Home' API Magazine : January 2014 Contents landlord to take out insurance. Mahon
strongly recommends choosing your
property manager based on the service
you’ll get, and not on the price. And keep
in mind the cheapest monthly fee might
not end up being quite so cheap after all.
Kafantaris says you need to ask about
other, hidden costs that a property
manager might charge. There may be
fees associated with lease renewal,
advertising, re-letting, end of financial
year statements, administration fees
as well as hourly charges for a range
of items. And different agencies can
charge for these things at substantially
You’ll find some people who will sing
the praises of self-management, which is
having no property manager at all. And
there are certainly people who manage
to do this well. However, if you don’t
know what you’re doing and can’t invest
adequate time and money to coordinate
the ongoing maintenance of a property,
forget it. It can be a real headache dealing
with troublesome tenants yourself, and if
Don’t ignore water issues
“Signs of water and dampness
can end up costing you
massive amounts of money
down the track,” Michael Conolly warns.
“A simple tap leaking didn’t get
attended to by a client as soon as it
should have. And it was actually a burst
pipe. It ended up causing $20,000 worth
Any drips, watermarks, mould or damp
smells reported by your tenant should be
you’re inclined to let maintenance issues
get away from you, this will catch up with
you down the track.
You also won’t be able to market your
property as effectively as a property
manager can, as you won’t have access
to the databases that major real estate
companies have of potential tenants, and
you won’t be able to list your property on
the major real estate websites.
¿ DON’T SKIMP ON INSURANCE
Conolly warns you shouldn’t skimp on
“It’s not a perfect world out there.
Sometimes things go wrong with tenants.
They might lose their job or get ill (and not
be able to pay the rent),” he says.
Landlords’ insurance can also cover you
for accidental or malicious damage to
your property by a tenant. And building
insurance can save you untold thousands
if something goes wrong.
If your cash flow is tight and you
couldn’t handle a big hit if something
went wrong, insurance is obviously a
¿ DON’T SKIMP ON QUANTITY
Conolly says that in spending a few
hundred dollars on a quantity surveyor’s
report, you can save thousands in
“A lot of people think (depreciation) only
applies to brand new properties. That’s a
big myth that needs to be addressed.”
It’s never too late to get a report – even
if you’ve owned the property for a while.
And some quantity surveyors won’t
charge you unless they can come up with
depreciation benefits outweighing the
cost of the report.
This is a no-brainer. Do it.
¿ WHICH EXPENSES CAN I AVOID?
“One of the things a landlord may delay,
or not do, is modernising the property,”
For example, you might be able to keep
old carpets or delay painting for a few
extra years. If you don’t have the cash,
then of course these things have to wait.
However, by modernising your property,
you can often attract a higher rent and
a tenant in a higher income bracket. An
experienced property manager will tell
you which upgrades are likely to have
this result. They’ll know whether air-
conditioned properties typically rent out a
lot quicker in your area, for example. And
they’ll know how much extra rent you can
charge if you put new carpets down.
Increased rent will pay for the upgrades
after a period of time. In fact once the cost
of the upgrades has been covered by the
higher rental, you start earning a return
on your original investment and your cash
flow position is better overall.
Another expense which is definitely
optional is setting up and administering
trust arrangements. While these can be
beneficial for some investors, often they’re
unnecessary. To work out whether you
really need these, talk to an accountant
who understands property investing
(preferably one who isn’t gung-ho about
creating trusts for everyone who walks in
¿ WHY IT PAYS TO TREAT
“Some landlords want the absolute best
for their properties and their tenants,”
“Some, when we send colour photos
after a routine inspection, are so
impressed with the way their properties
are being looked after by the tenants,
they’ll send Gold Class movie tickets,
or a $100 pre-bought Mastercard as a
“Other landlords will go for the cheapest
quote and always delay fixing items.
“If a landlord doesn’t adhere to minimum
maintenance standards, we let them go to
another property management agency.
“The more landlords understand
that tenants are important, the better
investing experience they will have.” API
MAINTENANCE TIP 4:
API JANUARY 2014
JANUARY 2014 API
æThe more landlords understand that
tenants are important, the better investing
experience they’ll have.Æ
FEATURE // ARE YOU TOO TIGHT FOR YOUR OWN GOOD?
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