Here is Part 2 in our focus on successful practices for Property Investors. You can read Part 1 here.
6. Failing to increase rents regularly
All landlords should regularly review rents to ensure they are at market rates based on market analysis from a management professional. A small, regular review is much better than a large, infrequent change that shocks the tenant so much they move out. As a new landlord, it might feel daunting to increase the rent for the first time fearing that your tenant may move out. In reality, as long as the increase is reasonable you should have no problems with your tenant. Compare your property with others which are similar in the area.
7. Losing sight of the bigger picture
If you are serious about property investing and truly want to create a better financial future for yourself and your family, you need to remain focused on building a portfolio. To do this you need to be able to leverage the equity in your properties. The greater your equity and rental returns, generally the more you can borrow. To establish the value of your portfolio your bank will use an independent valuer to establish the value of your property. It is important you understand what value they have put on the property and compare this with what you think. If the property has been undervalued, follow up this with your bank. Prepare a list of comparable sales, talk these through with your bank and don’t feel you have to accept their valuation. If you have a valid argument they will often listen to you. Set reasonable objectives around your property investing so you can stay on the track to your personal goals.
8. Paying down the wrong type of debt first
Experienced investors know that it can be tax-effective to pay down non-tax deductible debt (such as loan on your home) before tax-deductible investment debt. Most investors have their investment properties in interest-only loans until they have eliminated non-tax deductable debt.
9. Using the wrong accountant
It is very important to have a business plan and build a good team of people who can help to make the right decisions. A good accountant that truly understands property is worth their weight in gold. Ask your accountant whether they invest in property and how many properties they have. It is important to consider what tax issues you may be facing during the different stages of your life and to structure your portfolio around your plans.
10. Failing to use an experienced property manager
The most important trait of a successful business person is the ability to delegate and use the expertise of others. This is true of working with a professional property manager. Use of a property manager is inexpensive and tax-deductible. For a couple of dollars a day, a property manager can save thousands by ensuring your vacancy rate is low and your property obtains the highest possible rent. They prepare end-of-month and financial year accounts so your accountant can prepare your tax return efficiently.
Using a property manager saves you time so your time can be spent finding good property deals. This is particularly true for new landlords who can get lots of support and expert advice from their property manager. Using a property manager is particularly important if you are considering renting your property to a friend or family member. And remember, a property manager can remain independent of the personal relationship and ensure the property is managed professionally and fairly.
Until Next Time,