We often hear about all the things to do when we have an investment property, but what are some of the things we shouldn’t do?
Not doing regular rent reviews
Some people think that if the tenants pay rent of time and look after the property they shouldn’t need to get a rent increase, investors get comfortable and say things like ‘oh they are lovely tenants and have been there for so long, I can’t increase it now’. It all starts after one or two years of not increasing the rent, the longer you leave it the worse it is. We recently came across an owner who has had the same tenants for almost eight years, not once was the rent increased. Now the property is going through a period where maintenance items are coming up and its costing the owner. The property is at least $80.00 per week under market, which makes bringing it back into line with comparable properties very difficult.
Solution? Conduct regular rent reviews and small consistent increases, this will keep the rental return in line with outgoings and the tenant will not be hit with a large increase when they are least expecting it.
Not keeping up with repairs and maintenance
Owners who only do the bare minimum when it comes to maintenance often think they are saving money, that the investment shouldn’t cost much and tenants can ‘make do’. It is the tenants home. The better the environment that we provide, the more the tenants will appreciate it and do the right thing by you as the owner. The less the owner repairs and maintains the property, the more frustrated and disappointed the tenants become. Keeping the tenants happy is one thing, but more importantly it’s just like a car, constant servicing will keep the car running better for longer. If we don’t do the small repairs they eventually become big repairs and in some cases, require a property renovation as the property becomes un-rentable in its current condition which can end up costing more in the long run.
Solution? Conduct regular inspections and take the time to undertake regular maintenance, the property will thank you for it.
Not be thinking how can the property be improved
Have you recently undertaken a review of your property and considered how you can improve it? Not just on a superficial level with repairs and maintenance but an assessment if each area of the house is working for you as an asset? For example, we advised a client who had a beautiful large spa bath that took up whole room to remove it and make it a 4th bedroom. At first, they were hesitant as they used it regularly, and be regularly they narrowed it down to approximately 12 times a year. We transformed it into a 4th bedroom and increased the rent by $80 per week, easily accounting for the capital investment within two years, not to mention increasing the resale value. Maybe it’s a pool that let’s face it, in Melbourne may get a run for two months out of the year, it may be worthwhile removing it and extending the property, or turning it into an outdoor deck that would increase short and long-term value.
Solution? Take time to review your property and its layout and do a cost benefit analysis to see if removing an underused feature of your property and replacing it with something of more use is worthwhile.
It’s also worth noting that repairs and maintenance and certain capital improvements can be tax deductible, speak with your accountant to find out more.
If you want to get the best out of your property, give us a call to find out how we can help.
A new job in Melbourne, Australia is uprooting a Nashville family from the only life they’ve ever known, and because they’re moving across the globe, mom wants the one thing they never had at home- the beach. Elishah helps them find a dream home in Melbourne.
Click here to watch the full episode:
We have all had an experience (or several) where we have realised that cheap goods or service cost you more in the long, and sometimes very short, run. Be it a cheap t.v. or whitegoods that fail just after warranty expires; or maybe it was that accountant that gave you a $99 tax return that saved you $50 to $100 in initial fees but you in actual fact have missed a lower tax bill by $500 to $1,000; or maybe it was that real estate agent that promised to sell your house for a lower fee, but then another property in your street gets sold a month or two later by a different agent, and it wasn’t as nice and big as your one but they got $20,000+ more.
And the reason why this happens in real estate lies in the motivation of the agent; do they just want your business and money or do they genuinely want the best result for you. Anyone who provides the same service to two clients yet gets paid less for one will logically provide a lower quality service and therefore result to the one paying less and they won’t be willing to go the extra mile to get you the best price possible. They will be looking at you like a number, another one in and out of the system as soon as the agent gets the price that will get them their commission, not what is the best price that I can get for the client.
You may have already experienced this if you have sold before, or if you have an investment that is managed by the cheapest agent you would have likely found that rent reviews were not regularly conducted, or that the repair to leaking roof cost a few hundred dollars more than what it should. According to the REIV, the current (June Quarter 2017) Melbourne median house price is $822,000 and the median rental is $420 per week. A real estate agent that would sell your house for half a percent more would equate to $4,110 in higher fees, one $10,000 bid at auction would cover this and then some; or a property manager that is a percent more in management fee would equate to $219 in higher fees, miss one $10 per week rent increase and it would cover the agents higher fee for two years approx.! And when you factor in potential tax benefits, the reasons for using the better agent are even greater.
But be weary of some premium agents too, sometimes they may just be “mutton dressed as lamb”. So next time you look at an agent solely based on fee, think about how much they might be costing you in the long run. Avoid the temptation of the “quick fix” of getting the cheapest fee, focus on using an agent that has passion, wants the best result for you, is or has created a brand and legacy, has history of great results and not just a great number of sales.
If you need any advice regarding the sale or management of your asset please do not hesitate to contact us.
There are many ways to sell a property and one of the methods is to sell “off-market”.
Selling off-market is when an owner decides to sell their property and appoints an agent to do so without the use of traditional advertising.
So what are the benefits of selling off-market?
The benefits of selling-off market including not needing to outlay any monies to advertise, no sticky-beak neighbours popping in and having only genuine buyers inspect the property. Where time is of the essence, say in the case of financial distress, an owner may want a quick result and not be willing to wait for photos and advertising/marketing material to be prepared. In the case of high end property, there are only a limited number of buyers that can afford to purchase such properties and they are usually known within the network of the estate agent, therefore in some circumstances there is little need to advertise.
What are the negatives of selling off-market?
Whilst you may have an idea of who your typical purchaser will be, you never know who will actually end up buying it. By not advertising to the open market, you restrict the number of potential purchasers and this can limit the end sale result. There is also limited urgency on behalf of the buyer as there is less competition therefore not giving the buyer incentive to put forward their best offer.
If a property is ready for sale, good agents will already have a list of buyers looking to purchase and will show these buyers through before advertising. This is not a true off-market opportunity but rather a pre-market opportunity where if you pay the owners price they will sell. Some owners apply the tactic of “if I get my price, I sell”, these properties usually don’t sell and end up being “conditioning properties” used to show buyers “expensive” properties in the area, agents will then offer these buyers other properties which are “better value” driving up the price of the property that the agent thinks they can sell.
Some agents don’t have the ability to manage an off-market sale without compromising the sale price and as a buyer these are the agents you want to follow, as a seller follow the agent that has the skill to navigate the challenges that an off-market sale can bring and who can get you a great result.
If you are thinking about selling please give us a call to discuss the best selling method for you.