1. Not treating property investing as a business
So many people go out and buy a property and then treat it like a hobby and subsequently never achieve the maximum potential. If you were to go out and buy a business worth $500,000, most people would treat it very seriously and have the appropriate resources and systems in place to get achieve the maximum potential, the same goes for a $500,000 investment property.
It is import to have a personal plan in place and build a good team including property manager, accountant etc who can assist with making right decisions.
2. Approving & forming a direct relationship with Tenants
Many investors make the mistake of not undertaking proper screening of their tenants such as checking references and other documentation; this is really a mandatory way to ensure to the best of your ability that you’re going to have a co-operative tenant. If you’re working with a property manager, ensure that you’re confident with his or her selection process and ask any questions you might have about their rental history and references. Selecting a tenant should not be merely based on whoever is prepared to pay the most for your property.
Having a personal relationship with your tenant can make it difficult to make the right business decisions. It is only human nature to unwittingly take advantage of people when we know them. For example a tenant is more likely to be late paying rent if they know you and think you will not mind, it will also become difficult with rental & bond increases and making sure the home is up to scratch when vacating.
Having a Property Manager to manage your home will take this out of your hands and save your time doing the hard jobs whilst having a relationship with the tenant and looking after your own best interests for your investment property.
3. Rental Property Maintenance
Repair costs are part and parcel of property ownership. A major repair can be very costly and may require the property to be vacated. Not only do you need to understand your legal obligations to undertake urgent repairs for your tenant, you also need to consider the cost of it repairs. Many investors don’t set aside enough money to cover urgent repairs or stay on top of minor problems that have the capacity to escalate if not managed properly. Sometimes the quick fix works fine, but often it’s delaying a problem that’s going to cost a lot more money in the long run.
4. Not getting property insurance
Property insurance can be broken into two major components: landlord insurance and replacement cost insurance.
With replacement cost insurance, many investors might be able to estimate a construction cost, but there are additional costs that are quite often neglected.
Investors wary of their cash flow need to consider whether a small saving on their premium is worth not being covered for the full cost of reinstating a property if it was damaged or destroyed.
Common features of landlord insurance include:
• Malicious or intentional damage to the property by the tenant or their guests;
• Loss of rent if the tenant defaults on their payments;
• Liability, including for a claim against you by the tenant; and
• Legal expenses incurred in taking action against a tenant
5. Not using an experienced property manager
One of the most important traits of a successful business person is the ability to delegate and use the expertise of others!
A property manager is inexpensive and of course is a tax deduction. For a couple of dollars a day your property manager can save you thousands by ensuring your vacancy rates are low and your property obtains the right rent. They also pay the bills and prepare end of your monthly and of financial year accounts so your account can prepare your tax return effectively.