Entry Condition Report Checklist: Is Everything There?

Consider the following scenario: You are assisting a tenant with moving out when you discover some ugly marks on the kitchen floor. That was there when I moved in, your tenant claims, but you're not sure if that's accurate. Who will pay the repair costs for the floor, then?

The Entry Condition Report was created to reduce uncertainty when a property changes tenants since investment property owners around Australia are all too familiar with this scenario.

This article explains why having an Entry Condition Report is crucial. Additionally, we've supplied a comprehensive checklist that covers everything that should be included in an Entry Condition Report, how to use one, and how competent property managers may be helpful.

Would you like to speak to a specialist? Book a complimentary discovery session by calling: (03)999 81940 or emailing team@klearpicture.com.au.

Why is an Entry Condition Report required?

Where can I find the solution to the issue that we talked about earlier? Being proactive is absolutely necessary. Checking the Entry Condition Report that either you or your property manager filled out at the time that the renter first moved in will allow you to determine whether or not the scratch was actually there.

If there were scratches on the property, the owner of the property is the one who is accountable. If it wasn't, the responsibility would fall on the tenant. Confrontation resolved!

As a result of this, the Entry Condition Report is quite important.

By using the Entry State Report, you and the renter will be able to come to an agreement on the condition of the property as well as the contents of the property before the renter moves in. Everyone will be aware of the accountable party in the event that there is subsequent harm to property thanks to this method. Instead than pointing fingers, we need to focus on finding solutions.

The capability of the Entry Condition Report to minimise doubt in repair and maintenance conflicts is essential in this circumstance. Because everyone is given the opportunity to initially reach a consensus on the condition of the property, there are no arguments over the date on which the damage was caused.

Reporting Entry Conditions: the procedure

An Entry Condition Report must be completed in three steps:

1. You or your property manager will fill out the Entry Condition Report (here’s a sample Entry Condition Report PDF). This covers the functionality of all the house's components, including all the doors, windows, electronics, water and electrical connections, and appliances. Additionally, it will note any stains, dings, dents, or other damage on the walls, carpets, or other surfaces. A note will also be placed on the furnishings, fixtures, and exterior parts of the building.
2. As evidence, the property manager provides pictures and videos. After that, they'll sign it and send the tenant a copy.
3. The tenant's turn is now! The tenant is required to view the property and declare whether or not they concur with the entrance report's observations. They are free to add more words if they choose. Now is the moment to report any damages that the tenant is aware of but that the property owner may not have noticed. Correspondence benefits from images and video.
4. The Entry Condition Report must be signed by the renter and delivered to the management of the property within three days. This is especially important in the event that they disagree with the initial comments. In the event that the tenant does not carry out these steps, the initial Entry Condition Report that was supplied by the homeowner will be considered to be legally binding.
5. The property manager then makes a follow-up enquiry to see whether or not they concur with the observations given by the renters. In that case, they have a total of 14 days to complete the report and give it to the tenant.
6. If not:

• They will set up a mutually agreeable time to meet the tenant.
• Any issues must be resolved by the landlord and renter.

Following this, an email with the final Entry Condition Report must be issued to all stakeholders.

What distinguishes an entry condition report from an exit condition report?

In contrast to the Entry Condition Report, which is filled out by the tenant when they move into the rental property, the Exit Condition Report is completed by the renter when they vacate the property. The two are compared and contrasted after that. If there are any differences in the amount of property damage, it is likely that the most recent tenant caused the damage. On paper, the document appears to be almost exactly the same. In this method, you establish who is responsible for what.

Checklist of what's in an entry condition report

How are you able to be so positive that there are no dents or blemishes on the property that you viewed? The following is an exhaustive list of all of the issues that must be discussed in your Entry Condition Report:

• Entry - doors, walls, ceilings, windows, screens, blinds, curtains, fans, light fittings, floors, and floor coverings as well as power points are all components of a room that can be customised.
• Lounge / living room / dining room - same as above. Additionally, look out for TV points and air conditioners.
• Kitchen - same as the entry. In addition to these, check the stovetops, oven, griller, exhaust fan, range hood, dishwasher, and power points. Cabinets, drawers, benchtops, tiling, sinks, disposal units, taps, and power points should also be inspected.
• Bedrooms - check the doors, walls, ceilings, windows, screens, blinds, curtains, fans, light fittings, floor, floor coverings, power points, closet, drawers, shelves, and air conditioners in each of the bedrooms in the house.
• Ensuite bathrooms - examine the condition of the bath, the shower, the shower screen, the sink, the vanity, the mirror, the cabinet, the towel rails, the toilet, the exhaust fan, and the power points. Inspect the floors, walls, ceilings, doors, windows, screens, blinds, curtains, fans, and light fittings in addition to the ceilings, walls, and floor coverings.
• Toilet - doors, walls, ceilings, cistern, light fittings, and exhaust fan.
• Laundry - doors, walls, ceilings, windows, screens, blinds, curtains, fans, light fittings, floor, floor coverings, washtubs, washing machine, dryer, and power points.
• General - fire extinguishers, security systems, electrical safety switches, hot water systems, keys, locks, remote controls, stairways, railings, wheelie bins, pool, equipment, street number, letterbox, exterior walls, porch, balconies, decks, awnings, gutters, paving, pergola, garden shed, gate, fences, gardens, external taps, hoses, clothesline, solar panels (if any), and paths and driveways.

You should use the questions that are provided below as a guide in order to finish writing the descriptions of each item on the Entry Condition Report:

• Are electrical devices operating properly? What is their age?
• What kind of shape are the walls, floors, carpets, and furnishings in? Are they pristine?
• What condition are the plumbing and water supply systems in? Keep an eye out for water flow, water heating, and whether or not the taps are functioning.
• Is the property's electrical work trustworthy and safe? Are any connections faulty? Are the sockets functionally sound?
• Are the lawn, garden, garage, fence, and exterior spaces kept up well?
• Do any walls, surfaces, carpets, or pieces of furniture have stains, burns, holes, scribbles, mould, or cracks?
• Are the locks, curtain rails, doorknobs, and floorboards secure?
• Do the water sprinkler systems, roller doors, and smoke and burglar alarms all function properly?
• Are the pool heater and filter working properly?
• Are the lights functionally sound?

How should an entry condition report be completed by a property manager?

Throughout their career, a professional property manager has completed countless entry condition reports and property inspections. They are experts in identifying dings and scratches and contribute more thorough information to the Entry and Exit Condition Report.

Your investment property will function more smoothly if you have a good property manager. As is always the case, hiring an expert allows you to focus on something other than the property.

You're not alone if you think that completing an Exit Condition Report, comparing it to an Entry Condition Report, and managing disagreements and disputes is a laborious task.

Contact us today at (03) 9998 1940 or team@klearpicture.com.au for a consultation!

A good reason why 80% of Australian investors choose to hire a property manager to handle these concerns for them is property maintenance and transitions.

How does your property manager comment on the entry condition report?

A description box will be next to each item on the entry condition report that needs to be filled up. The person who filled it out is given the opportunity to add background information and to describe the damage that occurred. You can come across comments like the following:

• White walls that are spotless and unblemished by dents, scratches, or other problems.
• On the right-side wall, close to the light switch, there are two picture hangers.
• Excellent, steam-cleaned carpet that is in fantastic shape.
• One yellow stain in the area adjacent to the kitchen cabinets.

Property damage versus normal wear and tear

The colour of the draperies in your personal residence will eventually lose its vibrancy, and the same thing will happen at the rental property that you own. When it comes to maintaining a rental property, normal wear and tear is an unavoidable issue that must be dealt with. However, differentiating between true damage and normal wear and strain, as well as determining who is accountable for what, may be tough.

The following are some examples of things that can be considered normal wear and tear as well as harm to property:

What's the difference between fair wear & tear and property damage?

The term "fair wear and tear" refers to any issue with property maintenance that can be anticipated to crop up organically over the course of a building's lifetime. When a tenant causes a problem with the property's upkeep or repairs, whether accidentally or on purpose, it results in property damage. There is a fine line that separates natural wear and tear from damage to the property, and in the end, what matters is not whether or not the tenant was responsible for the incident but rather whether or not it occurred in good faith.

Accidents can occur in both normal, expected wear and tear as well as damage to property. It all depends on whether or not the tenant's actions can be interpreted as irresponsible and on whether or not you can reasonably assume that they were aware that their actions could result in damage, or on whether or not the damage was not something that you could reasonably expect the tenant to be responsible for. If the tenant's actions can be interpreted as irresponsible, then it is safe to assume that they were aware that their actions could result in damage.

How to successfully plan your budget for the upkeep of your investment property

In comparison, only 20% of Australians own a single piece of real estate, whereas 27% of them own two or more homes as assets. If you want to be one of the people who make up the 27 percent, you have some work to do. Some of our owners' top objectives include having a clean home, having renters that behave themselves, and having excellent contact with their property manager. However, a solid cash flow should be your number one objective because none of these other things can compare to its significance.

What exactly is property upkeep?

Let's begin with the most essential aspects of property maintenance, which are the operating costs and the capital costs. You will be able to immediately begin building your real estate empire and planning your future cash outflow for your rental property if you have a good understanding of this basic breakdown.

Is property upkeep necessary?

In point of fact, even the property that has been scrupulously kept will at some point require further upkeep or a redesign. In addition, it is advisable to be prepared for the unexpected when it comes to matters pertaining to properties. Who can say for sure when the next incident of mould growth or a burst pipe will take place? We are aware that it is best to be prepared for whatever property maintenance might be required and to put money in the budget for it.

1. Expenses for operations or maintenance

The overall costs associated with maintaining the property are included in this category. This also includes any applicable taxes and any necessary insurance premiums. While preparing a budget for some of these expenses might be simplified if you did it on a yearly or biannual basis, the remaining expenses could arise at any time. As a result, it is important to carry out frequent checks in order to anticipate and head off potential problems.

If you engage a property manager who is responsible for performing routine inspections, you may be able to better control your operating and maintenance expenditures. If you do this, you will constantly be aware of the status of your property and you will be able to properly anticipate any expenditures that may be incurred.

As the owner of the property, it is your responsibility to repair any fixtures, furniture, locks, or other items that have seen better days. In the event that your tenants accidently damage your property or make improper use of it, you may want to consider asking them to pay for the cost of repairs in the interim. Additionally, it is vital to acknowledge tenant requests for repairs and to carry them out as quickly as is humanly practicable.

What are the costs for maintaining rental properties?

You should be aware of the following costs involved with the maintenance of a rental property, which are highlighted in the following list:

• Painting
• Landscaping
• Garden, yard or outdoor area maintenance
• General cleaning and chemical costs for swimming pool
• Light bulbs and batteries on smoke detectors
• HVAC filters
• Repairs for gardening equipment
• Rental property inspection
• Pest control
• Cleaning products

Leaks in the plumbing and malfunctioning appliances are two of the most common problems that require repair. In a similar vein, be on the lookout for potential sources of problems, such as rodents, roof leaks, and sinks and toilets that are clogged with waste. Improving the interior of your investment property right now with a number of home upgrades that qualify for a tax deduction can allow you to save money in the long term on the property's upkeep and operational expenses.

2. Capital Costs

You are required to make a budget that accounts for the second category of spending, which is referred to as capital expenses (CapEx). These things make the property in question look better and extend its useful life. If the property is not properly maintained on a routine basis, the value of it may drop. As a consequence of this, you can consider the cost of capital expenditures, or CapEx, to be an investment rather than a loss-making item when it comes to the upkeep of an investment property. Tenants would rather live in a property that has been well-maintained than one that is in desperate need of replacements and repairs. Let's take a look at how much each of these things costs now:

• Plumbing
• Replacing or adding new appliances
• HVAC (Heating, Ventilating, and Air Conditioning)
• Water heater
• Flooring
• Roof
• Countertops
• Remodelling bathrooms and kitchens
• Windows

Develop a plan that takes into account the possible amount of time each of the aforementioned things will remain in existence. You will be able to determine when it is the proper time to replace or improve them based on this information.

You might be able to tell the difference between a maintenance expense and a capital expenditure by asking yourself whether the expense is intended to improve the condition of the property or to restore it to its original state. If it is the latter, then we consider that a cost of upkeep.

How much does property upkeep cost?

This is depending on a number of factors, some of which are the age of your property, its size, and the state in which it is located. Whether it is a home for a single family or a building that houses a business, the type of property has an effect on the amount of maintenance that must be performed. For instance, larger buildings that have an abundance of parking and additional features may require a larger cleaning budget.

Budgeting strategies for maintenance

Budgeting can be done in any way—right or bad. However, as a general rule of thumb, the following calculations may assist you in anticipating your maintenance expenditures for investment properties:

1. According to the 50 percent rule, your rental property's overall operating costs may equal 50 percent of its revenue. For instance, $500 might be spent on maintenance for a $1,000 monthly rent.
2. The annual property value is taken into account under the 1% rule. It implies that the overall operating expenses may rise by about 1% of the property value annually. For instance, your annual maintenance costs may be roughly $4,000 if your house is worth $400,000.
3. The 5X rule combines monthly rent with yearly maintenance expenses. Calculate the annual maintenance costs by multiplying the monthly rent by 1.5. For instance, a $2,000 monthly rent will result in a $3,000 yearly maintenance expense.

Source: CoreVest (2018)

These are approximations, as we all know. There is a high likelihood of changes and seasonal variations. However, it never hurts to plan ahead. It may assist you in avoiding experiencing cash flow issues.

Would you like to speak to a specialist? Book a complimentary discovery session by calling: (03)999 81940 or emailing team@klearpicture.com.au.

Other costs to consider are:

Insurance -You will find that dealing with late payments from tenants or property damage is simplified as a result of this change. Popular landlord insurance companies in Australia provide protection against lost rental income, damage to belongings caused by fires and other natural disasters, and structural damage brought on by tenants, visitors, or pets. These policies also cover damage to the building itself.

Tax - Your tax return must include information about your rental revenue. You can deduct expenditures associated with owning a rental property, including upkeep, repairs, bank loan fees, paying off renters' outstanding utility bills in default, property manager fees, advertising costs, insurance, legal fees, and land taxes.For further details, click here.