Common mistakes landlords make
Becoming a landlord may appear straightforward at first glance, but effectively managing investment properties demands the mindset of a seasoned business professional. There are several common errors that novice landlords often encounter.
The role of a landlord involves more than just purchasing a property, carrying out renovations, and leasing it for a sum exceeding the monthly mortgage payment. It encompasses agent fees, maintenance expenses, tenant screenings, potential rental losses, and various other considerations.
Maintaining meticulous oversight of investment properties is essential. According to Kirsty Hayes, Head of Home & Business Insurance at RACV, one of the crucial aspects, and potentially the most significant pitfall, is insurance.
"Without insurance, landlords face substantial financial risks if unexpected events occur, such as tenants ceasing rent payments or departing without notice," she explains.
Whether you're a novice investor or have prior landlord experience, sidestepping these common missteps can mitigate financial losses, time constraints, and stress.
Rushing to fill vacancies with tenants may seem tempting to avoid mortgage deadlines, but thorough vetting of potential tenants can yield long-term benefits. While this responsibility often falls on property agents, ensuring they scrutinize factors like payment history, lease adherence, references, and income status is crucial. Neglecting these checks may lead to inconsistent rent payments, sudden tenant departures, or prolonged vacancies, exacerbating financial strain.
Underestimating maintenance expenses is a common oversight. Landlords must maintain their properties to retain current tenants and potentially enhance rental income. Costs such as painting, carpet replacement, appliance upgrades, and structural repairs after severe weather events can accumulate rapidly. Establishing a dedicated maintenance fund to cover unforeseen expenses alongside charging sufficient rent to cover basic upkeep is prudent.
Securing appropriate insurance coverage is vital. While many landlords may possess building and contents insurance, policies covering a wide range of tenant-related incidents are essential. Recent legislative changes granting tenants increased rights, such as pet ownership, highlight the necessity for comprehensive coverage. RACV Landlord Insurance offers protection against tenant-caused damages, rental income loss, removal of tenants' possessions, unauthorized alterations, and lock replacements.
Failing to maximize deductible expenses can result in substantial financial losses. Keeping meticulous records of all property-related costs, including body corporate fees, rates, cleaning, management fees, loan interest, and maintenance expenses, is imperative. Neglecting to claim eligible deductions may result in missed opportunities to save thousands of dollars annually.
Understanding insurance options, comparing policies, and attending to rental properties attentively can avert financial pitfalls. Avoiding these mistakes is key to establishing oneself as a successful landlord.
Written by Eric Mai -
Property Manager & Business Development Manager