I'm sure you've heard it said that you should treat your property investments like a business.
But what does this really mean when it comes to the long-term management of your asset?
Well...here are six top tips on how to manage your property investment portfolio.
1. Be business minded
When you fail to plan, you plan to fail as the old adage goes.
In order to succeed in property investment, you need to have a detailed strategy mapped out and keep sight of your long-term goals.
When it comes to managing your property portfolio, you should think like the owner of a business, because that's essentially what you are!
Tip: Employ the best people for your team, take an active interest in all aspects of what they're doing and communicate with them regularly because at the end of the day, it's your asset and you need to make sure it's being looked after effectively.
2. Don't get emotionally involved
While we understandably wear our hearts on our sleeve when we go shopping for a new home – after all it's where we raise our family and find sanctuary from the daily grind – allowing your emotions to get in the way when it comes to your property investments is a big mistake.
Rather than imagining yourself in the property you're looking at, think about the type of tenant you want to attract and whether they would be happy living there.
After all, the tenant will help to pay your mortgage and by knowing your target market and catering to their likes and dislikes, you're less likely to have extended vacancy periods and more likely to achieve top rental dollars.
3. Keep your property pristine
One way to make sure you get the best tenant to look after your asset, whilst at the same time ensuring it retains its long-term value, is to conduct regular and timely maintenance.
With an abundance of choices for prospective tenants, they are increasingly particular about the condition of properties and will be reluctant to pay top dollar for a hovel that's seen better days.
Note: By keeping up appearances with a fresh coat of paint as required, attending to any necessary repairs, or even installing an air conditioner or dishwasher to take that bit of extra care for your tenants, you will reap the rewards with a top rental price.
Additionally, you are more likely to attract a tenant who pays their rent on time and treats the property with the same respect as they would their own home.
And let's face it, the well-maintained property will be a money-spinner for the long term as it continues to grow in value, rather than losing value due to untended wear and tear.
4. Stay on top of rent reviews
To maximise the return on your investment, it is essential to keep on top of where the rental market is heading.
Conducting annual rent reviews will ensure you always achieve the best possible price and therefore returns on your asset.
Often, by increasing your rent in line with the market, you can decrease the divide between rising monthly mortgage repayments and the contribution your tenant makes each month.
A word of warning though...
Getting too greedy can have the opposite effect and alienate a good tenant, who might decide to move on to greener pastures.
For this reason, you need to weigh up whether gaining a bit more in the short term could see you lose out in the long term because your property is overpriced and remains vacant for longer.
Of course, your property manager should be informing you of the appropriate rent to charge and when you should be increasing you rent.
After all, they should be an area expert and have a good handle on the current comparable rents.
5. Don't make it personal
Making friends gives us a warm, fuzzy feeling right?
Note: Getting too cosy with your tenants can actually cause a world of pain for landlords.
Firstly, there's more chance of complications when it comes to the tenant paying their rent in a timely manner, as they might feel they can take advantage of your personal relationship.
Secondly, if you stretch the friendship and pop around to visit too frequently, the tenants might end up accusing you of breaching their legal right to quiet enjoyment of the rental property.
Again, this is where the benefits of employing a business management attitude toward your property investment and have a proficient property manager look after your asset as opposed to getting personal, is invaluable.
6. Have good hired help
A good business owner recognises that they can't do it all themselves.
They hire a good team of professionals to help them effectively manage their interests and generate the best possible profits.
The same should apply to property investors.
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Employing an experienced property manager who knows the area your property is in intimately, will be a great benefit in the long term.
A good property manager will do much more than collect the rent for you.
Amongst other things they will:
1) Find prospective tenants
After finding a tenant, your agent should thoroughly screen them before recommending them to you.
This means checking their references and employment history and talking with their employer.
They should also check with their current agent or landlord to ensure they pay their rent promptly and keep the property in good condition.
2) Prepare the lease documentation
Your agent will need to prepare a lease that protects both you and the tenant.
The Real Estate Institute in each state has a standard lease that is used by most agents.
A good property manager may add some special clauses required to further protect you.
3) Organise bond documentation
Your tenant will be required to pay a bond.
Legislation in most states requires the bond to be placed with a Residential Tenancy Bond Authority.
Your property manager will handle the documentation for this and any disputes regarding the bond arising at the end of the tenancy.
Note: If, at the end of their tenancy, the tenant is up to date with their rent and has left the property in the same condition as when they moved in, except for what is called “fair wear and tear,” they get their entire bond returned to them.
Unfortunately, many disputes arise as to what is property damage that should be rectified by the tenant and what is “fair wear and tear.”
Misunderstandings can be minimised by having a well-documented condition report and photos of each room of the property at both the beginning and the end of the tenancy.
A good property manager will also give their tenants a document outlining their obligations when vacating the property which should help minimise disagreements.
4) Give you up-to-date advice on rentals
A good property manager knows the rental market and should be in a good position to advise you of the market rent for your property.
If there is an oversupply of rental properties on the market, a slightly lower rent should attract a number of tenants to your property.
5) Administer rent reviews
At the end of the lease or every 12 months, you will need to consider whether the rental being paid is still appropriate or whether you should ask for increased rent.
Your property manager will be in a good position to advise you when it’s appropriate to increase the rent and do so before the expiration of your lease agreement.
6) Pass on the rent payments to you promptly
A top property manager will promptly credit your rental directly into your bank account, rather than waiting for the first of the month as occurs in many agencies.
At Metropole, we will also notify you by email so that you have access to your money as soon as it is available.
7) Provide regular statements
By furnishing you with a fully itemised monthly statement and a comprehensive statement at the end of the financial year, your property manager can save you time and trouble keeping track of your accounts.
A good property manager will email your monthly statements to you.
8) Regularly inspect the property
Your property manager can minimise disputes with tenants when they vacate by conducting full internal and external inspections at the beginning and at the end of each tenancy.
At Metropole Property Management we prepare a detailed report which is countersigned by the tenant to confirm it accurately reflects the condition of your property.
During the tenancy, regular inspections followed by a written report should also be carried out.
This lets the tenant know that you take the proper care and maintenance of your property seriously and should pinpoint problems early, minimising the risk of having a “tenant from hell” damaging your property without you knowing it.
9) Handle arrears
Your property manager will shield you from the unpleasant tasks of handling rental arrears and will know the correct action required if the tenant is in default.
They will issue the relevant notices and should follow through until the rent is up to date.
10) Advertising
The best advertising medium for rental properties is the large internet property portals and private landlords are not able to advertise on these major real estate websites, but your property manager will take care of this for you and should have a list of potential tenants to show through the property.
“For lease” boards on the property can draw a lot of enquiries particularly if your property is on a busy road.
At Metropole, we have an extensive database of potential tenants as well as a list of executive and corporate tenants who use us for their accommodation needs.
11) Maintenance
A good property manager will have a team of qualified tradespeople who do a great job at a reasonable cost – often saving you money in the process.
Usually, you would advise your agent how you want them to deal with maintenance and they can attend to this on your behalf.
Pay authorised account and statutory charges.
At your request, your property manager can pay bills on your behalf out of the rent that they receive.
These could include maintenance costs, body corporate/owner’s corporation fees, public lighting, insurance premiums, and water and council rates.
Note: By handing your asset over to a property manager and paying a small, tax-deductible fee for their services, you will ultimately free up your own invaluable time to do what matters most – finding more lucrative rental properties to add to your portfolio.
