Not that long ago, I was almost too scared to tell people that I was a landlord. Before record low interest rates, many first homeowners struggled to get into the market. And as I wrote in an article on @latestarterfire’s blog post, being a landlord made you a pariah at any dinner party.
I’m proud to be a property investor and I’m proud to be a landlord. I’m proud that my properties provide safe housing to my tenants, many of whom are not yet able to buy a place of their own. And having private rentals available means they can then save to buy their own home. In fact, a migrant family who had been a tenant for nearly seven years moved out on New Year’s Eve to move into a place of their own.
I know some people think it’s a zero sum game: landlords take places from first home buyers. But it’s actually more complicated. There is an acute shortage of affordable housing, public housing is worse, and COVID put this into focus (e.g. people couldn’t hide homelessness through housesitting anymore). Basically, there is a need for private residential rental properties – especially affordable options – to fill the gap.
How to find a new tenant
As any property investor knows, finding a good tenant is super important.
When we found out the tenants were vacating (they gave us plenty of notice)., we considered running this apartment as another AirBnB. We have one AirBnB in Canberra, and pre COVID rented an AirBnB room in our apartment from time to time. We decided against AirBnB in this instance for a few reasons. While the value proposition (ie. the rental return) would have been better, we didn’t quite have the capacity for the amount of work involved to get it ready in the time required. When we set up our previous AirBnB, we had a bit more time on our hands so could do some more in-depth renos. We also had a lot of furniture in storage leftover from our previous relationships, and time to shop for household things to make it homely.
My Neil is currently busy working and only had one week off over Christmas in which to do renos. He was away for four months last year and has a lot more work travel planned (yep, even in COVID times). While the week over Christmas was sufficient to fix up and update bits and pieces to get the property rental ready, it wasn’t quite enough time to fully deck it out for AirBnB rental. Plus the AirBnB we have is already a fair amount of work and my business/es are getting a bit too busy for me to manage more than one. I know many people outsource to professional companies and perhaps we could have done that. But Neil had another idea.
“Why don’t we rent out to that affordable housing scheme the lady from YWCA talked about,” he said.
YWCA Canberra’s affordable housing
Last year, I recorded a podcast interview with the inspiring Frances Crimmins, CEO of YWCA Canberra.
Access to affordable housing is a problem for many, but it is acute for women – especially older women. In fact, 240,000 women over 55, and 165,000 women from age 45 to 54 are at risk of homelessness. Frances is a proud feminist who is on a mission to find practical ways to support women. And one of them is the Rentwell scheme for affordable housing.
Rentwell works like this: if a landlord signs up and agrees to offer a property at less than 75% of the value of market rent, the ACT Government will waive land tax. In addition, the 25% difference is treated as a donation to YWCA, and as it has Deductible Gift Recipient Status, the landlord can potentially receive a tax benefit. In addition, the lease is with the YWCA (not the tenant) and the YWCA guarantees rent for the duration of the lease.
I signed up in January, and within days a 60 year old woman escaping domestic violence moved in.
How did it feel? Well, as a domestic violence survivor myself, it felt so incredibly good to be able to pay it forward by offering affordable accommodation to someone who needed it.
How the numbers stack up
I’ll be honest and say we could have earnt more running this place as an AirBnB. I also did my sums and worked out we would probably have earnt a bit more if we rented it out with the previous agent on the open market – especially as there is always a shortage of rental accommodation in January. As my business is in the startup phase, I’m not *yet* earning megabucks so the tax benefit from a gift is marginal. But in the future, it may in fact prove to be a better value proposition than renting with the previous real estate agent it was with.
The difference between renting it out commercially and renting it out under Rentwell is marginal. But the feeling it has given us is priceless. We are happy with our choice because we feel that we are making a tangible difference to someone.
Have you ever taken part in an affordable housing scheme? I f so, how did it work?