Managing your property

Managing your property

What you'll learn in this step: It takes time, effort and money to look after a property.

It’s possible to manage a rental property yourself, and in so doing save a management fee that’s usually around 5 per cent of the rent. But it can be time-consuming and it's hard to remain emotionally detached when you have tenants ringing up complaining about every little thing, or you personally have to deal with damage to your property.

The other option is to use the services of a professional property manager. They’ll have up-to-date information on what’s happening in the market and what tenants are prepared to pay. They’ll have prospective tenants on their books, and experience vetting tenants. Because they manage many properties, they’ll have access to reputable trades people at cheaper service fees.

And their fees are tax deductible.

Read more about:
How to make a property work harder, Janet de Silva, October 22, 2006 - The Sun Herald: There are five things you should consider to maximise rental returns, Janet de Silva writes.

Insurance

Managing your financial risk as a property investor also involves insuring yourself against a myriad of potential hazards.

It’s up to your tenants to take out home contents insurance to cover their possessions, but you’ll need building insurance. Then there’s ‘landlord’ insurance, covering risks such as malicious or accidental damage to your property by a tenant, any legal liability should a tenant injure themselves, and lost rental income should tenants move out without paying.

Read more about:
Rental property blues, Gabrielle Costa, July 5 2006 - The Sydney Morning Herald: Can you afford to skip landlord insurance? Not if you have the tenant from hell.

Renovating

Be prudent about renovations. The colour palette of the kitchen in your investment unit may offend your sensibilities, but it only makes financial sense to replace it if a better kitchen will stop the unit sitting vacant or lift the rent you can charge.

Make a ‘cost-benefit analysis’ of your renovations. If the kitchen is going to cost $10,000, and you’ll have to borrow the money and pay interest, but it will only add $10 a week to the rent, it’s probably better left alone.

Don't ‘overcapitalise’ by spending too much on design, finishes and fittings.