Property investing is about ultimately making money.
From my experience as a property manager there are three main roadblocks that can prevent the returns on the properties you own now from turning into the nest egg you want to secure your future.
I call these the ‘3 Bs’:
Generally, if one of these is present there is usually a relatively simple solution. If two are present, there may a wider problem which may be preventing you from getting the most from your investment.
The good news is, if you are aware of what these common roadblocks are before they arise, it is much easier to get back on course!
No-one wants a bad tenant, and the risk of issues increases substantially when you have a bad tenant in conjunction with one or more of the other ‘3 Bs’.
Again though there is some good news – protecting yourself against bad tenants is actually the easiest of the ‘3 Bs’ to avoid, and your best protection is with good landlord insurance, and a good property manager.
Another reason you may have a bad tenant is because your property is on its way to becoming a ‘bad property’, commonly because there isn’t an appropriate maintenance schedule. Therefore if you can stop something becoming a bad property, bad tenants can turn into good tenants!
This leads me to the ‘bad property’.
As investors, you don’t need to buy a fully renovated $1m property, but if you want to stop a good tenant from turning into a bad tenant (or turn a bad tenant back into a good tenant), you do need to maintain your purchase.
On average most people hold an investment property for 7 years. If you buy something that is in original condition from the 80s with a 35 year-old kitchen and bathroom, inevitably things will go wrong. You should have a maintenance plan in place to fix areas as required. Some of the musts include yearly pest inspections and having gutters cleaned, and ensuring air conditioners and hot water systems are checked and serviced regularly.
My advice here is: if it’s broke, fix it! – and in a reasonable timeframe. Taking six months to fix an air conditioner could end up at QCAT and a result in a rent reduction being granted.
Bad Property Manager
Too many times investors only realise they have a bad property manager when they have a bad tenant – and this can be too late!
If your property manager isn’t letting you know of issues relating to your investment, then you may have an issue with your property manager.
A lot of the time property managers are reluctant to raise issues because they don’t want to lose business. But being frank and advising the owner of emerging issues – and this is key, coming to them with recommendations – can protect investors from unnecessary heartache down the track.
Good property management includes conducting regular inspections, reporting maintenance, following up on arrears and arranging lease renewals – if you don’t think this is being done as a minimum, then you should be asking questions.
In property management there is a saying that 90% of your time is spent with 10% of your properties. The same can be said of owning investment properties – you don’t want to spend most of your time worrying about the 10% of issues.
I have found over the years that if you get a combination of the ‘3 Bs’ in one property there is a good chance it is going to affect the property’s returns. The good news is that knowing what the three common roadblocks are, and how to identify them before they escalate into larger problems, can save investors time and money down the track!