Investment Tips – Managing Your Investment Property
When you consider the property you are going to invest in, you should also take into account how much time and money you are prepared to put into the management of the property…
Furnishing an investment property
For the investor, furnished properties can attract higher rents. The downside to furnished properties is the initial outlay of cash for the furniture – a cost that can quickly add up. Of course, of even more significance is whether there is a demand for furnished properties in the area where you have just purchased. This is where you really need to do your homework.
If your property is within walking distance of a CBD then there is every likelihood that there will be strong demand for both long-term and short-term corporate lets. This market segment generally requires a far greater investment in the furnishings because of the style of tenant you are likely to attract. With this type of property you may need to provide everything from the sheets and towels to the cutlery and crockery. If you get it right, a furnished property in a suitable area can provide handsome returns.
Perhaps you’ve purchased in an area near educational institutions such as a university or a TAFE college. Here also, a furnished property may improve your chances for a good tenant and great returns. International students, in particular, are more likely to choose a furnished property over one that is unfurnished.
Properties in the suburbs are more likely to be rented unfurnished. Most tenants will have their own furniture and a furnished property may not provide many benefits in terms of attracting and keeping tenants.
Part of the decision making process will depend on your personal circumstances and include the tax depreciation benefits that you will be entitled to when investing. Furnishing an apartment will provide additional tax benefits through increased depreciation that can be claimed against your income. It’s critical to discuss the impact of this with your accountant, who will be best placed to advise on whether this strategy will be beneficial to your personal circumstances.
Choosing a property manager
Selecting the ‘right’ property manager can often make or break your investment. When choosing a property manager, treat the process with as much (if not more) care as you’d give selecting a tenant. Ask the following questions:
- How long have you been in business?
- Do you have experience managing this kind of property?
- How do you advertise vacancies and select tenants?
- How do you collect rent and disburse it?
- What are your maintenance procedures and how do you handle emergencies?
- How do you handle overdue rent?
- What reports can I expect to receive and how often?
What to expect from a property manager
You should consider meeting the property manager who will be directly managing your property, especially if you have some special requirements as to how you would like to have your property managed.
A good property manager will help to manage your investment and will do more than just collect the rent. Good managers will take care of regular inspections and maintenance issues and handle the letting of your property to minimise any vacancies. They will also perform credit and background checks on your prospective tenants.
How much will a property manager cost?
Property management fees can vary and you can negotiate directly with your property manager on the level of fees they charge. Whilst lower fees are always helpful, a good manager is worth every dollar you pay and any savings may be insignificant when compared to the benefit of having your property managed well.
In terms of how much of your rent you will need to pay to have your property managed, in Queensland, fees for a long-term residential let are generally 8% plus GST. Charges over and above this fee, for example advertising your property for rent, is a separate fee again. Management fees for short-term letting such as holiday letting are much higher, up to 13%, and involve much more work for the manager.
Onsite Property managers
An on-site property manager can offer you considerable peace of mind. Not only do the managers reside in the complex, but they are on call every day. On-site property managers are often the largest investors in the complex having bought their own property to live in, as well as the management rights to the development. This means the property manager has a vested interest in the management of the complex and in ensuring all the properties are kept in good condition and occupied by stable, trustworthy tenants.
An on-site manager can often carry out minor repairs at no or minimal cost. This means tradesmen are not always required for small repairs that could otherwise be quite costly. An on-site manager is also better placed to keep you informed about the complex, its performance and condition. It is our experience that a good on-site manager clearly has more to gain if your property is managed well as they are building the value of their own considerable investment in their property and business.
For more information, contact LV Prestige today.