If your rental property is out of sight it’s likely out of mind. You might think it’s enough to spend a few days a year on the management of the property particularly when you pay professionals to do most of the work for you. But this thinking could see you miss out on tens of thousands in lost revenue over the life of your investment. Worse still you sell the property because the return isn’t worth the effort. If you are going to maximise the value of your investment property,watch our for these common mistakes.
1. Buying with your Heart
It’s acceptable to purchase a property based partly on emotion when you’re an owner occupier but not when you are looking for an investment property. Most investors even know this but still allow their personal likes cloud their buying decision. If you are looking for your first or next investment property, keep reminding yourself that you’re buying based on the needs and wants of your ideal tenant not your own.
2. Not Hiring Professionals
Trying to save money by handling the property management and tax returns yourself may actually cost you money in the long run. A good accountant who has a number of clients with investment properties may structure your loans or tax affairs in a way you may have never even heard of. Their experience and knowledge could improve your financial position by thousands. A property manager with years of experience has the people and communication skills you may lack in dealing with tenants. They will also have trusted contacts in the local area who can supply maintenance services.
3. Missing out on the Full Depreciation
Regardless of the age of the property, make sure you are claiming the full depreciation value of the property at tax time. Getting a depreciation report completed could significantly reduce the cost of holding the property. Ensure you use a qualified expert to prepare the report so that nothing is missed.
4. Rent Reviews Missed
If a property has a good tenant and there is little or no mortgage left, it is common for landlords not to conduct an annual rental review. A year or two slips by and rents in the suburb may have increased by $30 per week which equates to $1,560 per annum in missed revenue. Multiply this loss by a few years and the lost revenue is significant.
5. Skimping on Property Maintenance
If you take the time to ensure your property is kept in good working and aesthetic order you’ll save in the long run. For example, paying to have the gutters repaired and painted now may mean they don’t need replacing in a few years’ time. A tenant is probably not going to worry about little maintenance issues like an owner occupier does so if a property inspection reveals the grout in the shower has deteriorated, don’t leave regrouting until there is a rising damp problem otherwise the tilers bill will be much larger.
6. Becoming a Charity
It’s easy to feel sorry for potential tenants and the predicament they may find themselves in however you need to remember that your investment property is a business not a charity. A friend or family member may ask you to take on an out-of-luck tenant but don’t be tempted to skip the reference check process or offer a cheap rent because you feel sorry for them. There may be a good reason why they don’t have a house to move into – they could be a poor tenant that is about to put your investment at risk.
7. Landlord Insurance Not Taken Out
For peace of mind make sure your investment is safe. Landlord insurance may provide cover from losses due to the property being damaged or destroyed, unpaid rent, liability risk and legal expenses. Read the policy carefully to ensure you’re covered for any type of event that could significantly impact on the value of the property.
Spending some time on a regular basis looking after the affairs of your investment property will ensure you get the most value possible from the property. If you aren’t sure what makes an ideal investment property ask one of the Naked Edge Real Estate agents for some advice and if you’re looking for an experienced property manager contact Simone Kohli at We Love Rentals.