7 Tips for Managing Your Investment Property
Choosing a property to rent out to tenants is only a small component of maximising your investment return. The way in which you choose to manage your property can affect your cash flow and your overall returns.
Here are some tips for managing your investment property.
Treat it as a business
When you view a tax return for a rental property, you’ll notice that the Australian Tax Office (ATO) treats it much like a business. An investment property is an income-producing asset. The costs associated with generating that income are considered tax deductible expenses.
If the ATO views your rental property as a business asset, you should too. Be aware of your cash flow. Understand what causes your asset to stop generating income. Know how to improve your cash flow and increase profits without negatively impacting your investment strategy.
Assemble a strong team to help you maximise the returns you get from your investment. Your investment team should include a good home loan consultant, an accountant, and a professional property manager.
Don’t get emotionally involved
It’s easy to become emotionally attached when shopping for a new home. In fact, some investors make their decision based on what they would like in their own home.
Don’t choose an investment property based on emotion. Instead, take the time to view the property’s potential as an investment. Crunch the numbers, know what vacancy rates are like in your chosen area, and understand the potential rental demand.
If the numbers stack up, view it’s investment potential as part of your overall financial strategy. If the numbers don’t stack up, don’t look for excuses to try and somehow make it work just because you’ve fallen for it on an emotional level.
Stay impartial and treat your rental property like any other investment.
When you buy your investment property, the bank may ask if you have building insurance over the asset. But insuring the building doesn’t provide the level of coverage you need as a landlord.
By comparison, a specialised Landlord’s Insurance policy protects you against a range of things, including default or loss of rent, accidental or malicious damage to the property, and legal liability.
Landlord’s Insurance also covers damage to the landlord’s contents, including dishwashers, ovens and cooktops, hot water systems, air conditioners and other fixtures.
Stringent tenant screening processes
Finding the perfect tenants can be challenging for any landlord, so it’s important to have stringent tenant screening processes in place. Some landlords are happy to accept applications from any tenants willing to pay the rent on time. However, it’s also important to ensure you choose tenants that are more likely to look after the property too.
Run thorough background checks on prospective tenants and verify their income sources. Check on any references from previous landlords or property managers to gauge the tenant’s past conduct in other properties.
If you’ve engaged the services of a property management agency, your property manager will take care of all these things for you.
Stay on top of rent reviews
Your rental property is an investment, so you deserve to receive a fair market rate for the rent your tenants pay. Some landlords are over-eager about charging higher-than-average rents.
Others are reluctant to increase the rent, especially if they have long-term tenants in the property. Undercharging your tenants on the amount of rent they pay is short-changing your own investment goals and could negatively impact your cash flow.
Be sure you offer a vacant property at current market values and charge tenants a fair market rent. You’ll keep your tenants happy, which helps keep your vacancy rates low.
Keep up with maintenance
Good quality properties tend to attract good quality tenants. Rather than waiting to be told something has broken and needs to be repaired, spend a little time and money tending to maintenance and minor repairs on a regular basis. When a landlord makes the effort to keep up with maintaining a property, it increases the likelihood of a tenant also feeling obliged to look after it as well.
Engage a good property manager
The final tip is the one that is also capable of taking care of all the other tips on this list. Engage the services of a professional property management agency. Your property manager will keep up with all the relevant landlord-tenant regulations and legal obligations, as well as ensuring your property is inspected regularly and remains well-maintained.
A good property manager can take all the stress out of managing your rental property and help you get the most out of your investment.
This article provides general information which is current as at the time of production. The information contained in this communication does not constitute advice and should not be relied upon as such as it does not take into account your personal circumstances or needs. Professional advice should be sought prior to any action being taken in reliance on any of the information.