Owning an investment property is a substantial commitment, but one that can provide many benefits if approached carefully and thoughtfully.
Blogger: Carolyn Parrella, executive manager, Terri Scheer Insurance
Concerns over unpaid rent, unoccupied property and unruly tenants rank highly among the worries that can keep landlords up at night.
A specialised form of landlord insurance can provide landlords with peace of mind knowing they are covered for the risks associated with property investment, should the unforeseen occur.
With preparation and dedication, property investment can be an attractive wealth creation strategy for Australians. Like any investment, it’s not without its risks.
These are the top five pain points of property investment:
1. Unpaid rent
Concerns over rent being paid on time can become a major stress point for property owners relying on the income. It’s an issue that needs to be addressed as soon as possible.
If the tenant falls into arrears, a breach notice should be sent for non-payment of rent. If the tenant still doesn’t pay rent after receiving the first notice, a second notice should be sent to terminate the lease and request vacation from the property. Landlords should refer to their local laws and their lease agreement as these requirements may differ in each state/territory.
Landlords should complete thorough checks of potential tenants’ references during the screening process, specifically looking for issues with missed or late payments.
2. Unoccupied property
Having a rental property unoccupied can place significant strain on an owner’s cash flow.
Presenting a well-managed property may help to broaden your pool of prospective tenants, reduce time and money spent on advertising and decrease the number of days your property remains unoccupied between tenancies.
Items once considered luxuries are now standard requirements. Not offering these comforts can make a real difference to the property’s appeal and may impact the amount of rental income the landlord earns.
3. Managing paperwork
There is a sizeable amount of paperwork that goes with being a landlord, and left unchecked it can build up and become a burden.
A good property manager can save landlords from potential paperwork headaches by managing the administrative side of the investment property for them.
4. Maintenance issues
Leaky taps, broken tiles and repairing faulty appliances can create headaches for tenants and landlords.
Landlords who skimp on maintenance with quick fix solutions often find that it actually costs them more in the long run. With the popularity of home renovation shows like The Block, landlords are given the false impression that improvements to their properties are achievable within tight time frames and with limited practical experience or knowledge.
Do-it-yourself fixes can result in substandard workmanship and legal liability claims if there is an injury or loss resulting from a safety hazard.
5. Unruly tenants
No landlord wants to wake up to news that their property has been trashed.
While most tenants do the right thing, there is a minority that violate their lease agreement by behaving poorly or undertaking illegal activity at the property.
Some tenants may breach their pet policy, fail to adhere to noise requirements or smoke at the property. Although it’s rare, other tenants may use the property to distribute or manufacture illegal drugs.
Tenants involved in illegal activity go to great lengths to hide their activities. Routine property inspections can help mitigate these risks by identifying problems before they escalate.