These common oversights could be the difference between a minor hiccup and a catastrophe.
Blogger: Cindy Knight, general manager, Time Conti Sheffield
If you’re considering buying an investment property or are a newcomer to the rental market and want to avoid making costly mistakes when leasing your rental property, then the following points are essential reading.
These are seven common mistakes that many new landlords make. Here are some strategies that will help to either fix the problem or, better still, avoid it altogether.
1. Not keeping comprehensive records
It’s essential to document every aspect relating to the property and to ensure that all parties sign off on all documents (including lease agreements, any changes to the property condition report, pet policies, etc). Many landlords have made the mistake of thinking that a verbal contract would be sufficient or that their ‘charming’ tenant wouldn’t ever damage their property – only to regret not having maintained meticulous records of all dealings with the tenant and finding themselves out of pocket because of their inexperience.
The Australian Tax Office also has a lot of good information on its website with regards to what records landlords need to keep for them to lodge a claim and the section entitled ‘Rental properties – avoiding common mistakes’ is worth reading.
2. Underestimating the amount of time and effort involved
Don’t make the mistake of thinking that owning a rental property is a hobby – something you can dip in and out of when you feel like it. It’s not. It’s akin to investing in a business and it requires time, effort and resources if it is to be successful. It’s also important not to underestimate the ongoing costs of owning an investment property and to factor these in to your financial planning.
3. Not attending to repairs and maintenance issues promptly
Ignoring basic repairs and maintenance issues will cost landlords more in the long run. Think about the difference between a few hours to clean blocked gutters as opposed to thousands of dollars to replace water-damaged ceilings or carpets – or a quick visit to remove an overhanging branch versus having to fix the brick wall that the tree damages a few months later. Also, if you don’t sort out a tenant’s request for repairs promptly and satisfactorily, they could look for alternative accommodation – leaving you with the hassle (and potential cost) of finding a new tenant. What’s more, a property that is maintained to a high standard is likely to attract a better quality of tenant and a higher rental.
4. Not reading the insurance fine print
One of the biggest mistakes that inexperienced landlords can make is not ensuring that they are appropriately covered by insurance. A standard homeowner’s policy generally doesn't cover rentals, and it’s vital to check the fine print of any insurance contract to see what’s covered and what is excluded (for example, malicious damage to property, public liability, etc) and then to take out additional cover if required.
5. Failing to screen tenants thoroughly
Finding the right tenant can be the difference between being a success or a failure as a landlord – and as any experienced property manager or landlord will attest, there’s simply no substitute for thorough and comprehensive screening of tenants. It’s well worth the effort to find quality tenants – and that’s where appointing a professional property management company which has proven strategies for screening applicants, including access to default registers and tenancy histories, can be hugely beneficial. Moreover, they will check all tenant references thoroughly before signing any agreement.
6. Being slack about late payments
There’s no room for sentimentality when it comes to being a landlord – and being slack about late payments may end up costing you in the long-term. Tenants may take advantage of your perceived ‘generosity’ and you will lose out on interest – and potentially, on the rent itself. Follow the lead of professional property management companies who have a ‘zero tolerance’ approach to rent defaults otherwise you could end up in trouble.
7. Failing to check on the property regularly
Just because the tenants seem like good people doesn't mean you should skip your property inspections. Don’t make the mistake of assuming that your tenants are looking after your property in accordance with their tenancy agreement – make those scheduled inspections and ensure that all the boxes are ticked. Follow up where necessary – it’s worth it in the long run.
To avoid these and any other mistakes when leasing your rental property, it’s really worth considering appointing a professional property manager. They will have all the experience, the systems, the resources and the motivation to ensure that mistakes aren’t made – and that you get the most out of your investment.