Thursday, January 31, 2013

HIGHER RENT NOT ALWAYS HIGHER INCOME

Most experienced investors understand that $500 a week for fifty two weeks a year means more money in their pocket than $550 a week with several weeks vacancy during the year. So if maximising income from rental property investment comes from keeping their properties occupied, why do some landlords charge such high rents that their tenants move on whenever they get the chance and new tenants are slow to move in?
It is a fact of life that some investors fail to see the big picture and only look at the money in their pocket ‘right now’. They are blind to the possibility of rent loss down the track and don’t see that they might create dissatisfied tenants who move on when they find a better value option, thereby creating a cycle of  high turnover and increased vacancy.
The problems don’t stop there. Investors whose properties are ‘good value’ get more enquiry and can afford to be more selective when deciding who will rent their property, while those asking over priced  rents get fewer and less well-referenced applicants.
Furthermore, if a property stays empty because the rent is too high, owners can get desperate enough to overlook a tenant’s patchy references; in the effort to get the highest income, they make themselves more likely to get less because poor references could mean greater likelihood of getting behind with the rent.
New investors can avoid a lot of common errors by making use of the expertise of their managing agent. Many novice investors don’t think of asking  their managing agent’s advice until something goes wrong. Investors who do their homework and tell their agent up front what their needs are find it much easier to keep abreast of what’s happening and avoid confusion.
Most experienced investors ask their agent to provide a monthly statement of all income and expenses with cheques banked directly into the owner’s account. Most also ask for an annual written report of state of repair (internal and external) and cleanliness as well as a mid-year written kerbside report of state of repair and cleanliness. They should also receive a six-monthly written report of the current rental value and the local area vacancy rate and an annual written report of the current reasonable selling price of the property. Owners should carry out an internal inspection of the property themselves once every two years so that they can visualise its state of wear and tear when maintenance and repairs are discussed.
Most investors say it takes three to six months to get to know a managing agent and their way of working. Until then  it is best to require all expense items to be referred to the owner (other than emergencies) prior to the agent spending any money. After the initial period, set a limit on the amount the agent can spend (usually about the equivalent of one week’s rent) without reference to the owner.
Naturally, as with any contractual arrangement, investors should always have their agreement with their agent evidenced in writing.

Friday, January 4, 2013

House prices decline for second year


Despite home values falling overall in 2012, the rate of decline has improved dramatically from the year before.
According to RP Data figures, capital city dwelling values fell by 0.3 per cent over the month of December, which recorded an aggregate decline of 0.4 per cent over the 2012 calendar year.
However, according to RP Data senior research analyst Cameron Kusher, the results are pleasing when compared to the 3.8 per cent drop in home value witnessed in 2011.
“Capital city home values remain 5.7 per cent lower than their historic highs of November 2010, however, dwelling values are up 1.8 per cent from their low of late May 2012,” he said.
“It is important to note that despite the fact that standard variable mortgage rates have fallen by an average of 85 basis points over the past year and by 135 basis points since October of last year, the housing market has still been unable to record growth in values over the year.
“Home values remain below their historic highs across each capital city and have increased at an average annual rate of just 1.9 per cent over the past five years; it is clear that the previous strong value growth conditions to which many home owners became accustomed of recent years are well and truly behind us.
“Home values in Brisbane, Perth and Hobart remain below where they were five years ago, whereas the other mainland cities have all recorded significantly lower rates of growth in home values over the past five years than they did over the preceding five year period,” Mr Kusher said.

Source: www.rebonline.com.au


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