Six Ways To Make Your Investment Low-Stress
When you own multiple investment properties, you’ll quickly find that maintaining them can be a tough task and can chew up your free time.
You don’t want to make your portfolio a second job or as stressful as one. While investment properties can be difficult, there are many things you can do to ensure they are low-stress and low-maintenance.
If you want to be able to sleep at night, the first thing to consider is insurance.
This includes landlord’s insurance, which covers your building in the case of any damage, including malicious and accidental damage caused by tenants and their guests. If you have whitegoods, furniture or other inclusions, you may also want to consider an insurance policy that covers your contents. Check your policy to ensure you know what you are covered for and shop around for good deals.
You should also consider income protection and life insurance, to ensure you and your family are stress-free at times of illness, injury or death. Consider your worst case scenario and what insurances you can put in place to cover yourself adequately.
You may also want to consider strata insurance. Usually under the body corporate manager’s control, this covers legal liability for common areas in an apartment building or complex.
2) Choose a good property manager
Outsourcing the stress and day-to-day hassles to a professional for a fee is the choice of the majority of Australia’s landlords – largely because it requires a specific set of personal skills and specific knowledge.
There is little about self-managing that is low-stress, with awkward conversations, rent-collecting and chasing and dealing with tenancy laws fairly high on the list of areas where novice landlords trip up.
A good property manager will take all this stress away, keeping your property well-maintained, with good, regular tenants and minimal vacancies. Don’t scrimp when picking the best professional for the job – choosing someone with a proven track record will ensure they do their best to source good tenants and maintain a professional relationship with those individuals.
3) Set guidelines
While some landlords want to be involved with every detail, on a day-to-day basis you are outsourcing this stress to your property manager. Provide straightforward guidelines, in writing, that provide you the ultimate comfort level.
For many, this is giving the property manager a significant amount of breathing room and autonomy. Provide them a maximum amount they can spend for repairs and maintenance before you are contacted (for some this may be $100, for others it’s in the thousands) and let them know how frequently you want to be notified.
Know what the rules are and when to expect correspondence – all offices differ with their approach. You may not want to hear about every niggling issue, or you may be the type of person who likes to know exactly what is happening – either way, setting the expectations up front will lead to a low-stress approach to your rental.
4) Have a financial buffer
A financial buffer is a savings fund that covers you in situations of financial stress and hardship. For instance, an unexpected vacancy, tenants unable to pay rent or huge repair bills can all affect your ability to stay stress-free with investment properties.
Ensure you have enough savings per property to be comfortable. This should cover you for both expected and unexpected events and should be added to every time you gain another financial responsibility. For some landlords, this is as much as three month’s rent per property. The more you put aside, the better you will feel when something inevitably goes wrong.
5) Stay organised
Keep a folder for each property with all the documentation you might need. You will want to keep digital back-ups somewhere safe. Having a schedule of what is expected due, such as inspections and council rates, will mean you always feel in control with your portfolio. You can set alerts to remind you, however it’s useful just to be able to glance at a calendar with upcoming bills and be aware.
You could also consider an email dedicated to investment property correspondence, to ensure everything is in the one place, that also allows you to only check in and look as required. There’s nothing worse than being bombarded in your personal inbox on a daily basis.
By being organised, you can regularly and quickly review your progress, equity and local market movements, allowing you to make timely and educated responses. You should schedule in quarterly checks of your portfolio to ensure everything is performing well.
6) Have an exit plan
Before it becomes too late, plan what your “exit strategy” will be – or how you intend to sell the property should it be necessary. This includes knowing the lowest price you could take for the home to “break even” and the maximum loss you could sustain without being too affected.
By knowing when you want to sell and what the indicators are that mean you should sell, you will be able to sleep a little more easily. Speak to anyone else who is financially involved in the portfolio, such as spouses, partners or family members, so they are on the same page with the plan. Having these conversations in a low-pressure setting is always preferable to last-minute decision making when emotions are running hot.
The content does not take into account your personal objectives, financial situation or needs.
Readers are advised to contact their financial adviser, broker or accountant before making any investment decisions and should not rely on this article as a substitute for professional advice. All information is current as at publication release and the publishers take no responsibility for any factors that may change thereafter.