Renting & Pets

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Recently, we had a fantastic tenant choose not to renew her lease purely because pets were not permitted in the property and the tenant couldn’t bear being separated from her dog any longer. To some this may sound shocking, however, many tenants and pet owners in general can relate.

Did you know that as a country, we Aussies have one of the highest rates of pet ownership in the entire world? According to the Australian Bureau of Statistics, 62% of Australian households include a pet. Despite this, only 5% of rental properties in Australia are advertised as being pet friendly.

How does this affect landlords? One of two things typically happen. Tenants with pets will quite often overlook a property even though it may be perfect for them based on the fact the advertisement states pets are not permitted. Alternatively, many tenants may attempt to secretly house a pet on the premises which benefits no one. Breaching the terms of your lease is never a good idea, even if the reason for doing so has four legs and is super cute!

How can you make renting with pets easier? Let’s start by acknowledging that any property is valuable to its owner and the most common reason landlords dismiss pets is due to their concern over damage to the property. When it comes making your rental application, there are a few little things you can do to improve your likelihood of being fairly considered with your pet in tow.

  1. Be reasonable – don’t go out and buy a puppy! They may be cute but we all know they are little terrors in those early stages, even with the best training and the most responsible owner.
  2. Include a picture of your pet with your application, typically a pet is less of a perceived threat when the landlord can see it for themselves.
  3. Include written references which specifically relate to your pet and their behaviour. Proving responsible pet ownership is highly advantageous.
  4. Provide as much information as possible about your pet and their habits. For example, if you take your dog to day care or ensure they receive daily exercise it is worth noting. It is also worth noting the age, breed and general behaviours of your pet.

What to consider if you are a landlord? With vacancy rates being an issue for many, it is worth noting in the property advertisement that you are open to considering pets on a case by case basis. This would increase the number of inspections and applications received. Naturally you’ll want to consider the type of pet and their behaviours as well as the tenants references, especially in relation to the affect the pet in question may or may not have had on their previous home. It is also worth keeping in mind that pet owners will pay an additional pet bond should their application be approved and in most cases, pet owners are willing to pay above the advertised price in order to secure a property which allows them to keep their pet with them.

At the end of the day it’s all about finding a happy medium and ensuring the landlords losses are paw-fectly mitigated!

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INVESTMENT LENDING

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Our most recent blog post was dedicated to everything you need to know about owning an investment property, what we didn’t touch on was the lay of the land when it comes to investment lending in today’s financial climate.

To get an experts insight on the subject we sat down with our favourite Finance Specialist, Terry Gardiner of Money Quest. Terry spoke to us about the Interim Report from the Financial Services Royal Commission (you’d have to be living under rock if you’ve managed to escape hearing about the Royal Commission) which was recently released however he did note that since then, there have been many changes to investment lending which have significantly changed the investment lending landscape.

As a result, many individual banks have applied policy changes including: –

  • Variations to lending ratios for investment properties
  • Variations to interest rates applied
  • Introduction of the requirement for borrowers to ensure they commence principal reduction to investment debt, particularly if a borrower has had investment debt paying interest only for 5 years or longer
  • Essential focus on Living Expenses for all borrowers, with self-declaration

For a more in depth understanding of these changes, keep reading!

Lending Ratios

Very few lenders today will lend on a Loan to Valuation Ratio (LVR) over 90%, their preferred option today is for lending below an 80% LVR which means a deposit of 20% of the total purchase price is preferable. Lender appetite for lending up to 80% LVR is certainly stronger than lending above 80% LVR. Depending on LVR, significantly different interest rates are subsequently applied.

Interest Rates

Interest rates for investment lending with interest only (IO) repayments can be anywhere around .50% higher than rates for lending with principal and interest (P & I) repayments although it is worth noting that interest rates with P & I repayments for owner occupied (OO) lending can be a further .30% lower than the above rates. Today, it is very difficult to obtain IO borrowing for OO borrowing and significant substantiation is required with clearly defined reasons for IO repayments with an OO loan. Heavy focus is placed on the requirements of responsible lending.

Interest Only Lending

The majority of lenders today are reviewing existing lending and seek to ensure the life of a loan is maximised to 30 years from inception. However, if a borrower has had IO lending for 5 years, in many instances, they are advised lending requires P & I reduction, with repayments calculated to ensure the life of the loan does not exceed 30 years.

Living Expenses

Up until approximately 12 months ago, many lenders would apply Household Living Measurement (HEM) to living expenses to satisfy cost of living to borrowers. Today, a self-declaration is required from all borrowers, although lenders will also carefully scrutinise bank statements to confirm the self-declaration is deemed accurate. The best solution when it comes to finance is to take the time to carefully discuss any borrowing requirements with a Finance Specialist, as the information above is generic in nature and individual circumstances always differ.

For more information from Terry Gardiner, check out https://www.moneyquest.com.au/broker/terry-gardiner/

Terrence Gardiner is a Credit Representative (No. 399006) of Money Quest Australia Pty Ltd, Australian Credit Licence 487823.