01 Apr 2020

Buyers and investors nervous about tenanted properties

Media Release

In the wake of the Federal Government’s eviction moratorium announcement, it’s not just landlords and property managers who are facing challenges. Buyers and vendors are affected by the moratorium too.

Real Estate Buyers Agents Association (REBAA) president Cate Bakos said following the Government’s recent announcement to ban evictions during COVID-19, many buyers were indicating they would be anxious to buy tenanted properties.

According to Ms Bakos home buyers who are considering purchasing properties that are currently tenanted with a remaining fixed lease term, are fearful of bearing the brunt of full mortgage repayments with no rental income if their tenants stop paying the rent between settlement and occupancy.

“Investors with an appetite to purchase an investment property are equally cautious, fearing that the next six months of property ownership could be unviable for them if their tenant stops paying rent,” she said.

“We’ve got buyers who can deal with a 65-day settlement and vacant possession scenario but we are finding that they have zero appetite for taking on any risk with a tenant who may not pay the rent in the interim.”

Ms Bakos said while government support for landlords and tenants was pending, investors should explore all options possible.

“If you can limp along and come through this on the other side by investigating other loan options and/or negotiating with your tenant it’s your best option. You could also potentially end up with a very loyal and appreciative tenant for the long-term.”                                                                     

Key options investors should consider at this time:

Talk to your broker or bank

Ask them about any solutions they can offer for either refinancing your mortgage, accessing redraw funds or creating buffers with equity. Make sure you’re paying the lowest possible repayment at the lowest possible interest rate.

Switch your investment loan to interest only

The advantage of an interest only loan is that your monthly repayments are lowered. This frees up money for your essentials. In some instances, tax concessions on the monthly payments are also available during the interest-only period.

Talk to your tenant

Chat to your property manager or tenant in tandem with your property manager about when they can start paying rent or when their benefits will kick in. Remember you’re both going through financial hardship at the same time so try and work out a solution that works for both of you.

Switch eligible tenants over to Centrepay

Centrepay is a cheap billing service that landlords can subsidise any tenants receiving Centrelink payments to use. Talk to your Property Manager about using Centrepay to arrange regular automatic deductions from their Centrelink payment. You can use it for your regular bills and other ongoing expenses such as electricity and phone. Visit: https://www.servicesaustralia.gov.au/individuals/services/centrelink/centrepay