Avoid unnecessary losses and maintain a long-term reliable rental income from your investment property by avoiding these 7 common mistakes.
1. Purchasing Low Quality Fixtures & Fittings
Under-budgeting and purchasing low quality appliances is a mistake too many property owners make. Low quality fixtures, fittings and appliances often require regular maintenance more frequently and need to be replaced after a much shorter period – causing the cost to be more expensive than if a quality item was purchased in the first place. Purchasing quality fixtures also means tenants will call less frequently for repairs, creating less stress for you.
2. Bad Tenant-Landlord Relationships
You don’t need to be their best friend, but maintaining a good relationship with your tenants is a great way to encourage them to stay longer and take good care of your property, helping maintain a reliable rental income.
Good communication and goodwill goes a long way in maintaining good landlord-tenant relationships. Tenants generally expect enquiries and requests to be answered in a timely manner, and appreciate you being friendly and cooperative – remember goodwill reflects goodwill.
3. No Preventative Repairs
Does the roof need to be repaired? Are the windows leaking? Is the property secure? Look out for any preventative repairs required during property inspections to reduce the occurrence of damage over time. A roof repair may seem expensive now, but it’ll be far worse down the line if you have to pay for the repair AND the water damage throughout the interior. Try not to rely on tenants to inform you, as they may not know what to look out for and won’t notice until expensive damage has already occurred to your investment property.
4. Investing Badly During Renovations
When landlords decide to invest in their current rental property it’s usually with the goal to increase its rent income and tenant demand. Yet all too often people fail to invest in quality products that will earn them profits in the long-term.
Though it’s tempting, try to avoid cheap, low quality paint, wallpaper, carpets and tiles. These have a habit of wearing out quickly and only lasting short-term, making it a weak investment in your property that will only generate short-term profits. In addition, discerning tenants look for better quality so you may be cutting some of the best tenants out of your market.
With discerning tenants in mind, it’s also important to focus on bringing some modern touches to the property, along with giving it a fresh, clean look. The key is to go for on-trend colours, materials and fittings. Paint colours and curtains should be neutral tones and curtains should be matched.
5. Bad Price-Rent Ratio
Don’t make the mistake of sealing the deal and purchasing investment properties without fully understanding the financial situation. Take the time to first consider what the cash-flow will be, how the property will help your financial position, and what initial maintenance may need to be done to attract good tenants at a higher rental value. Analyse the gross yield and net yield of the property, then calculate what you will earn after all the costs are taken into account, you may even find the property isn’t as profitable as you first assumed.
6. Managing The Property Badly
Managing properties is more than just being available to answer tenant calls all day every day. Make sure you keep on top of the paperwork too, to avoid losing money that can be difficult to regain.
Too often we hear about landlords who let rent arrears get out of control with thousands owed because they didn't keep an updated spreadsheet on their investment. A simple spreadsheet can help you keep on top of rent arrears, maintenance costs, endings of tenancies, help you measure the financial success of the property, and remind you when the rent value can next be increased, creating a less stressful investment and a more confident investor.
Another common mistake made by self-managing landlords is the avoidance of properly checking and recording the condition of a property, at the beginning and end of each tenancy, then letting any damage go by without claiming the repair cost from the tenant’s bond.
This has a knock on effect. Firstly the lack of properly recording the condition is noted by the tenants, and they’re aware knocks and scrapes can be argued as being pre-existing, so the property may not be carefully cared for. Then at the end of the tenancy this damage is either repaired at the landlords cost and also causing a delay to the start of the next tenancy, or the repairs and redecoration are not made and the lower standard of presentation reduces the rent achieved and the quality of the tenants. A downward spiral results.
Of course, our professional Wellington property management service can take care of this for you, helping create a passive, reliable successful income from your rental property.
7. Poor Tenancy Agreement
We see many self-managing landlords who default to offering periodic tenancy agreements to tenants. This can cost them dearly, because in Wellington as much as 20% more rent can be achieved during the peak summer period over the winter period, and tenants on a periodic agreement can leave at any time with just 3 weeks notice. Use a fixed term agreement every time and lock in your rent for 12 months or more.
This not only ensures you have certainty of income but you also get better tenants, as the more transient tenants are happy to agree that the landlords can give them 6 weeks notice of termination whereas the better organised tenants don’t want this – they want the certainty of a fixed end date.
How We Can Help You
At Quinovic we're exclusively residential, our only focus is the residential rental property industry. Our knowledge of the industry and our professionalism keeps us motivated to stay one step ahead. Our clients are always confident their properties are kept compliant, our services continue to be of the high standard expected, and that we keep them up-to-date.
If you're interested in seeing how we can help you and your investment, get in touch today and receive a free, no obligation Rental Appraisal.