Maintaining an investment portfolio, be that one or many, requires landlords to concentrate on many aspects of their property investment. While you may have some knowledge of the requirements and dedication to property management, to ensure you continue to build wealth through capital growth and guaranteed income, you need to avoid costly mistakes. Some of those can certainly be overcome by using the services of a professional managing agent, but if doing it on your own, consider the following pitfalls.
1. Ongoing investment in a remodel/renovation
Upgrading or renovation is considered one of the greatest expenses for landlords. On the one hand you have the opportunity to present a contemporary property that attracts higher rental prices, but if you can’t recover the expense to remodel, your investment may not be justified.
Best advice: Trim your renovation budget to match other rentals in the area. Consider low-cost alternatives to enhance the property.
2. Ineffective marketing strategy
Marketing is essential if you wish to ensure your property is rented out all year, but if directed at the wrong demographic in the market, or the advertising does not appeal to the type of tenant you want to attract, you may experience long vacancy periods.
Best advice: Only advertise across platforms (eg: social media) that apply to the type of tenants you would like to have. Also word the listing to cater for that market. Include video’s and photography of the property.
3. Management administration
One of the worst errors by landlords is the assumption that they can manage the property independently, without realising the time, effort and knowledge required is extensive. This involves handling tenant disputes, managing maintenance and requests for repairs, rental invoices and statements, evictions, marketing, contracts, research on other similar properties, and so on. It can become overwhelming if you also have other responsibilities in your life.
Best advice: Use a managing agent who will charge a reasonable fee, but it may be worth it to have a stress-free rental property.
4. Not staying updated on tenancy regulations
Changes to laws and regulations happen, and if you are not keeping up to date, you may find yourself in a legal battle.
Best advice: Engaging the services of reputable property management company allows you to ‘assume’ that they are better informed about new regulations, especially the more local municipal bylaw’s that will ensure your property is compliant.
5. Underinsured
If you don’t have sufficient building insurance to cover the structure of your property and something goes wrong, your investment may start to cost you. You cannot cut corners on insurance as any damage that can’t be covered for financially, will lose you tenants.
Best advice: It is best to apply for quotes from three different insurers to ensure not only do you receive the greatest cover for the most affordable fee, but the best advice.
6. Not budgeting for maintenance
Keeping your property in good condition not only assures that you can attract tenants, but also justify the rent that you charge. If you don’t maintain the property, nor inspect it, other landlords in the area will have an advantage. Plus, it is your investment, you need to look after it!
Best advice: At least once a year, do a deep inspection. Also create a maintenance checklist that includes carpet cleaning, painting if necessary, updating appliances, checks for bugs and insect infestations, and waterproofing, gutters and roofs. And be immediately reactive if a tenant advises of an issue.
7. Feeling under pressure to find a tenant
Rushing to find a tenant because you are worried about losing a monthly income, may mean you do not vet tenants adequately. Finding high quality, long-term tenants can be difficult, particularly in areas where rentals are popular. Also to be considered is the exit of a tenant who may leave the property in bad condition, which means you’ll need time to make repairs.
Best advice: Always ensure your tenant agreement provides enough notice, so that you are well-prepared to list ahead of a vacancy, ensure viewings, and no down-time between a tenant moving out and one moving in.
