Like any asset, the aim of the game is to
MAXIMISE VALUE AND GROWTH and
MINIMISE EXPENSE AND LOST PRODUCTIVITY
Approaching maintenance on your investment property with a clear strategy underlying your decisions and an analysis of the pros and cons will make that maintenance call from your property manager all the easier to deal with.
First and foremost, ask yourself the question,
Why did I buy this investment property in the first place?
And don’t keep the answer to yourself. Let your trusted property manager know why, so they can understand where your priorities lie. If this changes, this is something your property manager needs to know. Open communication is key.
Investors who have a medium to long term strategy of their investment property regularly think about their investment and will ask probing questions to help you get to the bottom of your decision making. Setting out the pros and cons of maintenance planning is a good start and we encourage you to make a list …now, keeping in mind your individual investment strategy for your particular property.
I love my property like I love my car!
Undertaking maintenance on your investment property is kind of like servicing a car. You can choose to look after it and follow the recommended service schedule to mitigate any major Go Wrongs …OR… you can choose to just drive it until something goes wrong with the understanding that this will usually require a bigger more expensive rectification job.
You know that choosing to check your oil regularly will protect your engine. Leave it to the wind and you know that this is likely going to end up in expensive engine troubles reducing the life of the car. And when you go to sell your car of course people do their checks, getting a roadworthy and checking the log book to see what servicing has been carried out.
Let’s take a leaf out of the Body Corporate book. When we look at a well-run body corporate, for example, they will engage a quantity surveyor to develop a maintenance plan with a future value forecast of expected costs for the life of the building then calculate an annual budget and levies based on that evidence. No one likes paying body corporate fees, but the good ones have a plan based on economically sound advice which in the end manages the sinking fund and protects building value for unit holders. You’d expect this of your Body Corporate. Why not yourself?
The under-performing stratas have unforeseen expenses and underfunded sinking fund reserves. When things go wrong there’s not enough funds to address them, problems worsen, causing headaches and blow out costs for unit holders.
If you choose to ignore a maintenance plan you accept that when things come up you’re going to have to put your hand in your pocket, generally for a larger sum, to address what needs to be done. This is your choice and you have the option. It is up to you to determine what is best for you and make budget plans accordingly.
But be sure to base your decision on a well-balanced and informed approach and seek the advice of your advisors such as your financial adviser and your property manager who will have relationships with trades to give you a hand with identifying and budgeting key maintenance.
Some key points to consider:
* Think about the term of your investment – if it’s a short-term turnaround versus a long-term holding – your approach to maintenance will be different depending on your investment strategy.
* If the idea is to secure a long-term tenant and rental income, presentation and setting up ‘tenant mindset’ starts right at the beginning when you present the property for lease. Check out this link to realestate.com.au’s article on signs tenants to look out for. First impressions make a difference. https://www.realestate.com.au/lifestyle/6-signs-you-should-not-rent-that-house/?rsf=edm:nl:rent:a2
* Remember, just as advertising and presentation on inspection creates an obligation on your part to maintain the property to that standard, the Entry Condition Report is how a tenant is required to return the property. It’s a pinnacle point in time that poses a few questions in the mind of a tenant. They will ask themselves, “What does it say about the likelihood of an owner responding to a maintenance request?” and “If this is how the owner treats the place then I will treat it the same way?”.
This can turn a prospective tenant away at the first inspection or lead an applicant to think it’s a property they won’t have to put any effort into.
On the other hand, if they walk into a well presented and maintained property, the mindset is more likely that they will need to maintain the property throughout the course of the tenancy and will look after it because they are aware they have to return it in the same state as when they entered, subject to fair wear and tear.
* Looking after your property translates into looking after your tenants which increases length of stay. And longer-term tenancies mean reduced costs of tenancy turnaround and vacancy risk. At lease renewal your tenants are weighing up value for money and how comfortable they are in your property. Top of mind is how quickly maintenance is done and what investment the owner has made in making the property a home.
* Consider attending to minor problems as they arise. Left unchecked, minor problems will become bigger and more expensive problems later. Our experienced handyman, Maurlin from Hire a Hubby Albany Creek (0437 023 100) and our trusty plumber Warwick, Director of Plumbaround have recently been in to give our Property Management team training on regular issues to spot when doing our routines and entries/exit inspections. Here are just a couple of examples.
Maurlin points out one of the most common problems he finds, particularly in our Queensland climate, is the lack of preventative timber maintenance. “Decking & Timber Handrail, if regularly sealed and maintained for a couple of hundred dollars every couple of years, can prevent potentially bigger, more expensive and dangerous wood rot problems costing thousands.”
For Plumbaround, its braided hoses that are the ticking time bombs. “Rust spots on braided hoses are an indication of deterioration that, if left to further rust and corrode, could have catastrophic consequences”, says Warwick. “Those stainless-steel hoses you find under your kitchen sink, laundry and vanity have the potential to burst, flooding whole floors and causing significant damage to your investment property”, says Warwick. “A new hose is better than a whole new floor!”
* A portion of your rental income should be put aside each month to a maintenance fund to cover planned expenses as part of a 1 to 5 year maintenance plan. Discuss this with your Clark Real Estate Property Manager who has the experience and contacts in the rental market to advise.
* Be prepared for spikes in expenditure, particularly if the property has lost a long term tenant, purchased as ‘new to the rental market’ or owner occupied turned rental. The latter is often a cause for misunderstanding. You’ve lived in it like that so why can’t the tenant put up with it? Understand that the standard of care owed is higher when your property becomes a rental.
* Consolidate and simplify. At Clark Real Estate we can arrange to receive and pay all your property expenses (e.g. maintenance, rates, utilities, insurance and body corporate). All your expenses appear on your financial statements during the course of the tax year along with copies of supporting invoices. A financial year summary helps you easily analyse your investment earnings and outgoings.
* We will also advise you whenever your trust funds are insufficient to cover your monthly costs and assist you to make payment arrangements.
* Clark Real Estate can also arrange to withhold funds in trust from your disbursement to cover larger planned expenses, either as a one off or withhold a portion of each rent payment to build a maintenance fund to draw on whenever necessary.
Nicole, who owns an investment property in Wavell Heights, has authorised us to retain a portion of every rent payment and has built a maintenance fund to cover planned upgrades and an unexpected oven breakdown.
Nicole says “Getting Clark Real Estate to put away a small amount from each rent payment has been a great way to reduce the impact of a large invoice for a replacement oven. It also allowed me to have the budget to purchase a better quality oven with a longer warranty meaning a better return on investment. It’s now building a fund to cover a planned lighting upgrade, giving me control over cashflow and peace of mind.”
Most landlords are needing to budget for smoke alarm upgrades to meet 2022 compliance requirements. This may be a significant cost in your case but a regulatory requirement. Let us help you by creating a maintenance fund to build up your reserves to cover these upcoming expenses.
* Clark Real Estate has invested in a transparent system of maintenance which effectively provides you with a Dashboard for your property’s maintenance. Like a ‘logbook’ for your investment property. Your Landlord Portal also gives you a file of your invoices, the ability to communicate with our team and a list of past and scheduled inspections along with entry, exit and routine inspection reports.
At Clark Real Estate we understand that there are investors that prefer to budget and attend to preventative measures. There are others that prefer to defer work and save up for a more major expense outlay. No matter which investor you are, we want to ensure you are making well informed decisions in light of all the considerations and consequences.
At the end of the day our motto is to ‘connect people with lifestyle solutions’ when it comes to real estate. If we can help you find a better solution or you know someone who needs better property management, call us today on 07 3256 1600.