Making a success of your investment properties
We’ve all heard the horror stories – friends and family who’ve lost money and sleep because of bad tenants or poorly managed investment properties. What you don’t often hear are the success stories – the ones about savvy investors who manage to avoid or solve these problems.
How do they do it?
They know that to have everything running harmoniously and profitably, you need to follow the fundamentals.
There are seven keys that make managing property safe, easy and rewarding and they apply to any type of residential property, whether it’s a studio apartment or a waterfront mansion. The focus remains the same – finding the right tenant for your property and managing the tenancy process.
So what are these fundamental keys?
1. The landlord mindset
As with any business, the main focus is to generate income and grow your asset, and you don’t want to be up all night worrying about it. This is why it’s important to have a plan.
2. Do your research
Once you know your investment goals, you need to figure out which property will help you meet them. Knowing the options available, you can get them right from the start – including location, property types and where the area is in the market cycle.
3. Buy the right property
There are ground rules for buying an investment property. Know the dynamics that will impact the purchase price. For example, what time of the year you buy or sell will have an impact on the result. December is traditionally a difficult time to sell as buyers have turned their focus to end of year festivities. So those properties not sold over spring are competing for the few buyers left in the market. January, on the other hand, sees a reversal. During the end of year break, many resolutions are made to buy property but the summer market doesn’t start in earnest until mid-February. So January sees very little property available with many new buyers competing for them.
Make sure you’re fully organised before you bid at auction or make any offer, including having full unconditional approval from your lender.
4. Present your property
Appearances and first impressions are vital to success. Before you begin looking for a tenant, make sure your property ticks the boxes that tenants are looking for. Presentation is more than skin deep – safety issues, low-maintenance appliances and cleanliness can make a real difference to the rent you can charge and your peace of mind.
5. Start marketing
Set up marketing and pricing strategies that will minimise any vacancy whilst giving you the best chance of an above market rental. Evaluating the rental of similar recently leased properties will give you a reasonable idea of what to expect for yours – your property manager should be able to prepare this list for you.
If you’ve prepared your property well, you might consider an initial asking price a little above your expectations to give the chance of achieving a great rental – though you need to act fast if prospective tenants are not agreeing with your assessment to bring the asking price back to a reasonable level to minimise any vacancy. It’s not worth chasing a few extra dollars when you’re missing out on a weekly rent.
6. Choose a tenant
Choosing the right tenant is the backbone of a healthy and worry-free investment. Your tenancy application should be designed to uncover all the information you need to know about the tenant and be able to sort through the applicants. Don’t be tempted to take chances with a tenant. If it seems too good to be true, it probably is. A good tenant should be reliable, take care of the property and be co-operative if there is a problem.
7. Manage your property
Once you have good tenants, it’s important to keep them, and keep them house-proud. Policies, procedures and checklists will help you monitor the performance of the property and the tenancy, and prepare you for the unexpected such as if the tenant stops paying. That way there’ll be no surprises, and you’ll be ready for anything.
Whether you already have an investment property or you’re a first-timer, by understanding these seven keys you’ll be able to select, purchase and manage an investment property with confidence, minimise risk and create peace of mind.
For more, go to www.landlordmindset.com.au