Building an investment property and having tenants effectively pay for your mortgage is a great way of expanding your portfolio, increasing your asset base and maximising your cash flow. But that doesn’t mean that it’s easy. If you’re considering going down this path then make sure you check out our advice for prospective landlords. Building an investment property and having tenants effectively pay for your mortgage is a great way of expanding your portfolio, increasing your asset base and maximising your cash flow. But that doesn’t mean that it’s easy. If you’re considering going down this path then make sure you check out our advice for prospective landlords.
Manage Your Expectations
Your goals should always be to have a positive cash flow. This doesn’t always mean you’ll be rolling in it. Managing your expectations and keeping them reasonable means that you won’t be tempted to hike the rent too much and unnecessarily force out good tenants. Being too greedy can definitely backfire in the long run.
Know The Rules (Or Engage Someone Who Does)
Regardless of where you intend to build, there are a whole range of state and federal laws that outline your responsibilities and liabilities as a landlord. Ignorance is no defense so make sure you’re familiar with them or you could run afoul of the law and incur some serious financial penalties. If you’re unsure of anything then it’s always advisable to seek some expert, legal advice.
Do Your Research On Tenants
Vacancies are a fact of life as a landlord. Instead of rushing to fill them, do your research on prospective tenants and make sure you’re getting the right people. This includes checking references, running credit checks and even inspecting their current property. Not only could this save you lots by avoiding costly property damage and potential missed rental payments, finding good long-term tenants will make your life a lot easier!
Strike The Right Balance Between Earnings & Effort
Managing the property yourself will definitely save you money, but is it really worth all of the extra work that comes with being a good hands-on landlord? Take the time to work out if engaging a property management firm might be a better option for you (especially if you have multiple investment properties). It’ll definitely save you lots of time, hassle and stress.
Get The Right Kind Of Insurance
When renting out an investment property, normal home-owners insurance is often not adequate to cover your liability as a landlord. Make sure you sit down with an insurance professional and work out what policies and coverage you need to make sure you’re financially protected.
Create An Emergency Fund
20% of the value of the property is a good ballpark figure to work with. This will help you cover any emergency expenses that aren't covered by insurance. It never hurts to have an extra safety-net in place should things go wrong.
Are you considering becoming a landlord sometime soon? As Perth’s industry leader in all forms of property development and subdivision, we can ensure that you build a property that’s going to make your life as a landlord as easy and profitable as possible. Get in touch with us today on (08) 6461 5289 to find out more.