A rental property is a long term strategy for financial security, however there are some common pitfalls which can cost you money and reduce your profits in the long term.
The following tips will help you make the most of your rental property, resulting in less headaches when you own it and maximum returns when it comes time to sell.
Mistake #1 Buying the wrong property
Not all investment properties are created equal! Some have the potential to be money pits, while others struggle to attract tenants, meaning they can sit empty for months.
When you’re looking to buy a rental property, do your research into what is consistently in demand. You can find out some details by looking on websites like realestate.com.au and domain.com.au which share information about a suburb’s average rental yield, market demand and annual growth.
These are only surface level details. It’s important to speak in depth with an agent who knows the local area. At One Agency Ireland, for example, we will be able to guide you on what tenants are willing to pay, and which property features attract the highest paying tenants.
Before you buy your property, you should also organise a building, pest and strata report so you won’t be stung for hidden repairs you weren’t prepared for. These reports will identify what needs urgent attention and will give you an idea of the money you will have to spend over the next five – ten years.
Mistake #2 Failing to upgrade
The nicer your investment property presents, the more your tenants will be willing to pay, you also attract a tenants who care.
It also makes sense to keep your house or apartment well maintained and up to date as the costs are claimable and this will save you from having to upgrade everything at once when you are trying to sell.
The most important areas of an investment property to keep up to date are the kitchen and bathrooms. There are many low-cost renovations you can do to give these spaces a facelift. As an example, you can get a quote for replacing cabinet doors and handles rather than removing the entire cabinetry. You can also resurface kitchen benches.
Fresh carpet, wall paint and new light fittings are another way to make a property appear more modern without having to spend thousands. Think of what will provide comfort and appeal to residents; would it be a new air conditioning unit, ceiling fans, roller blind or fresh curtains?
Mistake #3 Avoiding inspections
People can present differently to the way they live so regular inspections are a must. This will ensure your property is being well looked after and will notify you if a tenant is not abiding by the conditions of their lease.
Take the pressure off awkward rental inspections if you’re self managing by having inspections manage by a professional property manager from One Agency Ireland. Your agent will conduct ingoing, routine and outgoing property reports. We take photos for evidence and refer to checklists along the way to make sure the property has not suffered any unreasonable damage.
Mistake #4 Failing to have Landlord’s insurance
It feels like yet another expense but insuring your rental property is as important as insuring your home, and can save you money in the event of something going wrong.
As well as home and contents insurance which will cover you for things like fire and storm damage, you should have Landlord’s insurance. This provides cover for permanently tenanted properties, including: loss of rent, loss or damage of contents, loss or damage of building (tenant damage). Some policies have additional benefits such as covering re-letting costs above the tenant’s bond, removal of goods and replacement of locks following an eviction and limited allowances to cover you for a Tax Audit and Legal Liability.
Mistake #5 Getting involved with tenant disputes
Your tenants have rights under NSW Fair Trading laws, the Residential Tenancies Act 2010 and Residential Tenancies Regulation 2010. In some cases, they may dig their heels in about their rights in a way that is unreasonable. Tenants may also try to get more than they are lawfully allowed by trying to confuse you about rules and regulations.
The best thing you can do in this situation is hand everything over to a professional managing agent. At One Agency Ireland we know the ins and outs of current legislation and can manage problems in a professional manner.
A good managing agency will always put a tenancy agreement in place which clearly states the rights and obligations of both parties. This process is managed in a compliant and professional way, helping to reduce the likelihood of disputes.
We see it time and time again; a landlord avoids working with an agency because they want to save a few dollars. Once a dispute arises, those property management fees seem very cheap in comparison!
With so many risks and pitfalls, it makes sense to hand the management of your investment property over to an experienced property manager at One Agency Ireland. As well as taking the stress out of dealing with tenants, we will be able to provide you with ongoing advice to maximise value and returns.