The purchase of your first investment property marks an exciting new financial phase in your life.
It may also cause some butterflies as you venture into this unfamiliar territory.
As with any first-time venture, you may well encounter some problems but here are some tips that should help you avoid, or at least reduce, some of the issues associated with being a landlord.
- Screen tenants
Check their details carefully and contact their referees and former property managers. It takes time but it helps ensure your property is in good hands.
- Watch the money
Don’t let tenants get behind in payments or you’ll set an unfortunate precedent and find yourself out of pocket. If payments are late, take immediate action to show you mean business.
- Insure yourself
A landlord insurance policy can cover you against potentially expensive payouts and loss of rental income. Among its benefits is the proptection it can provide if tenants damage your property.
- Do your sums
Rental income yields are below home loan interest rates, so make sure you can cover the interest cost differential. Other expenses could include council, land and water rates, and maintenance.
- Plan for a rainy day
As well as planning financially for the expected, you need to anticipate and provide for the unexpected, such as an unplanned vacancy or a sudden interest rate rise.
- Put things right
Failure to attend to maintenance issues could prove a legal liability risk if your tenants are injured. Have repairs done as quickly as possible and keep an eye on general maintenance.
- Keep your distance
Resist any temptation to become your tenant’s new best friend, otherwise it could be difficult to take action if issues arise. This is a business relationship and should stay that way.
- Inspect regularly
A minor maintenance problem now could become a costly repair job in the future. Regular inpections by you or your property manager can save a lot of time and trouble.
- Don’t be greedy
If you try to squeeze every last dollar of rental income from your tenants, you might lose them. This could result in a vacancy that can be more expensive than taking less in rent.
- Consider delegating
Many people dream of owning investment properties but don’t want the work of managing them. In that case, for a small percentage of the rental income, it’s worth appointing a property manager with time and expertise to look after your investment.