Finance advice
Gavin Smith

5 financial traps investors should avoid

By Gavin Smith

Once you have secured your next property, the hard work isn't over - and you need to make sure you don't take your eye off the prize. 

Blogger: Gavin Smith, director & general manager, State Custodians

You may have assumed that finding the right investment property and securing a tenant means the hardest part is behind you. 

However, just like any type of investment, it is important to keep an eye on the property and regularly check in to ensure you don’t make the common financial mistakes many investors make. Listed below are just a few financial traps investors often fall into and how you can avoid them.

Charging the wrong amount for rent
You have probably heard it all before - ‘don’t charge too much, but don’t charge too less’. But how do you know what is the right amount? 

Setting the rent too high may mean there is less interest from potential tenants and your property could remain vacant for an extended period, putting more financial strain on you. However, setting the rent too low may also result in financial strain as it will limit your rental return.

So, before buying a property, you need to research what the ideal rental price will be for you and the renters living in the property. Research other properties in the area which have similar features to your property and you can get an estimate of what you should be charging. Also, if you have a property manager, they can also give you inside information on what an appropriate rental amount could be.

Not keeping track of rent payments
Trusting that your tenants will pay the rent on time every month should not be your only strategy. If tenants start to fall behind or miss months altogether, it can be a long and costly process to try and reclaim the money.

So, to avoid this, set preventative measures beforehand. Set reminders for when the rent is due and check your account on that day to see if the money has been transferred. If they have not paid the rent within the requirements of the contract, then you can send out a notice to them.

By showing them that you are on the ball and regularly checking payments, they may be more likely to meet deadlines and will help avoid issues down the track.

Trying to self-manage
Self-managing a property requires a significant amount of commitment, time and resources and many landlords don’t realise this when they decide to take on the responsibility themselves.

Although self-managing can save you a portion of money, often the benefits of using a property manager can outweigh the costs. Do you have time to regularly inspect the property, find and screen potential tenants or know the legislation involved if disputes were to come up? A property manager would have knowledge in all of these areas.

Self-management can work out for landlords, you just need to realise the commitment and responsibility that is involved.

No maintenance
If you have been notified of maintenance issues on the property, you (or your property manager) are responsible for organising the repairs as quickly as possible. If you do not make these repairs in a timely manner, you could be liable if the tenant injures themselves due to this problem.

No insurance
There are a lot of risks involved with investment properties and not having insurance could mean you are jumping without a parachute.

Landlord insurance can protect you from a number of risks involved with rental properties including if the tenant damages the property or defaults on their rental payments. Some see insurance as an optional extra, but it should be considered a necessity for investors.

 

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About the Blogger

Gavin Smith

Gavin Smith

Gavin Smith is Director & General Manager of State Custodians and has over 20 years’ experience in leadership roles within the banking services sector. An expert in personal finance, securitised lending and the mortgage industry, Gavin has a Post Graduate Degree in Management from the Australian Graduate School of Management (UNSW), including several mortgage and securitisation qualifications.

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Tune in to the latest episode of Property Showcase, the podcast with the inside track on the products and businesses that will help turbocharge your portfolio, maximise returns and make your overall investment experience seamless and stress-free!

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To hear more about these services, make sure to tune in to this episode of Property Showcase!

 Make sure you never miss an episode by subscribing to us now on iTunes!

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Son Pham is the accredited Head of Mortgages at Rethink Financing\/Rethink Investing. He has over 6 years\u2019 experience writing loans, over 12 years in the wealth management industry working for the likes of CBA, AMP and private practice and he is also a licenced financial planner (AFSL 326450). He has multiple investment properties that are cash flow positive which help pay his mortgage on his home and fund his lifestyle.<\/p>\r\n

Son is able to write all types of residential and commercial property loans.<\/p>\r\n

In this episode of Property Showcase, head of mortgages at Rethink investing Son Pham joins host Tim Neary to unpack how an investor should approach getting a mortgage in place with banks tightening down on serviceability.<\/p>\r\n

Hear from\u00a0Son\u00a0about:\u00a0<\/p>\r\n

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  • The pitfalls that he has seen people get into<\/li>\r\n
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    Whether it\u2019s building a successful property portfolio or investing in one of their Development Funds, Open Corp can help you through every stage of your investment journey. The team has 40 property specialists who collectively have been involved in over $4 billion worth of property transactions and the acquisition of more than 8000 homes and investment properties.<\/p>\r\n

    In this episode of Property Showcase, director of investment services for Open Corp Michael Beresford,\u00a0joins\u00a0editor of Real Estate, Tim Neary to share why he disagrees that the cooling market means that the best times are behind us.<\/p>\r\n

    In this episode, hear from\u00a0Michael\u00a0about:\u00a0<\/p>\r\n

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Mortgages in a tighter lending economy and why Brisbane is a good option
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Will Magee has had ambitions to enter into the Australian property market for quite some time, but it has been more than just finances holding him back.  Having been granted permanent residency just two weeks ago, Will is wasting no time and is now in the process of signing papers and finding his first investment property.

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In this episode of the Smart Property Investment Show, Will joins host Phil Tarrant to share why he is purchasing his first property in partnership with his brother, discuss the complications that can arise from such a strategy, and unpack the ongoing plan for building a joint property portfolio with his brother.

Will will also share how they approached saving for their first property, why he is taking out the mortgage in his name exclusively, and share their savings plan for the year ahead.

If you like this episode, show your support by rating us or leaving a review on iTunes (The Smart Property Investment Show) and by following Smart Property Investment on social media: FacebookTwitter and LinkedIn.

If you have any questions about what you heard today, any topics of interest you have in mind, or if you’d like to lend your voice to the show, email [email protected] for more insights!

RELATED AREAS OF INTEREST:

From property in Australia to a ski lodge in Japan
Mortgage Trusts, an alternative first step for property investors
Should a real estate title be in one person’s name only?

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A property investment plan years in the making
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  ["title"]=>
  string(75) "Regional Victoria showing up Melbourne in price performance, new data finds"
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  string(139) "

Median house prices in regional Victoria outperformed that of Melbourne in the June quarter, the latest REIV figures reveal. 

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Median house prices in the regions rose 4.0 per cent to $419,500 but in Melbourne they dipped by 0.6 of a percentage point to $840,000.

The result in Melbourne was due to a 0.8 of a percentage point fall in prices achieved at auction; this was despite a lift of 2.3 per cent in private sales.

Inner Melbourne suffered due to auction prices, where median prices fell by 4.9 per cent to $1,459,000 but it was middle Melbourne that was hardest hit, with a 5.4 per cent drop to $974,500.

Outer Melbourne had a good quarter with the median rising by 0.5 of a percentage point to $681,000.

Apartment prices in regional Victoria grew by 3.7 per cent to $304,500 while the metro media was up by 0.5 of a percentage point to $604,000.

REIV President Richard Simpson said that despite fewer sales, many sectors of the market were performing well.

“2017 was a bumper year and while the trendline has flattened, despite the fall in median house prices in the June quarter, median prices are still up this calendar year for both houses and units, in Melbourne and in the regions,” Mr Simpson said. 

In particular there was been strong growth in regional centres which is probably due to the first-home buyers’ concessions said Mr Simpsons.

“The first-home buyers’ concession has been a boon for regional areas. A new entrant to the property market buying a house at the regional median will pay no stamp duty, while a first home buyer of an apartment in Melbourne at the median price would pay stamp duty of nearly $25,000,” he said.

Mr Simpson said that more prospective buyers are looking towards regional Victoria which is also having an effect in Melbourne.

“Melbourne’s outer perimeter continues to grow. Small increases in the June quarter mean that the median prices for both houses and units have risen over 10.5 per cent from a year ago.

Mr Simpson said moving forward that vendors need more realistic expectations as the highs of 2017 are now over.

“Negative chatter about the future of the sector coupled with stronger lending controls by financial institutions has created some uncertainty and vendors need to be realistic with their price expectations,” Mr Simpson said.

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Regional Victoria showing up Melbourne in price performance, new data finds

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