The most common mistakes landlords make
According to recent statistics, around one fifth of all Australians own an investment property, which means 20 percent of all Aussies are landlords.
For some, the strategy of owning an investment is long term, with a view to capital gain, for others it’s about building a portfolio of bricks and mortar, and for further still it’s about minimising taxes.
Regardless of your investment aims, there are a number of pitfalls that landlords can encounter along the way.
So, let’s take a look at the most common mistakes landlords make and how to avoid them…
Not treating an investment as a business
While the home you live in might be all about an emotional connection, an investment property is a business.
That means it should be serving a financial aim on your behalf. As we mentioned, that aim can vary, but when making decisions about your investment property, it is business acumen that you should employ with the assistance of a team of professionals around you.
This team includes a good property manager and a good accountant, with a clear strategy for what you want that property to achieve.
Considering the property your home
You might be paying the mortgage, but an investment property is not your home. That means you should be making decisions with a view to what a prospective tenant might like rather than your personal style.
It also means you should be mindful of how often you personally wish to gain entry to the property for inspections, maintenance etc.
There are of course laws regarding reasons for entry, but it’s also important to view it from the tenant’s perspective, considering how often they might wish to have their home entered by their landlord.
Failing to engage a good property manager
A property manager is the trusted professional who acts as the middleman between a landlord and tenant.
This ensures the relationship between the two parties remains professional, that rent is paid on time, repairs and maintenance are dealt with in a timely manner and that both parties adhere to the relevant state or territory legislation.
A good property manager effortlessly balances both parties’ needs while protecting the value of your investment by sourcing quality tenants.
Not undertaking repairs and maintenance
As an investment, it’s important your property remains in good repair and well-maintained. And this is a cost all landlords should factor into their annual budget forecasts.
Maintaining and repairing your property ensures the asset remains appealing to tenants, protecting both its rental market value and sales value.
Increasing the rent too much or too little
Setting the rent price is a balancing act that should be reviewed at the end of each tenancy agreement. The art lies in reflecting the market price and ensuring you get what you should for the property while also being mindful of the value of long-term tenants.
Your property manager should be advising you on this in the lead-up to a lease renewal.
Not being aware of the tax concessions
As a landlord you are entitled to tax concessions on your investment property, which is one of the reasons so many people see property as a solid financial strategy.
These concessions include depreciation on new fixtures you buy for the home, such as ovens, hot water systems, air-conditioners etc.
Meanwhile council rates, property management fees, repair costs, and the interest you pay on your loan is all tax deductible.
You should talk to your accountant about these concessions to ensure you are claiming all that you are entitled to.
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