5 Issues Facing Landlords Today and How To Overcome Them
For those of us fortunate enough to be an investment property owner, its not always a walk in the park. Yes, you’re a step in the right direction in terms of long-term financial freedom, but there are financial and emotional hurdles to manage along the way. Today we will address some of the more common issues facing landlords and give you advice on how to overcome them.
- Tenants not paying their rent on time
This old chestnut. You’re left wondering each month when the rent will be dispersed to you and if it will marry up with your mortgage repayment or if you must wear the shortfall until the rent is received. Tenant selection is critical to overcome this issue. Tenants may fall on hard times and genuinely want to pay on time but can’t, they may be absent minded when it comes to rent payments or just see rent payment as a low priority each month. Whatever the reason, your property manager needs to do thorough application checks including employment history to ascertain if their income is stable and if they are considered a reliable employee. A check should be done on National Tenancy Database (NTD), this will flag any problematic tenants if they have been registered by previous property managers. It is wise to have tenants either agree to their rent being directly debited or to setup a scheduled direct deposit in the agent’s Trust account each month – this eliminates the forgetfulness element. Finally, it is very important for your property manager to use their professionalism and experience to be a good judge of character on your behalf.
- Vacant periods
Unfortunately, there is no way of avoiding tenants deciding to vacate a property. This need not cause a cold sweat. Assuming your property manager has been doing regular inspections, they should be able to give you accurate information as to what/if any work may need to be undertaken to relet the property quickly and efficiently. Your property manager should do research into the current market and comparable leasing’s to advise you on what is a fair market rent. The Melbourne rental market is very seasonal, and it is ideal to have your property for lease in the warmer months (Jan-Mar, avoiding the holiday season) or spring when more renters are actively looking to move. This can command a premium rent – 5-10% higher than the cooler months. Offering a fixed term lease that has an expiry date in the prime leasing times is a good idea, this may mean it being less or more than the standard 12 months eg 13 months if the lease is commencing in November.
- Property not being maintained property
When you accept applicants to lease your property, you are taking a risk as to how well they will look after your property. Your standards of clean may not be the same as theirs and in some cases they will not treat the property as they would their own home – this is just part of being a landlord. You must rely heavily on your property manager to be your eyes and ears and to use their experience to select the best tenants, do regular inspections to ensure the tenants are treating the property well and to coordinate necessary maintenance during the tenancy. If is also important to have a property manager who thinks bigger picture and can advise you on larger cosmetic or structural works that you may need to attend to down the track. This helps you to factor in larger capital improvement works when it comes time to budget.
- Ineffective property management
As I have already covered off on in each of the points above, it is imperative to have an experienced, knowledgeable, efficient and well supported property manager to handle the day to day running of your investment property. A junior property manager with little training or support will not cut the mustard when an issue arises. A high turnover of staff will not help with tenant retention if they (or you) have no idea who is managing your property at any one time. Lack of communication is the number 1 issue tenants have with their property managers. The property manager is the middle man between you and your tenant, therefore the person you engage must represent your best interests and be able to negotiate a successful long-term relationship for all parties – ‘happy tenant, happy landlord’.
- Property is not a good long-term investment
This issue is more prevalent than you may think. When we buy an investment property, we can be misguided in our thinking that ‘it’s property, it will do well no matter what’. The tougher market over the last couple of years has highlighted the marked difference between an ‘A’ grade investment property and the rest of the market. A high rental yield is not always an indicator of a top property, in most cases, a high rental yield particularly in the early stages of ownership can be a red flag for inferior long-term capital growth. The number one issue we face when buying investment grade property for our clients is to educate them to remove the emotion from the property selection process. The rental market is strong in most capital cities, Melbourne vacant rates are typically in the 2-4% range, so there is a good chance that your property will be snapped up by tenants even if you don’t like the aesthetics. The key drivers for an A grade investment property are the underlying land value component, scarcity of the asset class, proximity to amenities and the ability to hold the property long term to realise the compounding effect of the capital growth.
If you would like to discuss our boutique property management service, if you would like a portfolio review to ascertain the performance of your investment property or are in the market to buy a top-quality investment property then please call us.