Stress is no good for your health and as a property investor, there’s really no need to experience it. There are many ways to manage stressful situations before they even happen, which is always my preferred approach!
When we set up our clients at Multifocus Properties & Finance, we always make sure they take a number of steps to ensure they can afford investing in property for the long haul, with several risk mitigation strategies added to the mix.
This means, for instance, they have buffers in place so that they can cope if they lose their job or have unexpected expenses. The end result is a prepared investor – one who is so organised that no matter what gets thrown their way, the investor is fairly stress-free!
Here a few of the most common landlord complaints, and how we work to structure things right from the beginning to help investors cope:
How to cope when: Your tenant breaks their lease, and stops paying
Sometimes people get down on their luck and they see no way out other than to literally run away from their problems – leaving you to mop up the mess. It can seem like a stressful situation when your tenant walks away from your property and stops paying rent, but if you take the right risk mitigation steps at the beginning, it doesn’t need to be.
We advocate for a two-pronged strategy when it comes to property management: first, you need to have a really good property manager, and secondly, you need a high quality landlord’s insurance policy.
You may have to pay a couple of hundred dollars for your insurance excess, but your PM will arrange to change the locks and source a new tenant, essentially handling all of the stressful running around on your behalf. A good insurance policy will also cover loss of rent and the costs involved in finding a new tenant, plus your bond will help you recoup other costs. Overall, the stress caused for you should be minimal.
How to cope when: Your investment property is damaged
Whether it’s accidental damage or a tenant who has deliberately made a mess, property damage can be a stressful and time-consuming problem to deal with. But not for the organised and prepared investor; for them, it barely raises a sweat.
Again, if you have a great property manager on your side, they will handle the bulk of the grunt work for you when arranging supplier quotes and liaising with your insurer to manage repairs after property damage. Better still, a truly great property manager may be able see the signs of a bad tenant before they reach the point of inflicting damage on your property.
This is why is really pays to work with qualified, experienced professionals; you may be able to save yourself a few dollars by managing your rental home yourself, but in the long run it can cost you so much more.
How to cope when: You lose your job
Timing is everything, isn’t it? I know an investor who bought an investment property a few years ago. It settled on a Monday – and three days beforehand, on the Friday, she was unexpectedly made redundant.
She had no way of getting out of the property deal by then, but it turned out to be a blessing in disguise. After job-hunting, she landed an even higher-paying role and better still, that property has grown in value by over $100,000!
If you lose your job you may panic at first, but it’s important to stick to the facts. This includes the fact that tax deductions are not lost simply because you lose your job; as soon as your new job starts, you can claw back any tax losses.
In terms of managing your finances while you’re without an income, there are always strategies you can use to minimise expenses while you get back in control. Be sure to speak to your lender or mortgage broker to discuss potential solutions, such as a loan repayment holiday, or accessing funds through a redraw.
How to cope when: The rental market goes down
There are a number of reasons why a rental market can turn south, the primary ones being an oversupply of stock after a flood of new properties hitting the market, and broader economic woes.
This is happening in Perth right now, where the economy is feeling the impact of the mining downturn. REIWA reports that the vacancy rate is very high at 6%, while rents are down 9% on this time last year. It’s a difficult time to be a landlord in Perth, as the tenants really do hold all the bargaining chips.
Now depending on the market, there may be strategies you can use to increase your property’s rent, like renovating, or adding amenities such as air conditioning or solar panels to reduce energy bills.
However other times, you may need to ride out the downturn in income for a few months (or even longer).
The most important thing to do during these situations is to keep focused on the bigger picture.
If you’re investing with a clear strategy and you have your finances set up in such a way that it cushions you against financial stress, then these types of setbacks shouldn’t have much impact. For a prepared investor, these are all pretty stress free situations; not being organised in the first place is when issues can arise.