Property Managers make the management of your investment easier (and hopefully stress free) but even with the best property manager, there are still lots of things to remember when you’re a property investor. From interest rate changes to the ups and downs of property prices, it’s important you remember a few key things to maximise the value you get from your portfolio. In this article, we show you a few common mistakes you should look out for!
Not prioritising your debt
Generally speaking – there are some types of debt you should pay off as quickly as possible, credit cards are a great example due to their super high interest rates! Other types of debt however, may provide you with a tax deduction, such as loans taken out to repair or improve your investment property. It’s wise to pay down any debt that won’t contribute to a larger tax return quickly. You can then start paying off tax-deductible debt when you can. Make sure you speak to a financial adviser so they can assess your unique situation and help you decide the best order to pay down your debt.
Depreciation – don’t forget to claim it!
A common rooky tax mistake area where property investors fall short is maximising their depreciation deductions. When done properly, maximising your depreciation claims can add thousands to your tax return. If you don’t have one already, make sure you get a depreciation schedule drawn up for your property to maximise your deductions (get in touch with your property manager – good property managers will always have a good valuer in their network that is often a lot more value for money than the first few that pop up on google).
Not increasing rents
Many property investors fall into the trap of no increasing the rental price when renewing a tenant’s lease. We are not saying that every time a rental increase is justified (you still need to check the market to ensure you don’t encourage your tenant to move out which will cost you more in vacancy and letting fees than a small increase) – but, if not done in line with themarket, you can end up in a situation where you need to increase your rent by at least $50 to catch up on past stagnant rent prices. When your leases come due for renewal, consider increasing the rent by $5 or $10. These small increases are more reasonable and your rent will grow in line with market growth.
Leaving your property vacant due to high rent
Just a week of vacancy can undo any of the gains you might have seen through a lofty increase in your rental prices. This is particularly true if you’ve purchased an investor package and your house becomes available at the same time as other similar products. Be smart and do the maths. Advertising your home at $5pw less than the 5 other same homes in the street will mean yours leases quicker – the rent for that year might be $5pw less (costing a total $260 for 12 months) but by leasing it out one or two weeks earlier than the others, you’ve already made this back! As always talk about the prices you set for your rental properties with property manager for their recommendation. You’d rather have a tenant locked in quickly rather than having your property sit vacant and losing money.
Managing your own property
It can be tempting to think you can manage your investment property yourself. However, unless you’re up to date with the residential tenancy act and the upcoming legislation changes – you’re putting yourself at risk! Breaching any of the legislation can get you into hot water and this can be a costly exercise. On top of that, there are hundreds of little tasks and processes that go into efficiently managing a rental property. Leave the management of your property with a professional so you can focus on your investment strategy.
Also – realise how much your time is worth. The time it takes you to research each bit of legislation as a situation arises compared to what you’re paying a property manager to do the job for you – it makes sense to stress less and hire a professional!
With so much to think about as an investor, it can be difficult to see where you may be making some common investing mistakes. Being mindful of the pitfalls above can help you become a better investor and make sure you’re always prepared to capitalise on new market opportunities.
Remember, this article does not constitute financial or legal advice. Please consult your professional financial and legal advisors before making any decisions for yourself.