Landlords (or more aptly known as 'property investors') are no different to most of us, where we want to negotiate a fair deal and save money where we can. However, experts have warned that cutting costs can lead to greater financial losses.
These are the 7 big cost cutting mistakes investors make:
1. DIY property management. Agent fees may seem like an unnecessary expense at times, but experts say it is a small price to pay to take the hassle out of the process in securing tenants, preparing paperwork, dealing with tenancy disputes, non-payment of rent and everything else in between that requires an understanding of legislation requirements, market conditions and negotiation skills. There have been many case scenarios where landlords who managed their own properties resulted in greater stress and paying more in the end.
2. Poor tenant screening process. If potential tenants are not screened properly landlords could end up with someone who fails to pay rent and doesn't look after the property. You need evidence that the tenant can afford to maintain the rent, have a good credit history, be of good character and provide references that they have previously maintained a property in good condition. Having access to national tenant database checks is very important.
3. Failing to act on reasonable tenant requests. If you don't act or fix urgent repairs in a timely manner your tenant may be able to break their lease and/or request compensation.
4. Failing to comply with safety requirements. Landlords are responsible for the safety and well-being of their tenants and can be fined if they fail to maintain the property, contract outside of the Act, don't meet legislated requirements such as installing smoke alarms and secure pool fencing, just to name a few.
5. Discriminating against tenants. You can choose a suitable tenant, but you can't discriminate based on race, status, age or gender. If found guilty of rejecting a tenant based on discrimination, landlords can face large fines under State anti-discrimination laws.
6. Not taking out landlord insurance. Building insurance may cover repairs to your property, but if the damage makes your home uninhabitable, or the tenant fails to pay rent only landlord insurance will cover you.
7. Asking for a rent way above the market rate. If the asking rent is too high, you may struggle to find a tenant, resulting in an extended vacancy period; or you may end up attracting short-term tenants, resulting in constant turnovers, potentially leading to higher maintenance costs, increased wear and tear or periods of vacancy with no rent coming in.