Process of renting out a property

[seano87]

Hi,

At the start of the new year, I'm going to be renting out my PPOR to my sister. I'll be renting an apartment closer to the city.

I wont be getting a property manager for this reason, but I'm unsure on the process of formalising all of this. The property will be negatively geared. I do plan on seeing an accountant in the coming weeks, but interested if anyone has information on this? Do I get a lease agreement signed up? How should I go about tracking rental payments for tax purposes etc.

First investment property, so don't really have a clue on this.

Thanks

 

[xanh]

It depends on how formal you want things to be with your sister living there.

Definitely get a lease put in place. In the very least, you'll need this for insurance purposes. You should be able to download a standard lease if you talk to Google.

Most self managers would do an initial condition report as well. Your choice, of course - given that the tenant is your sister.

You can probably get some sort of payment/reciept book from the newsagent that will do the job for tax purposes but keep good records yourself.

Well, thats a start - I'm sure some more knowledgeable people here will be able to add their comments.

Also, start reading up on the 'rules' (Residential Tenancies Act) should you get different tenants in there at a later date. Even with a PM, you'll still need to know this.

 

[seano87]

Thanks for that.
I take it this lease agreement form is suitable:

http://www.consumer.vic.gov.au/library/forms/housing-and-accommodation/renting/residential-tenancy-agreement.pdf

 

[Lil Skater]

You can find everything you will need on the Consumer Affairs website.

If you plan on taking a bond (good move for insurance) you will need to do a condition report and lodge the bond with the RTBA.

 

[brahms]

and I believe that electronic transfers of rent will suffice as receipts, as a record is available via the bank statements, however, if tenant requests actual receipts you will need to provide these (which will be unusual given the circumstances).

Perfectly plausible scenario. I have a similar arrangement with my mother in law....rent isn't 'fully' market value, but I have no agent fees and the place has never been so well looked after so the end result is just fine.

 

[marg4000]

If you wish to claim negative gearing deductions, the rent you charge must be "market rent" or close to it.
Marg

 

[buster]

Just have the money directly paid into your bank account the record of payment will be on your statement. That all I do. Unless she requests a receipt.

 

[Jacaranda]

Even though you are renting to your sister it is still your house and as you are renting it out you should consider it as a business transaction. Business within family and friends can still turn bad.

I would definately get a lease signed and both keep a copy. This will also help your sister later if she needs to rent somewhere else or purchase her own property.

Also do an inspection prior to your sister moving in and take lots of photos of everything. My agent takes about 300 photos on a tenant moving in and the number of times we have been able to look at the photos and confirm if a tenant did damage or it was there before they moved in. It also helped with the insurance claims when required.

Your sister may look after the property but a visitor may not. This way both your sister and yourself are covered.