Think carefully before using hard-earned equity from family home to fund a holiday home.
Residential property assets need tender care for a long life
Perhaps you bought an investment property recently. If so, it’s great you’ve made the move, and hopefully it’s a property you will hold for the long term.
This may achieve what many might describe as a ‘passive investment’. But how passive is it if you haven’t set the right post-purchase plans in place to ensure a trouble-free journey, which, in this day and age, can mean over many years?
According to the Reserve Bank of Australia (March 2017 Bulletin), on average, we are hanging on to property for far longer than we used to. Back in 2001, more than 8% of properties transacted a year; in 2016, it was below 5%. Even if this downward trend stops at 5% turnover, that number suggests the typical length of ownership will be around 20 years.
I have long advocated where possible that property (providing you select the right asset) is a ‘buy, hold, never sell and repeat the process’ proposition. Not good news for real estate sales agents but encouraging for property managers whose world revolves around what can be intense relationships between landlord and tenants.
Their job is about attracting good tenants and keeping them – which helps ensure asset protection – which experienced property managers excel at.
Asset protection doesn’t just come from basic steps like buying adequate building and landlord insurance or the installation of smoke alarms. It’s more. It is unavoidably expensive actions like maintenance of the roof and periodic painting of the exterior.
A key principle to ensuring capital and income preservation is a commitment to social responsibility from landlords.
Now, there is nothing worse than disrespectful neighbours who are loud and noisy, or have unkempt nature strips with rubbish lying around. Tenants often suffer the blame, sometimes rightly, sometimes wrongly. When tenants are responsible, investors are usually unaware of this neglect but, on occasion, they do know but decide to be wilfully indifferent to the problem.
This is a foolish attitude because good cohesion between tenants and owner residents on a street is a win-win for all concerned, and part and parcel of asset protection for the investor.
Indeed, good behaviour begets good behaviour. Renovation by one resident often encourages neighbours to do the same and so on. Get a run of renovations and there is a noticeable improvement in the feel of the street, which lifts value for all. It’s a phenomenon we see at a suburb level with gentrification but it can apply in smaller ways almost anywhere. And by ensuring your investment property is well-maintained, you’ll have happier neighbours who are more likely to alert you to issues or problems.
The role of the property manager is to ensure the investor is well-represented throughout the course of ownership. In this way, steady income streams and capital growth are achieved in a harmonious manner. Vigilant protection is key rather than a lazy ‘set and forget’ approach.