Building wealth by investing in property sounds brilliant on paper. But, if you plan to manage the property yourself, it’s not quite as easy as watching the rent roll in.
With share market volatility and interest rates at an all-time low, many investors are casting an eye at property as a lower-risk alternative. However, buying an investment property means you also need to find tenants, manage repairs and juggle rental income with a mortgage.
For many investors, the prospect of saving a few bucks by managing a property themselves sounds enticing. But when you get down to the nitty-gritty, property management can be full of hassles that can eat up your time – and chew away at your bottom line.
“If you lack the skills to manage property yourself, it can cause more pain than profit,” says Chris Perry, director of sales at Defence Housing Australia (DHA).
Here are seven of the biggest pain points to avoid when it comes to managing property:
If you’re buying an investment property, you’ll need to find tenants. The most effective way to do this is to advertise. That means an upfront cost without any income coming in, says Perry.
“The DHA product goes a long way in mitigating those challenges,” he says. “You’ve effectively locked us in as the tenant. We find the occupants without inconveniencing you.”
Finding good tenants
In the current market, the ability of tenants to pay is a big risk, Perry warns. Before signing off on a tenant, you’ll need to check that they have secure employment.
Property is a long-term investment, Perry says.
“With DHA, you have peace of mind that the occupants can be Defence members,” Perry says. “We also manage that relationship, so you don’t have to.”
If a tenant leaves, so does the income – and that continues until you find a new one. But with a secure tenant in place you can budget confidently and plan ahead of time.
“DHA offer long-term leases from six to 12 years,” Perry explains. “And we pay rent every month – even if the property isn’t occupied.”
Toilet stops flushing; washing machine pipe bursts; stovetop stops working – the day-to-day issues of keeping a property up to scratch are endless.
Managing a property means receiving tenant calls at all hours, organising tradespeople and a lot of time and money. With DHA, most of this is covered under a management fee.
“You don’t have to worry about out-of-pocket expenses or setting aside time to manage these issues,” Perry says. “We deal with all of this quickly.”
If something needs to be fixed at your investment property, the repairs come out of your pocket.
However, at a DHA property, for almost anything non-structural, DHA is responsible for maintenance.
If an appliance breaks down, or if there’s damage to a door, lock or window, the tradesperson will be arranged to visit at no additional cost.
Late or unpaid rent
If your tenant can’t pay rent, not only will you have to chase the rent, but you also may end up in tribunals. It can be an expensive and protracted process.
All the while, that person is continuing to live in the property while not paying anything. You still have all your ongoing costs without the income to match.
This doesn’t happen with the DHA product, Perry says.
“It’s locked in, long-term and secure,” he says. “You won’t have to chase rental arrears either.”
Constant new tenants
Every pain point can return if you’re suddenly faced with the prospect of having to find a new tenant. It’s not unusual for investment properties to change tenants every 12-18 months, warns Perry.
“Every time that happens, you’re looking at an average of about three to four weeks in between where you’re not getting income, plus have additional costs,” he says.
“There’s nothing like knowing that your tenants are locked in for years. The rent just simply rolls in.”
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