New landlords often make the same mistakes, but if you are not careful these issues can turn into bigger problems.
Setting the rent too high or too low
Before purchasing an investment property, do your research to determine the going rental price. If the rent is too high, the property may not attract enough interest from prospective tenants. It will sit vacant and gathering dust while you achieve no profit return. On the other hand, if the rent is set too low you may experience financial pressure and the property may attract undesirable tenants. Look at listings similar to yours determine what the rental price should be.
If a property manager is hired, they should be able to provide you with information on similar listings and advise you on an appropriate rental price.
Failing to keep track of rental arrears
Your money should be on your mind. If a tenant falls behind in their rent, it can be a very long and costly process to resolve and could leave you considerably out-of-pocket.
Put rent day in your calendar and check your bank account on those days. If your tenant doesn’t pay on the due date, monitor your bank account on a daily basis. If they fall into arrears a breach notice should be sent for non-payment of rent.
The number of days in rental arrears before a termination notice can be sent, and the time between presenting the notice and requesting vacation varies around Australia, so it is important to be familiar with your local tenancy laws.
Regularly monitoring arrears and issuing tenants with appropriate notices promptly may help resolve issues sooner and mitigate any financial loss.
Trying to self-manage a property
Learn to outsource. Self-managing a rental property can create headaches for landlords, especially if they do not have enough time or resources to commit to such a task.
While it can be tempting to save a small percentage of rental income by self-managing your rental property, the benefits of appointing a property manager can far outweigh the costs.
Property managers are able to conduct regular property inspections to identify maintenance issues, have systems in place to find and screen prospective tenants, and have access to databases that list tenants with a history of defaulting on rental payments, damaging property and eviction.
If a dispute arises with a tenant, they are also familiar with the relevant legislation and can follow the correct procedures to help resolve the problem as quickly as possible.
This is the primary complaint from tenants–that their landlords take their time when it comes to repairs. Inaction can put unnecessary strain on the relationship you have with your tenant. If a maintenance issue arises and you are slow to fix it, you may be liable for any injuries the tenant incurs. Furthermore, the tenants may decide to fix it themselves or hire a shoddy contractor, which can cause more damage to the property. Make repairs a priority and ensure they are completed to a satisfactory standard.
Specialised landlord insurance cover can protect investors from many of the risks associated with owning a rental property, provide peace of mind and ease a landlord’s concerns about receiving regular rental payments if their tenant damages the property.
Standard building and contents insurance policies usually don’t cover landlords for these risks. Landlord insurance can cover property owners for malicious damage by tenants, accidental damage, legal liability for occurrences on the property that cause death or bodily injury, and loss of rental income as a result of property damage or a tenant absconding.
Even the most careful tenant can damage a property, which can be extremely costly for the landlord in terms of repairs and the loss of rental income.
Are there any other common mistakes landlords make? What can they do about them?