Its that time of year when you should stop, take a moment and review the performance of your investment portfolio. Or perhaps you’ve received some advice to consider investing in property. Either way, it’s important to know that your investment goes beyond the initial cost of purchase and the best way to do that is to plan ahead for ongoing expenses.
Anyone that has had in depth conversations with myself would hear me say this time and time again. Planning for ongoing expenses, such as maintenance and repairs, will ensure you don’t find yourself under financial pressure throughout your tenant’s time in your investment property. A lot of emphasis and hard work is placed on finding great tenants for your home, but once those tenants are secured, they need to be looked after. A happy tenant whose repairs and maintenance requests are dealt with promptly and professionally will pay tenfold. Achieving a relationships based on goodwill will always provide the best outcome for a landlord and should be highly valued and prioritised by both landlords and property managers.
Our research indicates that you should allow in the vicinity of 20% of your annual yield to cover your regular statutory costs (excluding land tax) and/or strata levies as well as any minor incidental repairs and maintenance expenses that could arise throughout a year.
Of course this will vary depending on the age and condition of the property. Remember, tenants are not expected to tolerate the minor annoyances that a homeowner might “just put up with”.
If you have recently purchased an older investment property that has never been rented before, you might find that you will receive an initial surge of repair and maintenance requests on average. But don’t worry, this will eventually settle down. As hard as you might try to prepare a property for your tenants, it’s important to accept that some things can only be experienced when living in a property.
While in excess of 20% of your gross annual yield may sound like a lot, as far as a business goes (and thats precisely what your investment property should be treated as), it’s actually not bad at all. The key to success is not to allow yourself to be caught short. Schedule a meeting with your property manager to see how they can help you budget for your known expenses to help to ensure a positive experience for you, your property manager and your tenant.