5 Tips for Managing Your Investment Property

5 Tips for Managing Your Investment PropertyWith around 6% of Australian adults owning at least one investment property, property remains a relatively significant avenue for building wealth in Australia. While choosing the right property is the first step to success, ongoing management is also essential for property investment success. These five tips cover many of the core issues that a property investor should be aware of.

Tip #1 – Plan for the long term

Property is an illiquid investment, and growth in value tends to take place over a longer period of time relative to other options (such as shares). A long-term strategy can ensure success when it comes to managing your property portfolio. Formulate a clear strategy for the long term by considering what you want to achieve and buying the right type of property according to your strategy.

For example, you might plan to take advantage of negative gearing and maximise capital growth by buying a property located in an area with high potential for growth. Financing issues are also important; consider interest rate rises and verify that you can meet your repayment obligations in the event that rates do rise.

Tip #2 – Monitor the local market

Stay informed about local market conditions for all your properties. You should be familiar with local rental yields, demographics, average property values and capital-growth rates, so that you know how much you should charge on rent and how you can make improvements to attract tenants who are willing to pay more. While news and media stories tend to focus on city- or state-wide trends in property, market conditions can be specific to regions, suburbs or even streets.

There are many online resources such as property and suburb reports and property websites. Visiting the local area and finding out about local amenities, schools, and developments is another way to find out more about the specific market that you are buying into. Regularly speaking to local agents is another easy way to obtain insights into the local area.

Tip #3 – Update the numbers

The potential of any investment property is revealed by the numbers. Always conduct due diligence and track outcomes by keeping accurate records. At the start, doing the numbers before you settle on a property will help you find the right mortgage. Before buying a property, review costs and expected return. Continue updating and reviewing the numbers to ensure that you have a sustainable situation with respect to cash flow.

Cash flow is a critical consideration because it tells you whether you can make your mortgage repayments, maintain the property, and keep it attractive for tenants. When conducting due diligence, factor in all the ongoing costs including maintenance, repairs, property manager fees, loan service and rates.

Tip #4 – Take out insurance

Unexpected situations can happen at any time, and being prepared will help you should the unexpected happen. If there is a period of vacancy on your property, insurance could cover some or all of the vacancy period. Landlord insurance can cover you for other losses such as damage, natural disasters and other situations.

Tip #5 – Use a property manager

For around 5-8% of your gross rental income, a reliable property manager will source and screen tenants, advertise the property, maintain it and send out payment reminders. As property managers have up-to-date knowledge of tenancy laws and regulations, they can provide you with useful advice on managing tenants. Additionally, they save you time by handling complaints from tenants, carrying out inspections, and applying rent increases.