Landlords make many careful considerations when investing in property. Success requires wise business decisions and a sound understanding of the market. It’s more than just spotting a unit ripe for renovation or watching your bank account fill up.
Landlords also face strict legal responsibilities. As your portfolio grows, you’ll want to protect yourself and your tenants from unexpected challenges. That means setting yourself up for success – and knowing when to call in the experts.
We have the inside word on how to lower risk when investing in property.
1. Invest in good landlord insurance
As a landlord, you have what lawyers refer to as ‘a duty of care’ to provide a safe property. But did you know your responsibility kicks off the moment you open the place to the public? That means you’re potentially liable for any injuries before the property has been leased, not just after tenants move in. A would-be resident who trips and falls during an inspection could be able to hit you up for compensation.
Protect yourself by taking out landlord insurance. Not only will this type of cover incorporate building insurance and your own contents onsite, but it should also include public liability cover – usually up to around $10 million. You can normally claim the premiums on tax, and it could provide financial peace of mind.
Look for: competitive premiums that cover you for incidents relevant to your specific property needs.
2. Employ a professional to manage things
How hard can managing an investment property really be? Well, quite hard, as it turns out. Besides the time and effort involved, landlords also need to comply with a host of regulations and stay abreast of any changes as they happen. Consider reducing your risk by engaging a professional property manager.
Your responsibilities are many and can easily be overlooked. For example, failing to lodge bonds with your state’s bond authority or provide accurate rent receipts could result in an appearance before a tenancy tribunal. There are strict rules around when you can inspect the property, how and when to give notice, and how promptly repairs need to be carried out.
Unless you’re a seasoned landlord who knows all the rules and has time to meet the requirements, using a professional service could make life a whole lot easier – for you and your tenants.
Look for: an individual or team with experience managing properties like yours.
3. Do it by the book
Landlords’ financial obligations can be complex, and the rules around what you can and can’t claim are often changing. You’ll have a variety of different incomings and outgoings, positive or negative gearing to consider, and different expenses that may or may not be taxable.
A great accountant will take out the guesswork. They’ll help you understand and manage your requirements at tax time and maximise your potential earnings while keeping it all above board.
Look for: a tax professional who specialises in the ins and outs of investment property.
4. Make sure you have contingencies
Property investment isn’t wash-and-wear. You’ll be managing risk in many forms beyond your legal obligations.
Before you invest, make sure you have plans in place if things go awry. That means:
· Knowing how much you can afford if interest rates go up.
· Having enough capital to cover you when a property is empty.
· Being able to address urgent repairs or maintenance upfront; and
· Having an exit plan if you need to sell.
Being realistic about what you can manage will save heartache in the long run.
Your Choice Mortgage Brokers Pty Ltd ATF Halo Innovation Trust trading as Heart Mortgage Services - Australian Credit Licence 38643.
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