There’s a lot to know about having an investment property, and running it well is important as buying a good property with capital growth potential. Here’s what residential property investors need to know about their new role as landlord.
Buying your first investment property and becoming a new landlord can be daunting. Here’re seven questions to ask yourself to make sure you’re on top of things and getting the most out of your investment.
Are You Financially Prepared?
In a premium location like Sydney’s Eastern suburbs you may start off by negatively gearing your property (to take advantage of tax benefits). On top of the mortgage repayments, unexpected expenses can and do tend to crop up, such as a broken water heater or air conditioning unit. So it’s important to make sure that you have done the maths and have an adequate financial buffer to cover you in the event of things like a prolonged period where the property is untenanted or if interest rates go up.
Do You Have A Professional Mortgage Broker?
The biggest financial commitment of any investment property is the mortgage. As Dylan Salotti, Managing Director of Divitis Finance advises, 'in this current period, the banks lending criteria has tightened lending; having a mortgage broker who is proactive in your needs, and has a diverse relationship of lenders in their belt, could make a big difference in ensuring you are in the best loan arrangement'. Ask your property manager about good mortgage brokers they know who will help you stay on top of your current loan, interest rates and paying down the current mortgage faster.
Do You Have An Experienced Buyers Agent?
A professional buyers agent, with a breadth of experience in real estate, can remove stress and uncertainty, and give you the confidence to buy the right investment property at the right price. As Veronica Morgan, Principal of Good Deeds Property Buyers explains, 'busy professionals often struggle to find and buy an investment property that outperforms for three main reasons – they are time poor, which can result in costly shortcuts or not getting the search off the ground; it's so much easier to over-pay than they realise; and they feel out-of-depth'. Ask your property manager about experienced buyers agents they know will provide insights that address all of these challenges and, most importantly, ensure you buy a quality property that holds its own, even during the cycle's downswing.
Are You Charging The Right Rent?
At the end of the day, it’s all about getting the right rental income to maximise your return on your investment. What you can charge will depend on the state of the property, the location and current market demand. You want to set the rent high enough to achieve a good rental yield, but not so high that you’ll scare off prospective tenants. Be sure to do your research, talk to your property manager about what’s realistic for the area and current market, and when you’re buying consider any amenities that might attract more rent (such as a pool, parking spaces and building concierge). Updating your property between tenants with cosmetic upgrades like fresh paint, carpets and blinds is a cheap and easy way to ensure you continue to attract a good rental return.
Have You Got Landlord’s Insurance?
Too many first-time landlords mistakenly think that because they have building insurance they are covered in the event of damage to the property or loss of rent. While such insurance does cover you for some events, it does not typically cover the failure of a tenant to pay rent or property damage caused by your tenant. As our article Why You Need Landlord Insurance For Your Investment Property explains, a comprehensive insurance policy will protect you against the unexpected. For more information on landlord insurance we recommend to read how Watkins Taylor Stone can assist. Alternatively, ask your property manager about taking out landlord’s insurance.
Do You Know The Relevant Laws In Your State?
As a landlord you have responsibilities you must meet before, during and after a tenancy, and failing to meet these can have legal consequences. To start, familiarise yourself with the New South Wales Residential Tenancies Act. Other good sources of help and advice are the Real Estate Institute of NSW (REINSW) and Fair Trading NSW. With future changes being mooted, your property manager can help you ensure you’re meeting all your requirements as a landlord and inform you about your rights.
Do You Have An Expert Property Manager?
A property manager will assist you with everything from marketing the property and thoroughly vetting prospective tenants to conducting regular checks, organising repairs, and raising the rent at suitable intervals. Should you run into problems with tenants and need to evict them, the property manager will act as a welcome buffer between you and your tenant, managing the process for you. Take the time to find the right property manager who really knows your local market and who you feel comfortable working with, as a positive long-term relationship will make your life as a landlord much easier - and their advice can make it potentially much more profitable.
If you need more advice about your new Eastern Suburbs investment property, contact our team of specialists today.