Owning a Rental Property - Two Things You Need To Know
All property investors will want the same thing i.e. a vessel to create greater wealth for their futures and to provide passive income. Obviously rental yield, capital growth, tenant quality and demand will be your main concerns but here are just two tips to help you make the right decisions to capitalise your returns and keep your property safe. Maximising Rent
The time to maximise your rent is when you first make your property available to tenants, or for that matter when re-renting. At this stage try advertising for the top of the range – the market will soon let you know if this is attainable. If not, a reduction may be advisable so you don’t have it vacant for long.
Landlords, I have found, can make a couple of mistakes, these being:
- Often increasing the rent to the maximum possible, or
- Not increasing the rent at all.
If you increase the rent, often, to the maximum possible, you may drive the tenants out. If this happens you may end up with periods without rental income, which may outweigh the original rental increase, and the incoming tenant maybe not as good as the previous.
On the other hand, if you fail to increase the rent, it is lost revenue and it makes it difficult to raise it to market rates at a later date. If you use a property manager they should already know the market rent rates and be assessing these rates every three to six months. If you manage the property yourself the same applies, but you will need to complete the research yourself by asking real estate agents, completing due diligence etc.
Finally, tenants who look after the property and pay their rent on time are worth looking after. If you look after a tenant they will also respect you and the property in return.
Insuring your Property
In a recent article by Diane Clements
, a New Zealand Herald columnist, she overviewed the issue of landlord insurance.
In essence it highlighted the need for landlords to check and understand the fine print of their insurance policy. She says just because a policy has “Landlord” attached to it, does not mean it actually covers the risks faced by a landlord, some of which are as follows:
- Malicious damage or theft by a tenant
- Loss of rent for accidental or malicious damage, abandonment, or eviction
- Landlord’s contents i.e. floor coverings, blinds and drapes, dishwashers etc
- P-Lab found on property with no tenant references or regular inspections.
She suggests that landlords use an insurance broker who specialises in rental insurance to help you with the right cover.
Remember, owning a property is not a ‘buy, get a tenant and never look at it for the next 10 years’ arrangement. You are now a business owner and it’s important to run your investment as a business, keep the rents at market rates or just under, and check your insurance policies every year to identify any risks you are not aware of.