Being a landlord might seem easy enough, but successfully managing investment properties requires the mindset of a business professional. There’s a few common mistakes rookie landlords often make.
When it comes to being a landlord, there is a lot more to it than simply buying a property, doing a few renovations and renting it out for more than the monthly mortgage amount.
There’s also agent fees, maintenance costs, tenant checks, potential loss of rent and so much more.
Keeping on top of investment properties requires meticulous attention. Picture: Getty
But perhaps one of the most important elements of being a landlord (and one of the biggest things to get wrong) is insurances says Kirsty Hayes, Head of Home & Business Insurance at RACV.
“Without insurance, there is a big risk that landlords will be significantly out of pocket if the unexpected happens, for example, if a tenant stops paying rent or leaves without giving notice,” she explains.
So, whether you’re a first-time investor or have previous experience as a landlord, avoiding these common mistakes can help minimise lost money, time and stress.
1. Not waiting for the right tenants
We get it — having a property vacant can be anxiety inducing, especially as mortgage repayments reach their due date.
No matter how keen you are to have your investment property rented, taking the time to vet potential tenants can pay off in the long run.
While this is generally the job of your property agent, make sure they’re checking for things like history of late payments, exiting leases early, verifying references and their income status.
Failing to do these things could mean rental payments are inconsistent, tenants pack up and leave without notice, or your property could be vacant for longer periods — all of which will cause greater financial stress than waiting to find suitable and reliable tenants.
2. Underestimating maintenance costs
Being a landlord requires you to maintain the property you rent out, which can keep current tenants happy and may increase the amount of rent you’re able to charge.
Things like painting, replacing carpets, replacing appliances and even structural damage after a major weather event can all add up and cause huge financial strain if you’re not prepared.
Landlords should have extra funds to fall back on to do regular property maintenance. Picture: Getty
As well as charging enough rent to cover basic maintenance costs, creating a ‘maintenance account’ for home repairs which you contribute to regularly can help ensure you’re not thousands of dollars out of pocket should the unexpected happen.
3. Not getting the right insurances
Many landlords would be familiar with (and probably already have a form of) building and contents insurance.
Building insurance can help cover damages to the structure of your property; contents insurance can help provide cover for items within your property.
“Landlords should be looking for a policy that covers a wide range of tenant-related incidents,” Hayes says.
“For example, recent legislative changes give renters more rights, including the right to have pets.
“So it’s important to make sure that you’re protected and your insurance policy helps cover damage caused by a tenant’s pet.”
Not having the right insurances could cost landlords thousands in the long-term. Picture: Getty
This is where RACV Landlord Insurance comes into play. It’s a type of policy that protects property owners in the event tenants cause damage (whether accidentally or maliciously) or fail to pay their rent.
RACV Landlord Insurance also covers loss of rental income if an insurable event results in your property needing significant repair work, as well as up to $10,000 for the removal of tenants’ possessions, unauthorised alterations made by your tenant and up to $800 for the replacement of locks*.
4. Failing to maximise deductions
Failing to keep records of all property-related expenses means landlords could miss out on thousands of dollars a year.
Costs such as body corporate fees, council and water rates, cleaning, property management fees, interest on your home loan and some maintenance fees may be deductible in the financial year — so make sure you keep all receipts and thorough records!
Hayes adds that the key to being a successful landlord all comes down to research.
“It’s worth researching your options and comparing the fine print to ensure you’re financially protected if your property is impacted by unforeseen events.”
“Property owners run a real risk of financial pain if they don’t take the time to do their due diligence, or aren’t attentive with their rental properties.”
So to help avoid these issues down the line, don’t make these mistakes and instead help set yourself up as a successful Landlord.