Owning a Rental Property - Two Things You Need To Know
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All property investors will want the same thing: 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 RentThe time to maximise your rent is when you first make your property available to tenants, or 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.
- Often increasing the rent to the maximum possible, or
- Not increasing the rent at all.
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 every three to six months. If you manage the property yourself, the same applies but you will need to complete your own research 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 New Zealand Herald article by Diane Clement, she overviewed the issue of landlord insurance.
In essence, the article highlighted the need for landlords to check and understand the fine print of their insurance policies. 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.
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.
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Testimonials
This letter is to express my appreciation for the assistance and encouragement of both Anthony Lipscombe and particularly John Heaslip over the last financial year. The period since activating my trading trust has been one of considerable stress, as well as personal development, as I embarked on this as a relative business neophyte with virtually no awareness of the contemporary requirements of running a business, particularly the financial records aspect. During much of this period I have therefore felt considerable out of my depth. However I have been lucky enough to have had the benefit of the advice and support of John Heaslip in rationalizing what was a fairly chaotic set of records of the first year property trading. I am able to say that John in particular, has been unstinting in his attention to my needs and has done so in a manner which has never alluded to my extremely rudimentary grasp of managing a business, or even of being unable to set out a spread sheet properly. The result of the above guidance is that now, although my trading trust would still not be able to operate without the advice of GRA, I do least feel a sense of satisfaction that I have got to my present point without major disaster and that my property trust does now have some kind of firmer basis for any future activities - Name withheld by request
Gilligan Rowe and Associates is a chartered accounting firm specialising in property, asset planning, legal structures, taxation and compliance.
We help new, small and medium property investors become long-term successful investors through our education programmes and property portfolio planning advice. With our deep knowledge and experience, we have assisted hundreds of clients build wealth through property investment.
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