When property becomes a business there is the temptation to cut corners to save on costs, according to Abigail Koch, of comparethemarket.com.au.
“Property is unlike other business models, because what is regarded as a business by the investor is also a home for the tenant,’’ she said.
These are the 7 big cost cutting mistakes investors make:
DIY property management. Agent fees (usually between 5 per cent to 12 per cent) of weekly rent) may seem like a lot of money for nothing, But Ms Koch said it was a small price to pay for professional work. Landlords who managed their own properties without expertise in things such as handling the advertising, lodging lease agreements and bond forms and screening tenants, could risk paying more in the end.
A poor screening process. If potential tenants are not screened properly you could end up with someone who doesn’t look after your property.
Potential tenants might seem fine, but make sure you screen them properly.
Potential tenants might seem fine, but make sure you screen them properly.Source:Supplied
“Landlords should know if their property managers are checking that applicants can afford the rent, have a good credit record – including a history of on-time rental payments – are making reference checks, and vetting applicants through a tenant database,’’ she said.
Failing to act on tenant requests. If you don’t fix urgent repairs in a timely manner your tenant may be able to break their lease. “Tenants may legally be able to break a lease if the property becomes uninhabitable, leaving the landlord out of pocket for rent,’’ she said.
Failing to comply with safety requirements. Landlords are responsible for the safety and well being of their tenants and can be fined if they don’t meet legislated requirements such as installing smoke alarms and secure pool fencing.
Discriminating against tenants. You can choose a suitable tenant but you can’t discriminate. If found guilty of rejecting a tenant on the basis of ethnicity or age landlords could face heavy fines under State anti-discrimination laws
Skipping landlord insurance. Building insurance may cover repairs to your property, but if the damage makes your home uninhabitable, only landlord insurance would cover the loss of rent.
Asking for a rent way above market rate. If the asking rent is too high, you may struggle to find a tenant or you only find shorter term tenants. Constant turnover of tenants could result in higher maintenance costs or period of vacancy with no rent coming in.