Tenants from hell, high loan repayments and persistent maintenance problems can conspire to make landlords feel investing in residential property is best left to suckers.
Bricks and mortar, however, remain one of the most popular and effective ways to build long-term wealth, without the wild swings share market investors have experienced this year. Property investors should always look at taking a long-term view.
1. Bad Tenants
Poor tenant selection can be a major trap. Signing up a bad tenant can lead to a series of problems that may be time consuming and expensive to fix. You need to screen prospective tenants carefully. A professional property manager will be able to help with this. They have access to default registers that lists tenants who have caused past problems. It is important to check and phone all the referees, past property managers and all details provided by the applicant.
2. Where's the rent?
Tenants from hell aren't always those who trash your property. Those who don't pay rent or continually slip behind in payments can be just as painful for landlords. If a tenant is late in paying rent, it is important to take action immediately. This serves two purposes. First, it ensures that the outstanding rent is followed up and hopefully collected as soon as possible. Is also communicates to the tenant that if they are late in paying, there will be immediate action taken. The short term problems that can plague landlords can be avoided or at least reduced with planning and research which sets a good precedent going forward.
3. No insurance
A landlord insurance policy eliminates unnecessary risk and potential expensive payouts. Landlord insurance provides a safety net and peace of mind. It can provide you with cover against malicious and accidental damage to your property by tenants. It can also protect you from loss of rental income as a result of a tenant absconding or damaging a property leaving it unable to relet whilst repairs are made.
4. Over committing
Many property investors use negative gearing to get a nice tax refund but should remember they don't get all their expenses back. With rental income yields below home loan interest rates (although yields have been increasing with the latest reductions in interest rates), investors need to ensure they have the spare cash to cover not only the interest cost differential but also such expenses as council rates, land tax, water rates, maintenance costs and management fees.
5. Can you fix it?
When maintenance or repairs are required, landlords should act as quickly as possible. As a landlord, once you have been alerted to maintenance issues, it is you responsibility to act or authorise your property manager to take necessary action. Failure to do so can be a legal liability risk. If a maintenance issue arises and you are slow to fix it, you may be held legally liable if your tenant injures themselves. Landlords should be proactive with maintenance. Regular routine inspections will highlight areas that need attention and it's a good idea to implement a regular maintenance program.
6. Tenants as friends
Ideally the relationship between landlord and tenant should be at arm's length. Too close a relationship can lead to difficulties down the track, especially in situations where the parties have a falling out. It is best to have a professional property manager that won't be swayed by any personal interest.
7. No inspections
Conducting regular inspections and documenting the information can alleviate many possible problems. Many landlords who self manage don't conduct regular inspections. This has two consequences. If a tenant is causing damage to the property and regular inspections are not being held, the damage may go unnoticed and be costly to fix later on. Second, if maintenance issues occur and are not fixed, legal liability issues may arise for the landlord if the tenant injures themselves.
8. Self Managing
People who don't have the time, the knowledge or an interest in property management can get burned if they try to be their own property manager. Many landlords simply don't have the time to respond to maintenance requests or conduct regular inspections to address potential liabilities. While it can be tempting to save a small percentage of rental income to self-managing your property, the benefits of appointing a property manager far outweigh costs.
The staff of Time Conti Sheffield would love to assist with queries please do not hesitate to contact us.