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.
