No one said property investing was easy. And whilst most people talk about the front end of the process, the part by which one buys the property, the boring part of the journey, the part that involves holding the property for long, long periods of time, when nothing seems to happen, is rarely of interest!
Today, I wanted to outline the 6 typical mistakes I see landlords make every day. They are mistakes, I made myself early on in my investment journey. They cost me and others not only money, but unnecessary angst and sleepless nights.
Here they are in no particular order…
1. Taking little or no interest on the management of their property. This is the most common mistake I see. 9 out 10 times, landlords will outsource the property to a property manager and then… forget about it! This is the old “set and forget” investment strategy… except it is done literally! It’s a little like they’ve done their part by buying the property, and now it is up to the universe to look after it for them!
And that could be OK, except as it happens, often times the person they are passing responsibility to, is someone 3 months into the job, with very little real life experiences. Other times it is a disgruntled property manager, who has been put in charge of 150 to 200 properties, and who really doesn’t have time to care anymore (very common in our industry). Regardless, it is just human nature that – if as a property manager I know that my landlord don’t really care – I will care even less!
Let me share a secret: there is no greater motivation and reward for a property manager, than knowing their landlord cares and is interested in what they do! When they know for example that the landlord will review their inspection report properly, they will go the extra mile to make it complete. When they know that the owner will ask them what is happening with their rent, they will make sure to keep an eye on the market! The more time and energy a landlord invests in their property, the more likely it is that the property – and tenants – will be managed better and the rent kept close to market value!
2. Getting involved too much on the day to day management of it. This is the other extreme of the first mistake. Some landlords, either because they want to save money or because they fancy themselves being handy on the tools, decide to do all repairs and maintenance themselves. Others want to take an even bigger part on the management of the property and decide to pay bills themselves!
In my experience, this is a recipe for disaster because the landlord, unwittingly starts becoming emotionally attached to the property, not to mention the fact that often they will cut corners, which ends up costing them more money in the end. Property investing and being a landlord needs to be treated as a business. The moment a landlord develops an emotional attachment to the property, their judgment is compromised. An emotionally attached landlord, will end up making mistakes like over investing by buying the best possible appliances for their property, or fixing things that aren’t important to the tenant hence adding no value to the property. And of course, the largest side-effect is that being too close to the property, is the surest way to fall out with the property manager, who without realising will feel micromanaged!
3. Getting to know the tenant and building a relationship. This is a mistake that landlords should avoid. “Becoming friends” with the tenant, will almost certainly affect a landlord’s objectivity and cloud their judgment. It will most certainly affect rent increases and ability to assess requests for repairs. I have seen many landlords – including myself before learning my lesson – holding back on legitimate rent increases because they don’t want the tenant to think bad of them. I’ve also seen, instances where the tenant will make requests from the landlord directly, resulting in the landlord running around at all sorts of odd hours, trying to deal with issues and emergencies!
4. Being slow to or resistant on authorising repairs and maintenance. Many landlords are sceptical, resistant or slow on approving necessary repairs and maintenance. Sometimes it is because they are “careful with their money” and others because of the old “out of sight, out of mind” saying. In other words, not seeing for themselves the issues first hand, landlords can’t appreciate the frustrations their tenants are experiencing. A good part of Tribunals is devoted to resolving disputes relating to repairs and maintenance not being done and almost always, the outcomes are in the tenant’s favour.
Last but not least, we shouldn’t ignore that not completing repairs in time, is often cited as the reason tenants pack up and leave! Losing a great tenant, will cost a landlord thousands of dollars. My advice to landlords therefore, is to factor in their holding costs of their property, the cost of ad-hoc repairs and regular maintenance, so that when they come up, they are prepared mentally and financially for it.
5. Being petty. This is my biggest bugbear and it happens more regularly than I would like. I am the first to say that EVERY DOLLAR COUNTS. More often than not though, I see landlords that decide to be outright stubborn on matters that don’t really matter or that can be fixed with only a few dollars. I have never understood why some landlords will resist relatively inexpensive repairs (which are tax deductible) or decide to put their foot down, NOT accepting a great tenant, arguing for $5 extra a week! Good tenants are worth their weight in gold and not accepting one for a couple of hundred dollars a year – half of which will go the taxman anyway – will cost a landlord a lot more with every day the property remains vacant. My advice to all current and future landlords is to maintain perspective at all times. A little good will with the tenant at a cost of a few dollars, will go a long way.
6. Self Managing. Whole books have been written about this subject and in just about every property forum, you will regularly hear of the odd person asking the question: is it hard to self manage? The answer is… YES, it is hard IF YOU WANT TO DO IT RIGHT!
Managing a property takes effort and you really have to apply yourself to the job. It is a lot more than just collecting rent. It is about knowing the legislation well. And it is about making sure the landlord’s best interests are looked after, the tenant’s rights and obligations are met and their safety assured, and the property, repairs and maintenance, neighbours, strata and tradespeople are managed as they should. It is hard work and you have to know what you are doing.
It’s when things don’t go well that one realises the value of a good property manager. In my travels, I have seen numerous landlords who, in an effort to save the management fee, chose to self manage their property, making rookie mistakes along the way, which eventually come back to bite them hard. DO NOT DO IT. For a tax deductible cost of $1,000-$1,500 a year, find yourself a great property manager, and go on about your daily life. That would be my advice.
The points I have listed above, are mistakes I am seeing regularly. They are mistakes that I made early on in my investing career but with the benefit of now having a property management business, I recognise!
I now know that being a landlord comes with responsibilities, responsibilities which you cannot neglect or outsource completely. If there is one thing to remember from this blog, it is the fact that – IF YOU WANT TO MAKE THE MOST OF YOUR INVESTMENT, YOU HAVE TO TAKE A KEEN AND ACTIVE INTEREST ON IT! If you don’t, no one else will for you.
Who we are:
NextGen Property Mgmt (www.nextgenpm.com.au) is a boutique Real Estate licensed agency that specialises in property management. NextGen Property Mgmt does NOT has a sales team. Our area of focus is residential property and we operate in Sydney Inner West, Eastern Suburbs, St George and South West Sydney. NextGen was created from its infancy to cater for investors as it was founded by investors who quickly realised that in a highly regulated industry like Real Estate – competence, expertise, care and service by property managers varies greatly.
As an investor, you need to have trust for and feel valued by your property manager. You need to know that your property and tenants are being looked after with minimal disruption, and you are getting maximum return on your investment. At NextGen we understand that, because we are investors living busy lives ourselves. Our promise to you, is that you will no longer have to worry about your most valued asset because we will make sure to take care of it as if it is our own. If you want to learn more about us just click here to organise a time for a chat. Or call us on 0414 494 840. We would love to hear from you and to share our story.