We often meet people at our events (to learn about the next one – our last for the year – click here) who are thinking of property investment but are scared of the risk. When we ask what risks are they actually most concerned about, they tell us a myriad of reasons. The thing is, all of these risks can be mitigated and managed so the property is safe, financed well and as a Landlord you are protected from any unexpected events.
So, we thought we’d share a helpful list of all the ways Landlords can manage and reduce their risk when dealing with investment properties. All of our E-Fishient Investors do these things with their investment properties and we recommend that anyone, no matter how old or young, cash strapped or cash rich, confident or unconfident, should follow these steps.
Finance within your means
When you buy an investment property, ensure you discuss the purchase with a financial planner and mortgage broker so you are financing within your means. By speaking to a trusted professional, you can ensure that the property fits your desired investment strategy and that mortgage repayments and expenses allow for your comfortable standard of living. Be sensible when you invest and always invest within your means.
Keep records for everything to do with the property! Correspondence with tenants, correspondence with insurers, the bank, mortgage brokers, cleaners, sub-contractors and anyone else you deal with. This means you can always prove you have conducted yourself appropriately and have met your obligations as a Landlord if you are ever questions.
Ensure safety on the property is a priority
If there is a pool, ensure it meets the safety requirements. If there is a deck, ensure the railings are approved materials and dimensions. As a Landlord, you can find yourself in hot water if the property isn’t adequately safe. Most property requirements are now part of legislation so failure to meet the standards is the highest risk thing you can do.
Keep a maintenance schedule
To prove you have maintained the property well and to show evidence of maintenance costs and for depreciation and expense reporting, keep a maintenance schedule. This is also valuable when dealing with tenants to prove you have kept the property in a high standard and livable condition.
Keep a cash buffer
To safeguard yourself from the unexpected, keep a cash buffer that you don’t touch unless absolutely necessary. This can be helpful if you have shortfall in cash for mortgage repayments, repairs or sudden maintenance requirements that can’t be funded otherwise.
Obtain the correct insurances
Protect yourself by taking out the correct insurances for the property. Talk to an insurance broker who can help to select the necessary and best insurance options for you. It’s a small price to pay for peace of mind and do some shopping around before you take out a policy so the insurance provider is trusted and recommended.
When in doubt, seek professional management help
Last but definitely not least, while there is merit to managing a property yourself, property managers are qualified and educated in relevant legislation and management practices. This can save you a lot of time and money in the long run and can be highly valuable. So if you don’t feel clued up enough to take things on yourself, a property manager is tax deductible and very helpful.