The 9 Most Common Pitfalls That Landlords Fall Into and How to Avoid Them
Managing a rental property can sometimes become overwhelming. This could lead to you overlooking certain details, which could end up costing you money in many different ways. Here are some things to avoid if you’re looking to become a successful landlord, and how we can help you avoid them.
#1 – Not increasing the rent at every opportunity:
As of 1 July 2009, The Residential Tenancies and Rooming Accommodation Act 2008 has amended its previous act allowing for different rules regarding the frequency of rent increases now allowing for increases no more frequently than each 6 months. A good agent managing your properties would keep thorough records regarding your current lease renewals and vacancies. They will prepare a detailed comparative market analysis (other rentals which are comparable) to assist you in your decision as to what price you should expect to achieve. This will keep you from missing all opportunities to gain revenue on your properties! It should be all about getting great tenants and maximising your return.
#2 – Not getting long leases with rent increases in place every 6 months:
To make sure your vacancy times are kept to a minimum it is important when you have found a quality tenant to have them commit to a long lease. It is becoming more and more common to have leases for 12 months and even longer. This is part of the negotiation process and good property managers will push for the longer leases for you. They will also think about when they are due to expire and where possible include rent increases every 6 months.
#3 – Not making sure leases expire at peak periods:
If you have your lease ending at an off peak time you’re going to end up losing money. Make sure to have a property manager who plans to have leases expire at peak times so you get the best rent possible, and it is rented quickly if need be. The tendency is to just run with a 6-month or 12-month lease with no consideration of when that will expire. It is so common to hear of properties become vacant when the lease expires in months like December when it is harder to find tenants and offices close over Christmas etc often leaving the owners with weeks of no rent. Your property manager should push for a January or February expiry date in this case as there is usually a lot more inquiry. In peak periods you are likely to have little if any vacancy time and a likelihood of a much higher rent being achieved.
#4 – Not maintaining the property to achieve the best rent and to attract long-term tenants:
Tenants are a very important aspect of your property becoming a lucrative investment, but don’t let that take away from the property itself! You should have a property manager who has a good handle on maintenance and repairs. If you keep your property looking pristine you’ll have a greater demand from current and potential tenants, and in turn, you’ll be able to get top dollar for rent! They should not only advise you on current issues but also anything that could have potential liability issues and future maintenance, such as the property will need painting internally at the end of this 12-month lease allowing you to budget and be prepared.
#5 – Not meeting the market, therefore having the property vacant too long:
Make sure you keep up with the current market trends. If you have a property manager who keeps you up to date with the current return of rentals you’ll be sure to avoid vacancies due to being above the market. They need to be giving you constant feedback during the letting process so you can adjust the rent quickly if needed. Ideally, they should be in touch daily or every second day so you are able to make informed decisions at this most critical time. You always want to be competitive!
#6 – Having an agent who does not present to the market good quality photos and scripts:
Your agent should be putting your property on the market with as much information as possible to attract potential renters. What better way to do so than with ample photos and thorough scripts and maybe even a floor plan which will make it easy for individuals to picture themselves as your tenants!
#7 – Sloppy agents slow to get marketing in place when they know property is becoming vacant:
While you wait to put up ads for your soon to be vacant property, other agents are jumping at the chance to steal your future tenants! Your agent should have a record of any and all expiring leases and have the information on your soon to be vacant properties out on the market before the lease is up so you won’t have any gaps in your rent.
#8 – Not maximizing depreciation:
For a residential rental property depreciating assets are important to make note of. These include items such as stoves, freestanding furniture, gas or electric heaters and washing machines. Keep track of all of these assets in your properties so you can get the maximum out of your rentals and in turn the most deductions on your taxes. Ask your accountant, or talk to a quantity surveyor, to be sure you are getting your best return.
#9 – Not maintaining financial reports to maximise end of year tax reporting:
Your financial reports are the backbone of your investment. You should have an agent who maintains detailed, readily available information on all of your owned properties for ease in not only routine audits, but also end of year reporting. They should provide you with a detailed end of year financial statement to make it easy at tax time.
To find out more about property management services simply call RE/MAX Profile Real Estate on (07) 3510 5222 or send us an online enquiry.