Are you about to take your first step into property investment?
If so, you have probably given a lot of thought to your first property purchase. You may have considered what type of property you should purchase, where it should be located, and the property's rental potential. However prior to making an offer to purchase a property, you need to organise yourself and implement some of the steps listed below to ensure you avoid making costly mistakes.
Have the seller do some work for you.
There are tasks you can have incorporated into the purchase contract that will save you thousands of dollars. The idea is to request the seller to do some work prior to you taking ownership of the property, which will help you find a tenant more quickly.
Prior to purchasing a property you can request the owner to:
- Repaint or touch up paint imperfections
- Clean the property
- Repair any broken items. Broken items may seem minor to the seller, however somebody needs to fix them, why should it be you?
- Supply copies of professional photographs used for the sale. This removes the cost of obtaining these when advertise your property for lease.
- Include a pest control, not just a pest inspection, to be completed prior to you taking over the property.
Find a professional property manager.
An exerienced and professional property manager will help you increase the return on your investment. Your property manager can look after many issues for you, including rent collection, property inspections, arranging repairs and minimising tenant problems. Try to engage your property manager before your property purchase settles so they can begin looking for your new tenant immediately. This will minimise any potential vacancy period and increase your rental return, which is one of the main goals right through the life of your investment.
Take out landlord insurance.
Do not confuse regular home insurance with landlord insurance. There is a world of difference between the two. If the property you are about to rent out was previously your residence, you will need to change the type of insurance you have on the property. Landlord insurance can have many important features not covered under normal home insurance. These features include coverage for losses resulting from rent default, property damage (accidental or malicious), theft by tenants or others, rent loss if the property becomes uninhabitable and importantly, liability cover. Assess potential policies for their features plus any exclusions, conditions, excesses and claim limits that apply.
Look into the tax benefits.
Owning an investment property can bring the advantage of many tax benefits. You can claim the depreciation of assets, all or part of the interest on borrowings, certain repairs, and other expenses. Keeping records of your assets, including the date of purchase and value, is essential. For newer homes, you might be able to claim depreciation on the building as well as on items considered to be ‘plant and equipment’, such as floor and window coverings and appliances.
Check with your accountant for specific and up-to-date tax information.
Complete an entry condition report.
It is crucial that you and your tenants are aware of the property’s condition prior to a new tenancy. An entry condition report is useful and required by law. Thoroughly inspect your property inside and out and take as many photos as possible as a visual record. This is essential before providing your new tanant with access to the property. Identify any repairs that need to be rectified prior to the tenant moving into the property. A well maintained home always attracts better quality tenants who are more likely to respect your property and make rental payments on time. Make sure appliances, such as the oven and the dishwasher are all in working order.
Determine your ideal tenant.
Who do you want to rent your property? Who is your ideal tenant? Small things can count a lot. For example, if your property is a three bedroom home near a primary school and close to other facilities, families with young children may be attracted to the property. However if your property has no bath in the bathroom, poor fencing or no rear garden for children to play, it is unlikely to appeal to families with young chilren. Discuss with your propertry manager any changes you could make to attract the tenants you are looking for. Avoid spend any money on changes or improvements until you receive your property managers advice.
Set your rental conditions.
As the landlord, you can set the conditions under which you wish to lease your property. Pets okay? No smokers? Is gardening included? It is up to you. However be sure to remember, the more conditions you insert ino the lease the more you reduce your pool of potential tenants.
Including services such as lawn mowing, gardening or pool cleaning are essential if you want to take control over the long term value of your property. However ensure you increase the rent slightly to cover the cost of these items. These inclusions can be very attractive to tenants who often prefer to pay a little extra rent and have these items taken care of by the landlord.
Invest in knowledge.
Surround yourself with a team of professionals who are willing and able to help you increase the returns on your investment. There are two people most willing help to you on your investment property journey. They are a good accountant and a great property manager. They will ensure you maximise the return on your investment over time, and this will help in providing wealth for your family in the future.
Noosa Property Management can advise you on items you should include into your purchase contract.
Call Michelle on 0411 278 324 or email Michelle at firstname.lastname@example.org for the right advice.