Here are the 15 tips:
- Constantly assess market rental
- Utilise local experts for your property
- Ensure proper tenant reference checks are done
- Make sure direct debit, or an automated rent collection software is used
- Encourage your property manager to perform a minimum of two routine inspections per year
- Encourage your tenants to help source their replacement when they leave with referrals
- Go green (part one)
- Don’t offer rent reductions in lieu of maintenance
- Prompt communication and addressing of maintenance items
- Let trade suppliers quote on your maintenance – unless you have pulling power with a company
- Invest in good flooring
- A lick of paint shifts paradigms
- Go green (part two)
- Invest in a property manager who utilises a good system for maintenance
- If possible, consider installing keyless locks for entry
It’s not always easy to know how to maximise return on investment for your rental investment property, year after year, tenant after tenant. However, there are a number of things only savvy investors know that can make a big difference and lead to a higher return. In this article I hope to help you with 15 expert tips to allow you to keep reaping the rewards on your investment property.
1. Constantly assess market rental
Always being aware of where the market lies for you is important. Whilst having tenants vacate may pose a risk factor (long vacancy rates, marketing and leasing fees), it does mean that you are more likely to hit the current market rent each time. But, you don’t need to lose a tenant in order to constantly hit that market rate.
By reassessing two to three months from the end of a tenancy agreement period, you can see if a rental increase is on the cards, so long as it is within the market rate and not more than 15% of the current rent.
2. Utilise local experts for your property
The internet has been a real disruptor in terms of how buyers, sellers, renters and landlords find property. However, local knowledge is still king. If you are managing rentals in a different area than the one in which you live, it is important to hire someone who knows the community.
Whether that is a local property management company or local advisors, they will be instrumental in developing a management strategy that is tailored to that area, and the local people. This will help you make more informed decisions about property upgrade investments, setting market rental rates, and vacancy marketing.
3. Ensure proper tenant reference checks are done
Many agencies these days do not undertake thorough and rigid screening checks on tenants, as they are looking to simply fill the vacancy ASAP. Some checks that get forgotten can build a bigger picture on whether this tenant may cause trouble in the future, either through missing payments, requesting an unusually high amount of maintenance, causing damage etc.
If you take a tenant’s application at face value, without proper screening, it is easy to come unstuck when it turns out they either weren’t completely truthful, or were but the application form itself didn’t ask the right questions!
4. Make sure direct debit or an automated rent collection software is used
One of the biggest pain points in any business, including property management, is when the client, or, in this case, the tenant, doesn’t pay on time, or enough, or at all. The easiest way for your investment property to start bleeding money is bad arrears management.
Many agencies are using automated accounting software equipped with automated messages for when a tenant is behind. Most are also now encouraging tenants to go on a direct debit system. Whilst it’s not flawless, it does eliminate the tenant’s forgetfulness from the equation.
5. Encourage your property manager to perform a minimum of two routine inspections per year
In New South Wales, you are allowed to do as many as four routine inspections per twelve month period, or once every three months. It’s a really good tool to capture maintenance before it can become a more expensive or urgent problem.
Whilst many tenants are very quick to report maintenance to their property managers, some are either uncomfortable doing so, or not as tech-savvy.
As such, routine inspections can become the primary source of communication for them, making it absolutely vital. Generally, the longer maintenance is left, it becomes not less but more expensive.
6. Encourage your tenants to help source their replacement when they leave with referrals
As already alluded to, vacancy can be an expensive time for landlords, and in most cases, every landlord will go through it. Sometimes a good way to minimise this is to give your vacating tenant an incentive to find their replacement, for a referral.
This is best when you were happy with the vacating tenant, and of course, you should still do the full screening process. The incentive could look like offering them their last 2 weeks of rent-free if they find a tenant to replace them. Arguably, this might still be cheaper than going to market with the possibility of vacancy.
7. Go green (part one)
Save on stationery costs either through your own management or charged in the form of admin fees by your agent, by going digital with communication and statements etc. Many agencies charge an extra few dollars per month as part of a fee to recuperate stationery costs.
If you elect to only receive email statements and negotiate this with your property manager, you should be able to save anywhere up to $100 per year. This may not sound like loads, but believe me, over the course of several years of being a landlord, it can start to add up.
Maintenance Related Tips
Maintenance is most likely the biggest liability and expenditure when it comes to owning an investment property. This section gives tips specifically on how to maximise your return on investment when it comes to maintenance.
8. Don’t offer rent reductions in lieu of maintenance
It can often be quite an easy trap to fall into – offering the tenant a reduction in their weekly rent whilst the work is yet to be started or completed. However, many landlords fall into the trap of dropping the rent and not doing the maintenance at all.
It’s better for both your income, and the overall market if you don’t do this, and instead just complete the work in a timely manner. If the overall market rent drops, this can affect your long-term value when it comes to a sales perspective too.
9. Prompt communication and addressing of maintenance items
Communication breakdown is probably the primary culprit behind almost every negative experience in rentals. This is doubly the case when it comes to maintenance. Slow responses to maintenance can lead to spiralling costs, frustration from the tenant, and even rent reduction requests.
The best solution is to quickly respond by assuring the tenant that it will be attended to, and organising your quotes as soon as you can.
Just like in the previous tip, it’s better overall to attend to the maintenance than to reduce your rent, as maintenance left unattended can eventually lead to an apathetic attitude from the tenant, which can create more maintenance within the property.
10. Let trade suppliers quote on your maintenance – unless you have pulling power with a company
Generally speaking a rule of thumb for completing the larger items of maintenance is to get at least a couple of quotes. You want to make sure you are getting a good price, but also, just as importantly, good quality work. If the work is not good, it can end up costing you again in the future.
If you have a good relationship with a handyman or plumber etc, it’s a good idea to keep making sure they are giving you their best rates and looking after you. Many times, some trade suppliers offer their best prices for the first job they do for you, or once you have an established relationship.
11. Invest in good flooring
Your floors are the most used part of the property. No matter what else gets touched or used, the floor will constantly be used. Prospective tenants look at the floors first and foremost, and a nice, aesthetically pleasing floor will definitely sell a property during a leasing campaign.
It is also important for the floor to be functional – easy to clean and maintain, sturdy, and comfortable. Carpets for example may look nice, but are harder and more costly to maintain than nice polished floorboards which can be swept more easily or simply be sanded if there are any scratches or marks.
12. A lick of paint shifts paradigms
It’s amazing what a fresh coat of paint can do for perceptions. This goes not only for prospective tenants but also for your ongoing tenancies. When the old, slightly tired walls with some scuff marks suddenly get a fresh coat, it gives people the perception of care being given to the property.
It’s not just the walls either – window frames, door frames, bathroom tiles, bath resurfacing, doors, external walls, balcony railings are all components of the property which, when given a minor facelift, can be transformed. Your tenant’s perception will improve with something as simple as a fresh coat of paint.
13. Go green (part two)
Try to find the most cost-effective ways to run a property. Some utilities might still be considered to be a landlord’s cost – such as water usage. It’s worthwhile looking into water efficiency measures so that this can be charged to the tenant.
Another great way to help lower the running cost of the property is to look into LED lighting rather than Halogen and to ensure all the kitchen appliances are up to date. Having your electricity circuit breaker board given an inspection by a licensed electrician is also a good idea too, as this is another potentially high emergency maintenance cost if it comes to it.
14. Invest in a property manager who utilises a good system for maintenance
Maintenance is potentially the biggest liability when it comes to your return on investment. The cost of undertaking the maintenance, and the arguably higher cost of doing it sluggishly or not at all. Some agencies such as Charlotte Peterswald Sydney, are now using management software that can help automate parts of the process whilst still allowing for valuable human input.
This is important as it can ensure that nothing gets missed. Where it’s even better is that it allows the property manager to communicate with tenants, trade suppliers and of course, landlords. This means that expectations can be managed, assurances given and work completed quicker, ultimately helping you save money. Charlotte Peterswald Sydney has a great maintenance system and they save their landlords money!
15. If possible, consider installing keyless locks for entry
Keys can be another liability for running an investment property. Whether it be tenants losing a set, having to cut extras, or providing access for trade suppliers (some of whom charge extra for key pickups or don’t do it at all, costing your or your property manager valuable time), keys can be a nuisance.
By installing a keyless entry system, you can negate all of these issues as no key would be necessary. There are several options in this niche – such as coded entry or smartphone app-linked entry systems.
Bonus tips: Consider the following maintenance or upgrades
We can often feel daunted at the possible cost or scope of improvement costs. However, there are a number of improvements that can be made at a lower cost, that maximise the current market value and future sales value of your property:
- If your ceiling is popcorn style, change it -this tends to look out of date.
- Change heavy curtains or drapes for roller blinds. This increases the perception of the size of the property.
- Consider adding a water filter tap to your kitchen sink. This is a relatively cheap added extra that can add a lot of value.
- Change the kitchen/ bathroom flooring to look fresh and modern. It could be new tiles or a nice vinyl sheet lino.
- Update your bathroom mirror/ cabinet if the mirror is starting to de-silver at the edges – old rusting or de-silvering mirror edges can make the property look rundown.
- Whatever you do in the kitchen, it equals increased value. This could be anything from changing the cupboard doors or updating the appliances like the cooktop or oven.
These are all fairly small tasks that can have drastic positive effects on the rental value of your property and can be done either when the property is vacant, or when you have a tenant living there.
Now you are ready to maximise your ROI
Now that you have read through these 15 expert tips to maximise return on investment for your rental investment property, you are ready to be an expert, savvy investor who can turn a few dollars into a big return! Charlotte Peterswald Sydney is here to help you with your property through their maintenance system, automated rent system, prompt communication and understanding of your needs.
Making the most out of your investment property is not as daunting as it is made out to be. Even just following half of these tips will ensure you a nice, tidy return.
If you are looking into switching your property manager, here is our comprehensive guide on how to choose a real estate agent to rent your home.