Eight ways to increase your bottom line as a landlord
When you purchase a rental property, you don’t just want to make ends meet. It’s an investment, after all, and you want to make sure you’re doing everything you can to get the best return. Taking the time to calculate your potential profit before you buy is a great start, but what comes next?
Here are some guidelines to follow as a landlord that can make all the difference to successful property investment:
1. Do your due diligence
Because this is an investment property, it’s always wise to analyse the numbers the same way you would any business.
Before purchasing, make sure the rental income is more than yearly expenses. Check the average rental price in the area and deduct any loan repayment, property tax, rates and insurance you’ll need to pay. If you still have money left over every month, then it’s a good sign.
2. Find great tenants
It’s always hard to know if tenants will take care of your investment the way you would like them to, but recent tenancy law changes in New Zealand make it difficult to evict.
Your best chance at success is to run thorough background checks on all applicants before signing the contract. Call their references and previous landlords and ask if they kept the property tidy and paid their rent on time. Meet with the applicants in person to gauge their suitability and ask lots of questions.
If this all sounds like more work than you have time for, it might be a good idea to consider a property manager who is an expert at finding and managing tenants. For a little extra cost, you could end up saving money in the long run.
3. Be a proactive, friendly landlord
Create a good relationship with your tenants
It pays to form a good relationship with your tenants from the get-go – respect their privacy and let them know you’re always keen to help with maintenance issues if needed. Be good to them and they’ll return the favour by taking good care of your rental property.
Stay on top of maintenance
Putting off maintenance can lead to even steeper costs down the road. Ask your tenants to keep you posted on any leaks, mould or wear-and-tear so small problems don’t turn into big ones. Try to schedule regular inspections and look for any potential problems that could be fixed.
DIY wherever possible
Save yourself money by doing the easy maintenance jobs yourself. It’s always best to hire a professional for the tricky jobs, so you know you have a long-term, quality fix.
4. Study your legal obligations
As a landlord, you’re legally obligated to comply with tenancy laws and regulations. Complying won’t just keep your tenants happy and safe, it’ll also ensure your property stays in good shape. This will keep your maintenance costs low and avoid expensive legal fees.
5. Exclude utilities from rent
The rent that you set should exclude utilities like electricity, water and gas – they should be the tenant’s responsibility. It’s common and best practice in New Zealand (and overseas) and will help you maximise your rental property investment – without bills eating away at your income.
6. Prepare for wear-and-tear
Before your tenants move in, it’s a good idea to invest in durable, quality flooring, skirtings and paint. This will be a higher up-front cost but may save you time and money on general wear-and-tear going forward.
7. Good insurance
As with any insurance, it’s better to be safe than sorry. Set yourself up with comprehensive landlord insurance that usually covers sudden or accidental damage, hidden gradual damage, methamphetamine consumption, damage to neighbours’ properties and natural disasters. You can also opt to cover lost rent or tenants vacating without notice.
8. Deduct expenses against tax
Keep a record of every single expense for running your rental property. New Zealand gives out numerous tax deductions for landlords, especially if the property is owned by a company. Over time, you may save yourself a lot of money, making your investment even more profitable. Every cent counts!
Maximise your rental property, get great returns
As with any investment, you want to make sure you’re getting the most out of your rental property. In most cases, owning a property in New Zealand is a fantastic investment, and renting out your property will greatly improve your returns. Set yourself up for success with a positively geared property, good insurance and a can-do attitude. If you can then find great tenants and commit to staying up to date with maintenance, ROI will follow.
When you’re ready to grow your investment portfolio with a rental property, Global Finance can help you with your due diligence. Contact one of our experts today.
**These are general guidelines and are by no means a reflection of bank or lending policies