Having an investment property can be very rewarding, but there are some common mistakes landlords make. These mistakes include misunderstanding the tenancy agreement, deferring repairs and maintenance, having inadequate insurance, charging the wrong rent and failure to budget for expenses and downtime’s.
1. Misunderstanding the tenancy agreement – Tenancy agreements are a vital part of renting out your property. It contains important information about the tenant’s rights and your responsibilities and can have serious consequences if you fail to comply. Before you sign the tenancy agreement, make sure you’ve fully read and understood it and that it includes any additional clauses you require (note that clauses can only be added if they are compliant with the Residential Tenancies Act). Contracting out of the Act will only land you in hot water.
2. Deferring repairs and maintenance – When you purchase an investment property you are essentially buying a business and with that is the need to inject capital. Maintaining your investment and keeping on top of repairs will help you protect the property’s capital value and allow you to attract and keep quality tenants. Holding off on repairs and maintenance to save money is a false economy as you’re only likely to attract unsatisfactory tenants, have longer down times between tenants, and get lower rent.
3. Inadequate insurance – We all know that it’s important to have an insurance policy, but not all cover everything that’s important to you. It pays to shop around. Real Landlord insurance is one option and is available to all landlords who have their properties managed by an accredited Property Management company. This covers you for lost rent, rent downtime in between tenancies and damage caused by tenants.
4. Charging the wrong rent – Setting the right rent can be tricky. Over price and you end up with longer vacancy times and more tenant movement, but under price and you won’t get the same return.Your rent should be in line with similar properties in the area, and it’s a good idea to review it throughout the tenancy. Give your local property manager a call for advice on how to set and manage rent increases.
5. Failure to budget for expenses and downtimes – Owning a rental property means you’ll incur expenses like rates, insurance, body corporates, repairs and maintenance, lost rent between tenancies. Having a good comprehensive budget or financial plan in place will prevent you from ending up out of pocket.
6. Failure to conduct regular Inspections – Regular inspections are a vital part of managing your property. This is how you keep ahead of any repairs and maintenance that might come up and also ensure that your tenants are taking good care of your property.