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Summer and Student Accommodation - some key issues!

Posted 17/12/2018

So, for this blog, we thought we would discuss some of the big issues around student accommodation.

There are some parts of the country where at this time of year the city looks deserted. Palmerston North and Dunedin are 2 main centres where there is a large tertiary institute operating. Lots of students live in the cities during the year for their studies. However, come the summer break, all the students go home after their exams. Often, they leave their accommodation that they live in to search for new accommodation when they return in February.

So, for this blog, we thought we would discuss some of the big issues around student accommodation.

House on Baldwin Street, Dunedin - The Steepest Street in the worldHouse on Baldwin Street, Dunedin - The Steepest Street in the world

The “Unavailable for Rent” issue

When a rental property that you own has a tenant in the property or when you are actively looking for tenants, then the property is known as “Available for Rent”. This means that you are either earning money (rent), or the property is ready for a tenant to move in and then you can earn money.

“Unavailable for Rent” is when a rental property is not actually available for tenants to move into. Maybe you have decided to sell the property. Maybe you have moved back into the property. Or, you are going overseas for 2 months and don’t want to look for new tenants just right now. These are examples of when a property is not available by tenants to rent.

The issue here is that it can affect the expenses you can claim in your tax return. Normally, a property’s expenses can only be claimed as an expense when a property is “Available for Rent”. This would be from the point in time you start advertising for a tenant and the house is available to be moved into by a tenant.

So, what happens if the property is “Unavailable for Rent”? Any expenses paid during this time cannot be claimed in your tax return. For yearly expenses such as Insurance and Rates, you will have to do a calculation to remove a portion of these expenses paid. For any other one-off expenses paid during this time (such as repairs), then these cannot be included.

So, how can you ensure you get a maximum expense claim? By ensuring that your rental property is always “Available for Rent” by not removing it from the market for a set time. This may mean actively advertising for new tenants. However, with student accommodation, there is another common way used. By signing up tenants in November to a fixed tenancy for the coming year, many landlords give the tenants a large discount over the summer as the house is not needed. However, both parties benefit – landlords have income over the summer months and tenants have secured a rental property for the next year.

We cover more on this “Unavailable for Rent” issue in one of our free courses which you can find in our course catalog here.

Different Types of Tenancies

It is common with student accommodation to use a “Fixed Term Tenancy”. But what is it and what are some different types?

A Periodic Tenancy is a tenancy that is open-ended – it has no end date.  It keeps going until the landlord or tenant decides to end the tenancy.

 

A Fixed Term Tenancy is a tenancy which lasts for a set period of time.

If a fixed tenancy expires then at the end of the term it will automatically become a periodic tenancy (which has no end date). The landlord or tenant has to give notice (between 90 and 21 days before the end of the term) if they don’t want this to happen.  For example, the tenant may wish to have the fixed term tenancy end and so that they can move out – a common occurrence for student flats.

Alternatively, if both the landlord and tenant agree, they can renew or extend the tenancy for a further fixed term.

Doing repairs

The time between one group of students and a new group of students can be a good time to carry out some repairs. Have a look at our previous blog post for some tips about carrying out repairs to a rental property.

Also, make sure you don’t remove the rental property from the market making it “Unavailable for Rent”. This would cause the expenses to be not claimable in your tax return. To help prevent this, minimise the time of your repairs and always actively advertise for new tenants while the property is empty. We would recommend even advertising over the Christmas period – people now research online during this time.

Damage to the property or unpaid rent – the Bond system

For any rental property, a bond can be lodged with tenancy services at the start of a tenancy. The bond can be for no more than 4 weeks’ worth of rent. The idea is that this can be used if there is any unpaid rent or damage to the rental property at the conclusion of the tenancy.

We cover bonds in more detail in the Rental Coach course (the Standard Version or Full Version), and you can read more detail on the Tenancy Services website).

Rental Coach is a unique e-learning course that helps equip landlords to understand the numbers of their rental property and help answer all the questions you have related to your rental property. For more about the course, visit our website.