The goal for any landlord is to find tenants that will take care of your property and at the same time pay rent on time consistently. There are two keys to achieving this goal.
First seems counter intuitive but consider lowering rent for the right tenant. Lower rent for other properties is one of the biggest reasons why tenants will move. It will be worth losing a minor amount each week to keep your tenant happy and not look for other properties. In the long run you will end up making more money there will be less vacancies, less advertising costs per year and if you have good tenants less money spent on repairs and maintenance.
Customer service is the second key point. Provide excellent customer service to the tenants that are looking after your property. Make them feel valued and start to see them as your “customer” rather than a “tenant”. Develop a mutually respectful relationship with your tenants. Next time your tenants are thinking about moving the good relationship you have with them will play a big part in their decision.
Decrease your vacancy
When your property is empty you are losing money. Spend a little extra time and find the right long-term tenants. Do not rush. It is ultimately much better to wait for the right tenants.
Cut down rental turn around
Keep your turn around to a minimum. Make sure that you a prepared for the tenants to leave. Have accounts set up on sites like Trademe property. Have photographs ready to go. Be absolutely prepared so the second you find out that your tenants are leaving you are already advertising your property for new tenants.
Add revenue streams
If your renting a single property, offer your tenants extra services that they may need. For example, landscaping services. Some tenants would rather pay then to deal with the responsibility. Another great idea is to offer cleaning services. Once your tenant has agreed to extra services you can negotiate with contractors and get them to do it at a lower price than your tenants are paying you, creating a margin for yourself.
Animals are not so bad
A lot of landlords will not allow pets, but this can be an opportunity for you to make a little extra money. A good tenant with a well-trained pet will be more than willing to pay a bit of extra rent to keep their pet.
Furnish to increase rent and decrease tax
This may not be for everyone, but a furnished home might be your key to financial reward. Tenants who have little to no furniture, short term renters or those new to the country will be willing to pay more for the convenience of moving into a furnished home. Some of our clients managed to successfully increase rent by $200 per week by furnishing the home.
This decision will largely depend on the location of your property. Areas closer to the city centre will be more ideal for furnishing.
There are taxation benifits for furnishing your property. All the furnishing you provide can be depreciated and can be deducted from your overall net profit. This means you will pay less tax and at the same time you will be able to increase your rent.
Weather extremes will help your rent
Surprisingly air conditioning is an important factor for tenants. In today's world air conditioning units are getting more and more affordable. Air conditioning unit can add about $30-$50 in rent per week. During the extremes of winter or summer you will notice that more and more people will be willing to pay a little extra for your property because of the air conditioning.
Take advantage of Inner-city parking problems.
In most cities parking is always a problem near the city centre. If it is possible, think about adding in off street parking. This can be extremely valuable for increasing rent and attracting a higher quality of tenant. To boot as time goes by the parking problem within the city centre will only get worse and will also spread out. This means the value of your off-street parking will increase with time. Off street parking near the city will increase your rent by $50 per week.
Do not depend on one property. Use the C-B-A Strategy to grow.
The C-B-A strategy is a great option if you are interested in growing your portfolio.
First, we must understand the definition of C-B-A properties.
A class C property is a property that needs major renovations. It could be a property in a less than ideal area but that is not always the case. This type of property will need substantial work and may lack basic amenities that renters will be after.
Class B properties are maintained by are not the best. They will not have the latest or the best amenities. Most renters will find this property acceptable however there is plenty of room for improvement and has potential for the future.
Class A properties are the properties in great locations and have everything renters would want. There's not much room for improvement here. You can simply put these up on the market right away.
Be very careful with class B properties. Class B is the sweet spot and this is where everyone wants to be. Meaning that there is a lot of competition here which will hurt your margins. Obtaining these types of properties will also prove to be difficult.
Class C properties are the properties you really want to keep an eye out for. Competition is low so you can get a great bargain on the initial purchase. Upgrade the property. Take advantage of the taxation laws and claim back all the repairs you perform on the property. Ultimately you want to upgrade this to a class B property. Hitting the sweet spot. Do not over invest and try to turn these into a class A property, unless you have a extraordinary opportunity.
This all sounds great, but we must warn you do your research on class C property. Take a good look at the neighbourhood etc before purchasing class C property
Prior to purchasing a class C property it will pay to take a contractor with you who can look at the house and can give you an estimate on how much it will cost you to upgrade the property to a class B property. Take into consideration the costs of repairs when you place a bid to purchase the property. Remember this is a class C property there will not be much competition thus there is more wriggle room for you to negotiate the purchase price.
Follow the rule of C-B-A to acquire new rental properties it won't be long before you are able to outright purchase A class properties.
Get Rid of Your Problem Properties
If you are interested in building a portfolio, you will need to learn how to let go of trouble some properties. The best thing to do is to hire an accountant and get a report prepared by the accountant to show you how much money you have put in, what you have received back and IRD liabilities you may be facing in the future if you continue with the property. This can be an extremely difficult decision. At 93 Accounting we have gone through this procedure with many of our clients and have found that ultimately are clients are mentally and financially better off selling certain properties. If you would like a budget/financial forecast prepared by us please contact us by visiting www.93accounting.com
It’s important to understand that you cannot grow an investment property portfolio if you are holding onto dead weight. Get out from under the property and move forward with properties that will perform better.
Having great knowledge of your own area is a great advantage however do not fall into the trap of just investing into one area. Diversify your locations, this is a tip told to us by many of our successful clients. Diversifying will mitigate risk. An unfortunate example is the South Island earthquakes a horrible event but imagine if all your properties were in the that region. Another reason to diversify is to ride the highs of other locations.