Owning an investment property can be very rewarding – but becoming a landlord carries plenty of risks with it too. Here are some of the most common mistakes we see landlords make, along with tips to avoid them.
1. Overpricing the property
Savvy investors will look to maximise the rental return they receive. However, listing your property at the very top of your pricing expectations can be a risky strategy. Enquiries from potential tenants generally peak during the first few days your property is advertised – if you’ve listed at an unrealistic price, they may not make it past the search page.
Melbourne’s current weekly medium rent is $450. At this rate, just two weeks of vacancy will cost you $900 in lost rental income. If a $10 reduction in rent would mean the property was leased immediately, this small decrease would actually save you money – ‘costing’ you just $520 over the financial year.
2. Choosing the wrong property manager
All property managers are not created equal. Choosing one with local market experience who takes a strategic approach to maximising the value of your investment will give you the best outcome. A great property manager will take the time to understand your objectives and actively work with you to ensure you enjoy strong returns and low vacancy rates. They’ll save you time, money and hassle by making owning an investment property straightforward and rewarding.
3. Having inadequate insurance
Your rental property is a significant asset – it’s incredibly important to insure it appropriately. Landlord insurance is tailored to cover risks that property investors face and includes aspects not covered by other types of home and contents insurance policies. Landlord insurance covers you for tenant-related risks, including loss of rental income, and loss or damage to your contents or building caused by your tenants. And, because it’s an investment expense, your policy premium is tax-deductible.
4. Neglecting repairs or maintenance
It can be tempting to delay repairs or maintenance issues when you’re not personally faced with them everyday. However, it’s in your best interest to address any problems that arise quickly – both to keep your tenants happy and to stop the problem from becoming a bigger issue. Your property manager should manage the process for you and will have a list of trusted local trades they use to ensure the job’s done right the first time.
5. Not treating it as a business
While your property manager will look after the day-to-day aspects of owning a rental property, you should treat your investment property in the same way you’d treat any other significant financial investment. This means staying on top of what’s happening with your property and working with professional advisors like accountants and financial planners to ensure you’re making the most out of your rental.
At Greg Hocking, property management is a core part of our business. if your current property manager is just going through the motions, contact your local Greg Hocking office for more information about how we can work with you to achieve the best rental returns.