Neglected or maintained?
Owning a quality investment property over a number of years can do wonders for building your wealth. As capital growth and rental returns inevitably increase, the pain of owning an investment property begins to reap the desired return for landlords. The financial pain of transactions costs and establishing the investment property are behind you. Future capital gains and increasing rental returns are fruits to be enjoyed by the landlord.
Yes, an investment property can offer dazzling dividends. However, like any investment play, where there is a chance of a gain, there is also a chance of a loss. If you are a long term holder of real estate, time will usually take care of the market in your favour. The market may ebb and flow in the short term, but it will often reward the long term investor, both in increased rent and capital growth.
What is absolutely heart breaking for a landlord is when the investment property is trashed, wiping off market gains. Not only is this heart breaking, it is common. So common, that if you have not physically inspected your investment property in the past 2 years, you would be well advised to do so.
Most landlords discover the true state of their investment property when it comes time to sell it. Initially they mistakenly believe they are selling a well-maintained property. They have formed this belief as it was stated in the property manager’s condition report over the past few years.
It is only when the owner physically inspects the property or the market feedback comes back that the property requires renovating that reality comes to the fore.
The palace in the landlords mind is a shambles in reality.
Reality
If you are a landlord, or about to become one, there are some realities that you should accept about owning an investment property or properties
Firstly, few if anyone will treat the home as well as you would. This can often be hard to accept for people that lease out their primary residence for whatever reason. The family home becomes an emotional investment. Outdoor areas in particular are often neglected. This is not a criticism of tenants, it’s a reality.
Secondly, investment properties experience wear and tear. When you allow wear and tear to go unchecked, you are complicit in the deterioration of your own investment. If you are a long-term holder of real estate, it is likely that both your property manager and tenants will change during your ownership. Consciously or not, their treatment of the property will be governed by the owner’s attention to detail. With investment properties, neglect equals loss.
A noble rule is to maintain the home as though you lived there. If possible, doing the minor repairs yourself can save dollars.
If you are constantly resisting repairs, keep in mind that a stitch in time saves nine. And ultimately money.
Thirdly, it is an error to rely solely on the agent’s written or verbal feedback about the condition of your property. What the agent finds acceptable may be totally unacceptable to you. Unless you are present at the property with your agent outlining your expectations, there is an increased risk of a disconnect in expectations. Many investors have eventually inspected their investment property and been shocked to witness the true state of the property first hand. The pain is magnified further given the state of the property bears no correlation to the condition reports they have been sent over the years.
As the real estate industry looks to increase the number of properties per property manager, the upkeep and maintenance of the respective property can be neglected. As a landlord, it is your responsibility to ensure that this is not the case with your property.
Finally, owning an investment property is not a set and forget proposition. It is a mistake to turn your back on an investment. Property managers are often hard working good people. They don’t need to be micro managed. The property manager manages the property but the landlord manages the standard expected of the property manger. If you fight the property manager on every repair and maintenance issue, the property manager will simply stop telling you about such issues & asking you to fund repairs. Then one day the renovated investment may be a renovators delight.
If these realities seem too confronting and demanding, owning an investment property may not be for you. To suggest that investing in residential real estate is a guaranteed way to build wealth is only half the story.