Many investors think that buying the right investment property is the hard part of the process when building wealth through real estate, but it’s only the first step. Managing your investment effectively for maximum profits and minimal stress is step two, and it requires a strategy and approach all of its own. Being a landlord is rarely a ‘set and forget’ proposition, even when you have a professional and experienced property manager in place. You still need to keep abreast of changing trends and regulations, and work with your property manager to ensure that you are achieving the best results for you and your tenant.
We’ve put together a list of hints and tips for a smooth property investment journey;
BEFORE YOU BUY
1. Speak to a local property management expert
Speaking to local property managers and investment specialists in the area you wish to invest in will help you understand what types of properties are in highest rental demand so that you choose a property investment that will truly shine in the market.
2. Look at vacancy rates
Check the vacancy rates for the suburb you’re investing in. Typically, on the Gold Coast, a vacancy rate lower than 3% indicates a strong and busy rental market where you won’t have to wait long for new tenants to move in after previous tenants move out.
ONCE YOU’VE BOUGHT THE PROPERTY
3. Choose the right tenants
Choosing the highest quality tenant is not the only factor at play when renting your property, selecting the right tenant to suit your investment goal is important too. Ask questions about their long-term intentions – do they only want to stick around for six months, or are they in it for the long haul? This could save you money down the track.
4. Get quality landlord insurance
This is one of the most important expenses in relation to property investment and it is one that you certainly shouldn’t scrimp on. A good insurance policy will cover you in the event of problems such as damage to your property, or loss of rent due to tenancy defaults.
5. Don’t overcapitalise
While presenting your property in its best possible light will draw the attention of high-quality potential tenants who are prepared to pay a premium, it’s important to remember that property investment is ultimately about the returns you will earn. Don’t overcapitalise on expensive upgrades and renovations when cheerful but more affordable alternatives are available.
6. Market wisely
Investing in effective marketing campaigns when introducing your property to the rental market could make you more money. Speak to your property manager about marketing options that are available to best promote your property.
7. Invest in professional photography
They say that a picture is worth a thousand words; in property management, professional pictures could be worth thousands of dollars more on your rental return. Professional photography attracts a higher volume of interest, and higher interest means higher demand and higher rental prices.
8. Use real estate technology to your advantage
Technological advancements make property investment and property management more convenient and streamlined. Some websites and applications provide instant access to information about your investment property, including rental payments made, maintenance invoices, and financial statements. These applications can offer you peace of mind, as well as answer many questions that you may have without even having to contact your property manager. Speak to your property manager about the technologies that they have available through their branch and learn to use them.
9. Know the legislation
Take the time to understand basic tenancy legislation. A knowledge of the rules that apply to tenancies, such as late payment policies and notice periods, will come in handy when working with your property manager, and in the event that issues arise.
10. Take the time to understand the different types of tenancy agreements
There are two different types of tenancy agreements: fixed and periodic. Fixed tenancies encompass a set period of time, while periodic tenancies can be adjusted monthly, or even weekly. Speak to your property manager to make sure that the types of lease agreements in place are in alignment with your investment goals.
11. Make an informed decision about pets
There are positives and negatives to allowing pets in a rental property. This concession can bring a lot of tenants to your door; many of them are responsible and will be looking for long-term leases. However, pets can also cause damage, no matter how careful a tenant is, so this is a question you need to weigh up carefully. Make sure that that you include pet damage on your landlord insurance if you do choose to allow pets in your investment property.
AS A LANDLORD
12. Reward good tenants
Great tenants are worth their weight in gold when it comes to ensuring that you receive the maximum return on your investment, and that your property is well looked after, so do what you can to have them stay on as long as possible. Some ways you can make your tenants happy include attending to necessary repairs or requests quickly, giving reasonable notices of any rental increases, and even giving a token of appreciation when they renew their lease, or at Christmastime.
13. Know your key dates
Be mindful of when your tenants lease is about to expire, and work with your property manager towards renewing it at least three months before it’s up. By being proactive you will have time to find a new tenant if your current one vacates, and you will minimise the risk of any vacancy periods.
14. Respond swiftly to requests for maintenance
To keep a good tenant, it’s ideal if you can present a home that runs so smoothly, they will never want to leave. If a tenant reports that something is broken, don’t wait to fix it; by nipping it in the bud early, you’ll keep your tenant happy, and the repairs will benefit your property in the long run.
15. Don’t forget to upgrade and update
While you’d like to keep good tenants forever, the truth is that you most likely won’t. Vacancy periods are a great time to evaluate the property and see if any improvements can be made to generate a higher rental return, being careful of course, not to overcapitalise.
16. Increase rent according to what the market dictates
While it would be great to seek soaring rental increases to drive down the mortgage on your investment, all rental increases must be reflective of the current rental market. Keep an eye on what’s happening in your property’s local market and seek advice from your property manager before making any decisions.
17. Build a good relationship with your property manager
A positive relationship with your property manager will certainly lead to positive outcomes for your investment. Take the time to get to know your manager and listen to their advice. Always offer credit and gratitude where it is due, and you will find that the management of your property will run very smoothly.
18. Keep an eye on your books
Aside from making sure the rent gets paid every month, you should take the time to understand the rental statement / ledger that you receive each month. By understanding your statements, you will be able to see when rent is paid to, what accounts have been paid, as well as track any fees. This will also come in handy when you need to collate the right documents and information at tax time.
19. Keep it professional
It’s good to have a pleasant relationship with your tenant and be courteous and compassionate however it should never get in the way of doing business. If your tenant is late in paying rent it could mean that you will be late in making your mortgage payment, do not be afraid to put your foot down if a tenant is behind in rent, it’s just business.
20. Be aware of tax benefits and liabilities
There are many tax deductions you can claim while renting out your property, such as depreciation, maintenance expenses and mortgage interest. It’s a good idea to work with an accountant to ensure you’re maximising your tax benefits and minimising your liabilities.
21. Have an emergency fund
Have a financial plan-b in place to maintain the property and cover the mortgage throughout any periods of vacancy. It is a good idea set aside some of the rental income you’re receiving towards a reserve fund so that you can be proactive about this.
22. Be accessible
Part of owning a property is about being available. While you don’t need to be ‘on call’ 24/7, you do need to be reachable by email and phone, and ready to respond to any requests from your property manager. Do try to get back to your property manager as quickly as you can.
23. Have a backup
You may not always be able to act at a moment’s notice. It’s a good idea to have a trusted friend or family member who can step in on your behalf should your property manager or tenant need your assistance or if issues arise when you’re unavailable.
24. Get everything in writing and keep it
The tenancy agreement shouldn’t be the only document in you Dropbox or expander folder– documents such as routine inspection reports, maintenance invoices, and important correspondence should be kept, and kept together.