As a property investor – before you ever meet a single potential tenant for your property – you will make a number of decisions on how to position and get your property ready – from the advertisement, to the fixtures to the tax structure. Many times property investors run on auto pilot – taking suggestions on their property investment portfolio from the banks, or they over complicate their property investment business by making un necessary investments or renovations that end up costing them more in the long run – and finally they fail to structure their taxes in the correct way which ends up costing them come tax season.In this video blog I will outline the most common mistakes I see investors making – including taking scary photos, not loving the puppies, getting creative with paint colors, the furnish question, when to not use your accountant and how to avoid paying out additional excesses with your landlord insurance for when things get messy.
Photos have an impact on us emotionally that words never could. Sure – people want to know how many bedrooms a property has – and in a perfect world they would make their decisions based on the location, the size, and the description.But humans are a funny bunch – for many of your prospects – they will sometimes go off the “vibe” that they “feel” about a place – when making a decision. The smallest details can make the biggest impacts – this is something that AirBnB and Uber has learnt to harness to great success – giving a rental a homely feel with certain portraits, or offering riders in an Uber a water bottle or even a simple mint – all quite minor enhancements with minimal investment – can make a huge difference to customer’s satisfaction and perception of a service.While it’s true that the cameras in our smartphones are getting better and better every day there is still no substitute for a professional photographer that knows what they’re doing. You can use a service like Snappr to get a photographer for as little as $169 in your area – not only will you get photos done with good lighting and high quality – but by using certain lenses a good photographer worth their salt can actually make your property look much more spacious than it really is – this is something that is impossible to achieve using a standard smartphone or a personal camera that you may have. You’ve probably had the experience of seeing a beautiful apartment or house photo only to show up and realise it’s not as good as it looked in the photos – I know that can be annoying – but for many professionals they simply don’t have the time to inspect multiple properties and once you get them in the door you then have the ability to convert them to a tenant – but without good photos from the get go you wouldn’t even get an inspection.Remember – more inspections leads to a higher quality tenant – which leads to a lower vacancy rate and higher rental yield – because the more applicants you have the more you can charge in rent!
They say a dog is a man’s best friend – until it comes to certain landlords. It’s becoming more and more popular for landlords to state that pets are not allowed. Looking past the moral question of separating man from his best friend – stopping your tenants from bringing their furry friends with them actually hurts your bottom line.From a completely legal stand point – the trend is currently moving towards landlords not being allowed to dictate whether someone can have a pet or not. As of this writing less than 7 days ago the ‘Housing Legislation Amendment Bill’ passed in parliament stated that Queensland landlords cannot refuse their tenants to have pets unless they have a valid reason.
https://www.abc.net.au/news/2021-10-14/qld-new-housing-bill-removes-refusal-right-on-pets-in-rentals/100540534What this means is – even if you advertise your property as ‘no pets allowed’ and someone moves in… and brings their pet – there’s really not that much you can do anyway.Also – even without this new legislation our experience at MetroCity is that tenants with well behaved pets are some of the best tenants around. Having a calm pet usually tells you a lot about a person – and pet owners tend to be the first to raise their hand to fix any issues that are caused by their feline friend.
Now kids and babies on the other hand – that’s a whole different story. From our experience – a tenant with a well behaved pet or two is a much higher quality tenant than someone with a number of un behaved kids (or even teenagers).The worst thing is – when kids cause damage we’ve found that many times the parents don’t want to accept responsibility and pay for full repairs which strains the landlord-tenant relationship. The great thing is – if after you’ve listened to everything I’ve said – you still don’t want pets in your property – guess what? You can still have that requirement – just don’t put it on the ad and instead just casually ask the applicant if they have any pets during inspection – doing so could significantly lower your vacancy rate with your next ideal tenant that moves in with their pet lizard that’s kept in a glass cage – that you would have never had the opportunity to interview had you advertised as “No Pets Allowed”.
When it comes to painting your rental investment property there’s only one color that stands the test of time – white. With all the renovation shows on TV you’d be forgiven for thinking that the key to getting a high rental price is getting some beautiful, never before seen funky color to differentiate it from the other properties on the market. In short – making your property one of a kind.While we’re not telling you to not let your creative juices fly it is important to understand the practical long term implications of going down this road that many first time property investors don’t consider. Many first time investors choose to give their rental unit a unique paint job in a unique bright or dark color – in many times to reflect their personality or what they would like. Now this is fine… until the family moves in and their son decides to paint a part of the wall in crayon – or perhaps someone makes a hole in one of the walls during a rowdy party – no problem – just repaint over it right?Unfortunately when you need to paint over a section of a wall – in our experience – nothing looks quite right like white – and every paint store always has plain white paint available – and it’s usually much cheaper (and available) than any other exotic color. And white is a great color – it’s a fresh and brings out a sense of space. So when it comes to your paint job – don’t make your investment business more complicated than it needs to be and stick with white – your pocket book will thank you.
At some point you’re going to have to make a decision – to furnish or not to furnish. That is the question. Since furnishing a property entails higher costs in purchasing of furnishings – the reason for doing so – from a landlord’s perspective – is higher rent right? This may not always be the case – you may or may not get higher rental returns from a furnished property in the city or if you own hotel like accommodation. In our experience – a tenant that brings their own furniture tends to stay for longer than a tenant who wants a one stop solution for their residency needs.Also – we’ve found that people tend to be a lot rougher on furnishings like washer, dryer, chairs and the like when those items don’t belong to them – and when they don’t have to pay to replace them – and if you choose to go down the road of furnishing your rental accommodation you also incur the responsibility of fixing items when they break. A $20 per week additional income may be wiped out with one dishwasher repair.Chairs are another problem – while a 6 chair and dining package may set you back $1,000 – fixing or replacing one broken chair will end up setting you back $250 – to get that exact chair replaced.Then we come to the issue of wear and tear – in our experience it takes around 7 years for the carpet and tiles of a rental property to begin looking tired and affecting the rental returns – however furnishings start having that old look after only 2 years – when you’re furnishing a property ask yourself if you’re willing to go through the trouble of not only having to fix every little thing that gets manhandled by your tenants – but also if you’re willing to replace all the furnishings every 2 years to maintain the minor rental return increase you will receive from a furnished place. Also – keep in mind some people love their furniture – and having a furnished property will drive away the exact long term tenants you are looking for who have their furniture in storage and are just waiting to move into your unfurnished property and become long term tenants.
Being able to claim your rental property’s depreciation is a big tax incentive for property investors. The more depreciation you can legally claim the lower your tax bill – which leads to more money in your pocket at the end of the tax year.Most property investors leave depreciation calculations to their accountant – who assures them that they can handle it – and they leave a lot of money on the table by doing so.The accountant will review your invoices and create a depreciation schedule. This may look good on the surface but you are missing out on a big ton of depreciation potential by missing out all the non tangible depreciation costs.Experienced property investors bypass the accountant all together when estimating their depreciation schedule and instead engage a a professional depreciation expert – who doesn’t care about your invoices and will asses your rental’s depreciation based on estimates from their own expertise.While a professional depreciation expert is not free – you’re looking at approximately $650 per property – the amount of money they save on your tax bill is significantly higher every time we have engaged them – as they take in depreciation on items like wiring and lights which your accountant will miss.As a property investor – engaging a depreciation expert may be one of the best investments you make.
Before we even begin this section I can’t stress how important landlord insurance is – whether you own one or multiple properties as an investor. While landlord insurance is not compulsory in Queensland you should be aware that any accident that happens in your investment property – let’s say someone slipping in the tub and injuring themselves – falls on your shoulders. This is the law – and you only need one tenant to bring suit against you and bankrupt your entire investment portfolio.When it comes to landlord insurance the mistake that investors make is not foregoing it – almost every property investor opts into landlord insurance – the most common mistake is getting it from the wrong place – specifically from banks. In most cases investors take the landlord insurance upsell that is offered to them by the bank organising their finances – however you are under no obligation to take what is offered to you by your bank by default – and the competitive marketplace means that there are a number of landlord insurance firms that give you a lot more bang for your buck.So how does that look like in a practical sense – well a big example is multiple excesses. Let’s say for example that your tenant has a rowdy party and puts a hole in the wall and damages the carpet. Traditional bank landlord insurance will treat these incidents as two seprate claims and you will end up paying 2 excess payment claims – specialist landlord insurance won’t play this game with you and will treat the 2 incidents as one since they happened on the same day.Another area where specialist landlord insurance shines is if your tenant chooses to do the runner and vacates the property without paying. While traditional bank landlord insurance will provide you with cover for 4 months – a specialist landlord insurance firm will cover you for 6 months – you can do your own personal calculations to see how much money you’d save in such a situation – and you’ll see why – at the same price you’d be doing yourself a disservice by not engaging a specialist landlord insurance firm.
This article outlined 6 simple decisions you can make as a property investor that would save you thousands (and perhaps tens of thousands) year after year. Maximising your investment property’s return starts with making the right foundational decisions before you ever even advertise the property – follow this frame work to leave more money in your pocket and grow your
Let’s talk numbers – because everything else is just window dressing.
1.4%. That’s the average vacancy rate for properties managed under Metrocity. This is compared to the 3.3%-5% average vacancy rate in QLD (reported by REIQ’s vacancy data for the December 2020 quarter).
0.9%. That’s the average rental arrears for properties managed by Metrocity.
10 years. That’s the years of continuous experience that our “deep knowledge” investment service manager Crichelle Hills has working with Metrocity in the South Brisbane area. If you want someone to “practice” management on your property Crichelle is not that person – there are 101+ unexpected issues that can arise in property management – Crichelle has seen them all multiple times – and knows how to handle each one to optimise your rental return on investment and avoid un-necessary management expenses.
550+. That’s the amount of properties MetroCity has under management. We are larger than the upstart property management business and can provide the experience that 30 years in the game gives – however smaller than national firms so you can pick up the phone and speak to your property manager without being transferred to an anonymous customer service person not in the country.
Finally – our 350+ positive Google reviews – because while we love talking numbers the ones we are most proud of are the verified 5 star reviews of not only our property owner clients – but also our happy tenants. Because every good landlord knows that a happy tenant equals a stress free, optimised and predictable rental revenue stream – and this is the science that MetroCity engages in on your behalf.
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