will need to pay for electricity, gas and in some cases water usage.
Contents Insurance Annual payment This will cover you from damage or loss of personal belongings.
Connections Once off payment This includes cost of the connections of all the utilities and services you will need or wish to have, which are not paid by the landlord as part of the rental agreement.

 Calculate the Cost of Buying (Your Own Home)

Expense
Frequency
Amount
Notes
Deposit Once off payment The deposit needed to purchase a home is 10% of the asking price.
Loan Establishment Fees Once off payment Some financial institutions will charge an establishment fee to cover the set up costs for your loan. Consult your financial institution to determine establishment fees.
Lenders Mortgage Insurance Once off payment If your deposit is less than 20% of the value of the property, the lender will require you to pay mortgage insurance. Consult your financial institution to determine likely costs to insure your loan.
Mortgage Registration Once off payment Your mortgage deed must be registered with the government. This process will incur a fee. Consult your financial institution to determine likely costs of your registration.
Connections Once off payment The cost of the connections of all the utilities and services you will need or wish to have.
Property Valuation Once off payment A third party often chosen by the lender needs to determine the value of your land and improvements. Consult your financial institution to determine likely valuation costs.
Stamp Duty Once off payment Stamp duty costs will differ from state to state and will depend on the purchase price of the property. Refer to the link below to calculate stamp duty costs. www.stampdutycalculator.com.au/stampdutycalculator
Legals Once off payment Legals will cost you approximately $600-$800. This covers the legal transfer of ownership and will be conducted by a solicitor or conveyancer.
Mortgage Repayments Monthly The mortgage rate will depend on a variety of factors including institution, loan type, whether interest payment consists of interest only or principal and interest. You also need to consider the impact of rate rises.
Utilities Monthly You will need to regularly pay for the costs of all your utilities and services.
Council Rates Quarterly or annual payment Payable yearly or quarterly, your council rates will depend on the council in which your property is located and the value of your home.
Body Corporate Fees Quarterly or annual payment If your property resides on a shared block (e.g. is a townhouse, unit or flat), it is likely to incur body corporate fees. These fees cover maintenance of common areas and sometimes cover building insurance. The fees will hugely depend on the condition of the property, its features and the area.
Insurance Annual payment If your property resides on its own block, it will not be subject to body corporate fees. However, you will be responsible for building insurance and maintenance.
Yearly Mortgage Fees Annual payment Your loan may be subject to a yearly loan account fee. It is important to consult your financial institution to determine if this is applicable. Also ensure you budget for possible rate rises as interest rates fluctuate yearly.