Loan pre-approvals by banks can be confusing. They aren't a rubber stamp to buy whatever you want, but some buyers are being a little too cautious.
Protecting your property investment
It’s a competitive world out there. There are hungry landlords who want your tenants and will try to tempt them away with a keenly-priced rent and a well-presented and conveniently-located property.
Losing tenants and/or failing to replace them promptly is one of the biggest fears for investors; rightly so, because an extended period without rental income can be a painful hit to an investor’s cash flow and even solvency.
Your best defence against this scenario is to remain competitive. Don’t seek above-market rental increases and keep your property well maintained and stocked with features that meet today’s tenants’ expectations. You’re deluding yourself if you think that renters will be drawn to your stuck-in-a-1980s time-warp without air conditioning or central heating.
Of course, your property manager should be providing you with the necessary market intelligence on all this. You are paying them good money (usually around 7 per cent of your gross rent) for a reason. Alas, although there are property managers who are great at responding to and resolving tenant-initiated concerns, I’ve rarely met one who is proactive about reviewing a current client’s property and making market-savvy recommendations about what needs to be done in terms of maintenance and enhancements.
It’s, therefore, vital that you, the client, drive your property manager in this area. Ask for an audit of the property to be done the next time the agent is doing a periodic inspection. The property manager shouldn’t just focus on what needs to be done now, but provide a schedule of jobs worth doing in the next three-to-five years. This allows you to budget accordingly and plan what can be done whilst a tenant is ensconced in the property (typically small internal jobs and external work such as painting) and be ready to move on bigger, more disruptive maintenance when your current tenant serves notice down the track.
The audit will of course outline likely costs of a program of works, but it should also provide guidance on the likely payback in terms of scope for rent increases that the results will bear.
Any decision to undertake works will require quotes from tradies. With so much variance between suppliers in terms of prices and quality of work, insist that the property manager seeks multiple quotes and make it clear you will not pay invoices until you have seen and approved the completed job.
A further sweetener to address maintenance now is tax. Unlike major capital works improvements to a property and adding depreciating assets such as central heating or air conditioning (the costs of which can only be reclaimed slowly over many years or once a property is sold), maintenance and repairs are fully claimable in the current tax year. Perhaps have a chat with your accountant and then consider lining up a few jobs before 1 July.
Underpinning all this discussion is the need to protect your asset’s income generating ability (which will also likely enhance the capital value of the property as well). To this end, don’t forget to keep your insurance policies up-to-date, so you’re protected if the place burns down! Check that the insurances provide sufficient cover. Once you start down the dull road of reviewing your insurance, you might as well obtain quotes from other suppliers so you can save money as well as being secure.Richard Wakelin