There are some realities about owning & managing an investment property that landlords should accept before they become landlords. If not, the investment property that was meant to serve you as a rock solid performer can cause unwanted expenses, energy and stress. It is commonly accepted that tenants on the whole will not maintain a property as well as an owner-occupier would. We are not here to make judgements on this point, rather just let you know the facts. When you do have a tenant that takes good care of your investment property, ensure that you take good care of them.
1) They under invest in the maintenance of the property – If you buy a brand new investment property with a 10 year plan but neglect the maintenance of the property, you end up selling an un-renovated property. The capital gains in the general market can be wiped off due to the deterioration of the property. When finance costs 7% and rental returns are 4% before expenses, it is not a great surprise that many landlords have difficulty finding spare cash to maintain their investment property. However, it is far cheaper to maintain a property than renovate one. A stitch in time saves nine!
2) The second mistake that landlords make is they don’t inspect the property often enough. Relying on a condition report from the property manager is not sufficient supervision of the property. Maybe it should be sufficient, but in reality its not. Many landlords are horrified when they finally inspect their property having not inspected it for several years. The actual condition of the property is so far removed from the condition reports they have been receiving that it defies logic. This is a shattering reality when the superb residence you originally leased out is now a battered wreck. The 1% you negotiated off the agent’s commission won’t be much compensation if your agent does not keep your investment property to a high standard.
3) The third mistake that landlords make is they allow issues to fester. When the landlord is happy to let maintenance issues slide or insists they are done on the cheap (& nasty), they set the expectation standard for both the agent and tenant. As a landlord, it is important that you insist your investment property is maintained to a high standard, both through your actions and words. All properties experience wear and tear. It is the landlord’s responsibility to address it. If not, over time, the festering issues become major problems. If you know the mistakes that other investors have made, you have a better chance of avoiding them. If you maintain the investment, the odds of achieving an acceptable return increase.