Category: Articles

Minimise Risk, Maximise Returns

Managing an investment property – how hard can it be?

Many owners of investment properties think that managing their own portfolio is saving them money, but the reality can be absolutely the opposite. Having your investment property or properties professionally managed not only ensures that you’re acting within the complex legislation in your dealings with tenants and you retain your privacy and your leisure time, it can actually add value to your portfolio. Plus, all management fees are tax deductible, so it’s a win-win situation for investors.

Professional property management is important in managing the risks associated with owning and renting out an investment property, as well as maximising the value of your asset and your investment returns. The increasingly complex strata and residential tenancies legislation lays down very specific rights and responsibilities for landlords and tenants alike. For example, you can’t just call in to your investment property to check everything’s OK, or drop by to carry out a repair job. The tenant has the right to peace and privacy in the property, and this means the relationship between landlord and tenant definitely has to be kept at arm’s length.

A property manager will not only carry out regular inspections to ensure your investment is being looked after, they will also advise you on areas of concern that may need maintenance or upgrading. Tenant safety is a key issue in this regard, in particular in relation to providing an appropriate level of security (windows and doors closing and locking), fire safety (smoke alarms must be installed and working) and maintaining the property in a safe condition. This might mean fixing up a wobbly balcony, repairing decking or having regular maintenance on air-conditioning or gas heating. Not only does a manager know the appropriate standards for a “safe” property, they will also have licensed tradespeople who can carry out the work. Landlords who ignore their responsibilities or are not aware of them are in danger of being sued should an accident happen, with numerous test cases showing that this can be a very expensive experience. Most property managers will also advise, and often project manage refurbishment work, based on current vs potential rental vs refurbishment outgoings.

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Finding and assessing tenants can be a time-consuming and costly process – particularly if you don’t have the resources of a professional management team. Advertising the property, fielding phone calls and opening it for inspection will all take up time that you’d probably rather be spending with family and friends, or earning money at work. Tenant databases, which give indications of potential problem tenants, are not all available to the public, and a property manager’s experience is often vital in identifying good –and not-so-good – tenants. On the other side of the coin, many quality tenants refuse to rent properties that are not professionally managed, so you could be missing out on a premium letting and be forced to lease your property to a less desirable tenant, possibly at a lower rental.

Renewing leases, giving notice and rent rises are all areas that are tightly legislated. With dedicated computer systems, property managers track dates and lengths of leases, and so will ensure that you don’t end up with a tenant who requires excessive notice before leaving. By monitoring the local market, your manager will also be able to advise you on current rental levels and negotiate a rent rise when appropriate – so you’re always achieving the highest possible returns on investment.

And if the worst should happen and your tenant doesn’t pay the rent, or holds week-long parties, or is trashing the place? Sorting out problem tenants or, more importantly, not leasing to them in the first place, is when a professional property manager really comes into their own. With all the legislation at their fingertips, an in-depth understanding of what a tenant can or can’t do under their lease, experience of negotiating with tenants and computerised records of all communications and rental payments, your property manager will take the stress out of a difficult situation. And if, as a final resort, the case goes to the Residential Tenancy Tribunal, you’ll know that your case is being presented in the best possible way.

But employing a property manager is not just about avoiding a rental disaster, it’s about valuing your time and privacy. If you’re working full time, the last thing you need is to be spending evenings or weekends sorting out issues relating to your investment portfolio. And it’s not cost effective. If you value your time at the hourly rate you’re paid, I’m sure you’ll find it’s cheaper to employ a property manager. And once the fees are tax deducted, the case for using a professional property manager becomes even stronger. Add up the pros and cons, value your time, and get a quote for professional property management. Then you can sleep easy, knowing that your investment is in safe hands.


Guest Expert:

James Snodgrass

James Snodgrass

James Snodgrass, Principal, Forsyth Real Estate