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Common mistakes landlords make

By David Meadowcroft

We would like to do all we can to help you maximise your returns on investment.

In our experience, these are the most common mistakes landlords make. They inevitably lead to greater costs and unnecessary stress.

1. Setting the rent too high

This will result in your property languishing on the market, which is detrimental in two ways.

Firstly, it will take longer to find a tenant, which means more weeks of vacancy. Holding out for an extra $10 or $20 per week – especially in a slow or oversupplied market, is usually not worth the longer vacancy period. Two weeks’ vacancy on a $500 per week property equates to a rental loss of $1,000 – also equivalent to $20 per week.

Secondly, prospective tenants tend to dismiss ‘old’ properties. Your listing will drift down the search rankings online and tenants are likely to assume there is a problem with the property itself.

2. Not investing in professional photography

Your property will be more appealing to tenants and re-lease faster if your marketing is high quality. You only need to invest a few hundred dollars for professional photography and copywriting that can be used over and over again.

The first time prospective tenants see your property is in a list of available rentals online. If your property stands out, more tenants will want to inspect it.

3. Not investing in maintenance

Small maintenance issues such as chipped and flaking paint, rusty stovetops and mouldy grout make your property look tired and uninviting. Remember, most tenants are looking for a new medium-term home for themselves, not a crash pad. They want a pleasant environment.

4. Managing the property yourself

What you save in money you will lose in time and energy – and you’re likely to make a mistake.

Property managers are experts in their field. They are fully across all legal and contractual matters and they know how to handle all the common issues with tenants.

There will always be months where nothing happens and you will feel like your property manager got paid for nothing. Then a major issue requiring many hours of work will come along and the management fee for that month will seem very cheap.

Property managers do all the work most landlords do not have time to do, such as arranging quotes for repairs, chasing tenants in arrears, periodic inspections and a lot of paperwork.

5. Starting a direct relationship with the tenant

If you don’t want frantic calls about plumbing problems on the weekend, or abusive calls about rent increases or bond issues, don’t start a direct relationship with your tenant. It is always better to let the property manager act as the conduit.

Many issues require discussion between you and your manager before deciding what to do, so don’t open the door to direct communication with tenants.

6. Failing to meet essential needs

It will be easier to rent your property and tenants will stay longer if it meets their essential needs.

In today’s modern world, tenants paying big rents in major cities will expect wardrobes in all or most bedrooms, a dishwasher in the kitchen, a dryer in the laundry and air conditioning in the living room.

7. Not attending to repairs quickly

This will make your tenants feel ignored and disrespected. Your property is their home and when things break down you have to respond immediately to minimise the disruption to their lives.

A failing hot water tank means they can’t have hot showers. If the dishwasher stops working, that might mean hours of washing and drying dishes for a family tenant.

Responding quickly shows you care. Tenants are more likely to stay longer and accept rent increases without complaint if you look after them.

8. Not getting landlord’s insurance

Landlord’s insurance covers a lot of items that building and contents insurance do not. The most important is loss of rent.

If a tenant stops paying rent, the formal process involved in serving an arrears notice to them, then waiting out the time they have to comply, then commencing eviction proceedings (if necessary) takes time – usually two or three weeks. This can amount to several hundred dollars or even thousands in lost rent.

Other items covered by landlord’s insurance include theft and malicious damage by tenants or their guests and the legal expenses relating to eviction.

Always check the fine print as some insurance policies are not valid on lapsed leases.

9. Failing to maximise deductions

Deductions on rental properties are usually worth thousands of dollars per year, so it is extremely important to keep good records of all your expenses.

Immediately deductible expenses that can be claimed in the financial year incurred include normal body corporate fees, cleaning costs, council and water rates, insurances, pest control, interest on your loan, property management fees and some repairs and maintenance costs.

10. Forgetting about depreciation

Depreciation can be used to reduce your tax but it’s not actually a cost that comes out of your pocket. It is a claim for the declining value of your property and its plant and equipment.

Even if you own an older property, you might be surprised how much depreciation value is still available. You can claim 2.5% of the construction cost each year for 40 years after completion. You can also claim depreciation on extensions, renovations and structural changes to your property.

If you own an investment apartment, you can depreciate many capital improvements made to your building, such as a new lift or new carpet in common areas.

Before you rent your property out, have a depreciation schedule done by a quantity surveyor. The schedule will tell you how much you can claim as a tax deduction each year.

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