NAVIGATING PROPERTY INVESTMENT – Part Two


Note from the Editor:

Missed part one? Catch up here.

This article was written for the SDC by psychologist and member @Jan A. Jan A. works part-time, taking on clients under the Medicare Mental Health Care Plans. She works with people of all ages, from children to seniors!


This article is for those who are considering investing in a property to rent out. The information is designed to assist people who will need a mortgage to buy an investment property. If you can pay cash for a property, some of the advice may still be relevant for you.

Hopefully, some of the information in this article about navigating the property market will be useful. Please note that advice expressed in this article should not be taken as the only view or even the best one for you. It is not to be taken as professional financial advice. I am only passing on what I have learnt about this form of investment. Check with other people who have property investment experience. Consider their views, take on board what is useful for you and discard the rest. Practical experience provides the most useful information. If any readers have experience in this investment field and would like to contribute to this information, please add your comments to benefit others.



Building and Pest Inspections: When you find a property that might be suitable, you pay a small deposit for the seller to hold the property for you while you have building and pest (termite) inspections done. Always have these inspections done. The only exception is in Tasmania where you do not need a pest inspection because it is too cold for termites!

A termite inspection is vital. If you buy a house that is or has been termite infested, rectification costs could be enormous. No insurance will cover termite damage. The only 'insurance' is to have a termite barrier installed around your house to prevent damage. This barrier is worth the cost. They cost around $2,000 to $3,000 and last about 12 years. Spraying for termites only makes them run to another part of the property and set up again there. Your building inspector will check aspects of the house that are not immediately noticeable to you, such as whether there are issues with the roof. If you have inspections done and there is a problem with the property, you can claim the deposit back. If the inspections have satisfactory results, you can proceed with the purchase, and your initial deposit is included as part of your 10% deposit on the property.


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Building and pest inspections are crucial to avoid further expenses down the line. Image Credit: Shutterstock



Insurance: Once you buy an investment property, always have landlord’s insurance. This insurance covers more than just the building. Provided you have a lease in place, landlord’s insurance also covers losses if tenants skip out owing rent. It covers malicious and deliberate damage left by tenants. It covers accidental damage, such as a stone going through window glass when the tenant is mowing the lawn. There is always an excess for the owner to pay, usually about $300.

Agent: Engage a managing agent to look after the property and collect the rent. Check their fees and charges before signing with them. Usually, 90 days’ notice is required to dismiss an agent if they are unsatisfactory. When you engage your agent, provide bank account details where they will deposit the rent. Make sure you update your bank details if you change accounts. The managing agent will provide a statement of collections and expenses at the end of the financial year. This statement should be provided free of charge. If the agent charges for the annual statement, get another agent. Provide the agent with a copy of your landlord’s insurance, updated each year.



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Thank you for the advice, but this bit:

"You may also wish to specify whether or not you allow pets (usually cats and dogs) and any limitations on the number of pets."

Landlords, in at least S.A., cannot refuse pets.

"A landlord or agent can’t state ‘no pets allowed' - unless pets are specifically prohibited in the property's strata, community title, rooming house or residential park rules - or charge a separate pet bond, although they can impose reasonable conditions regarding the type of pet and nature of the premises."

Which is excellent for those that can't be without their beloved animals, plus they can't charge you a pet bond!
 
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Thank you for the advice, but this bit:



Landlords, in at least S.A., cannot refuse pets.



Which is excellent for those that can't be without their beloved animals, plus they can't charge you a pet bond!
My son allowed the tenant to have a small dog to keep them company.
When they moved out the little dog had mailed and chewed its way into all the bottoms of the internal walls
Agents response"wear and tear" nothing you can do about it.Again cheaper to have the doors replaced an d paid by him than the legal battle and loss of tent till it would be sorted
In the end after having it rented for 8 years when moved out to his new home and new baby that arrived,he sold it.BEWARE INVESTMENT PROPERTIES NOT ALL THEY ARE NADE OUT TO BE.
OH,and don't forget your strata fees communal lighting bills ,communal water,shared water bills amongst all units equally,even though he was l alone and only home to go to bed at night...and now capital gains tax on whatever profit he may have made when sold,minus the real estate fees etc etc.He had very good financial advisers by a top Sydney well known accounting firm,so.no it wasn't through lack.of knowledge or ignorance.
 
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My advice after many years of flipping and renting houses is give it a wide berth.
It's not worth the stress and heartache.
Unfortunately, my experience has been, for every good tenant there are a dozen bad ones.
Tenant Insurance??? Mmmm. I found, like most insurance policies, they have lots of loopholes. They don't cover your gardens in most cases, so if the tenants don't water the lawns, gardens etc it can be a massive expense to replace. This happened to us on several occasions even though we were subsidising the water costs. One company refused to pay out on burnt carpet because we didn't know when the damage was actually done, the tenants had a rug hiding it.


Agents charge a fortune, a lot of them charge for inspections they don't actually do

Property is so expensive these days unless you can pay cash, you'll be lucky to cover your mortgage.


If you have to evict a tenant it can take months to get them out. It once took us 18 months, with no rent coming in and you never get recompensed because you can't get blood out of a stone.

The law is more on the side of the bad tenant than the good landlord.
If you're a bad landlord well that's your problem


You always need money behind you. Hot water systems need replacing. Ovens need replacing. Plumbing., electrical, air conditioning problems, etc etc

JMO!! No more tenants for me, especially since they bought in the laws that tenants can paint YOUR home, have pets whether or not you want them and many other laws restricting the rights of the lawful OWNER of the property.
One of the reasons peopke are pulling out of rental property investment.
 

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