Avoiding Property Management Pitfalls.

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Most experienced investors understand that even a few weeks’ annual vacancy usually means a lower net income than if the property had been rented at 95 percent of market value for the whole year. So if maximizing income from rental property investment comes from keeping their properties occupied, why do some Landlords expect to rent their properties for 110% of market value?

The answer to this question no doubt varies but such Landlords sacrifice weeks of rent and create dissatisfied tenants who move on when they find a better value option, thereby creating a cycle of higher turnover and greater vacancy.

Furthermore, investors whose properties are good value get more enquiry and can afford to be more selective when deciding who will rent their property. Being selective means checking references (these days references are even available for pets!) but beware of taking into account irrelevant criteria such as dress style, marital arrangements and other personal choice issues. The bottom line criterion is: Does their history indicate that they would be able to pay $x per week for ‘y’ weeks?

If a property stays empty because the rent is too high, owners can get desperate enough to overlook a tenant’s patchy references; in the effort to get the highest income, they make themselves more likely to get less because poor references could mean greater likelihood of getting behind with the rent.

New investors can avoid a lot of common errors by making use of the expertise of their managing agent. Many novice investors don’t think of asking their managing agent’s advice until something goes wrong. Investors who do their homework and tell their agent up front what their needs are find it much easier to keep abreast of what’s happening and avoid confusion.

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Experienced investors ask their agent to provide a statement of all income and expenses with monies banked directly into the owner’s account each month. Many agents also supply written inspection reports of the state of repair (internal and external) and cleanliness typically 3 or 4 times a year.

Your agent can also give you a written report of the current rental value and the local area vacancy rate particularly when reviewing the rent, ideally every 6 months. An annual written report of the current reasonable selling price of the property is also a good idea and one which your agent would be willing to supply on request. Owners should carry out an internal inspection of the property themselves at least once every two years so that they can visualize its state of wear and tear when maintenance and repairs are discussed.

Most investors say it takes three to six months to get to know a managing agent and their way of working. Until then it is best to require all expense items to be referred to the owner (other than emergencies) prior to the agent spending any money. After the initial period, set a limit on the amount the agent can spend (usually about the equivalent of one week’s rent) without reference to the owner.

Naturally, as with any contractual arrangement, investors should always have their agreement with their agent evidenced in writing.

To assist you further we’d like to offer you our book called ‘The Property Investor’s Guide to Profitable Property Management’. If you haven’t taken advantage of this offer before, take this opportunity to download it now.

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Thanks for your time.

About Gai Kroczek

Gai is the Owner/Manager of Total Care Property Management together with Bernie Kroczek of Bernie Kroczek Real Estate. Gai has been in Real Estate for over 20 years and runs a professional Property Management team utilising the latest technology to assist owners in maximising their investment while also assisting tenants.

Gai is also the web designer and maintains all the office technology keeping abreast of all the many changes and implementing them to make sure our owners get the best possible service.

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