SPENDING SAVES YOU MONEY
JUST LIKE your car, a building needs maintenance. A typical home has many thousands of parts. When everything is well maintained you have a home that is comfortable, safe, healthy and energy- efficient. As a property investor you need to monitor the building, identify potential problems and fix these problems promptly. After you have purchased a property you are responsible for maintenance. This chapter will help you to know what to look for and how to fix it.
Remember that you are maintaining an asset that has the very important task of building your future wealth.
In Australia, the cost of property maintenance is high. Our tradespeople are heavily taxed and highly regulated so no wonder cheap labour is hard to find, but that is another story. The high cost of labour and materials means that it is more expensive than most people realise to maintain a property. Once investors have coughed up the huge amount necessary to purchase the property they seem to think, great now I can relax and watch the money roll into my account. An Australian Bureau of Statistics (ABS) survey conducted in 1999 found that maintenance costs seem to be around $2,000 per annum on a rental property. Interestingly, the same survey found 64% of people who lived in a house that was more than 60 years old said it had major structural defects. Hardly a news flash that older properties need more maintenance. Given it’s now 2016, it’s likely that maintenance costs have only increased.
WHY USE A PROPERTY MANAGER?
I personally use the services of professional property managers to manage the maintenance of the property in my investment portfolio. Yes, I could do it myself but my time is worth more than what they charge (and your time is worth more too).
OK, so here is how you make a list of maintenance on your own home easy. Set and forget. Have a look at the following example shown.
Gutters every 6 months by ACME gutter cleaning ph. 555 7788 firstname.lastname@example.org
Window cleaning every 12 months by Sparkle Window cleaners ph. 555 123 email@example.com
Air conditioning service every 12 months by Be Cool Air Con Solutions ph. 0455 456 789 Alex@becool.com
Schedule this maintenance using inndox so you get a reminder that is linked to your contacts and is there for the next owner. This makes your property more attractive as a buyer can more easily take over the management of the property.
Why you should get one maintenance company to do multiple jobs
Save time by getting one company to do multiple items. For example, the guys who clean my windows also clean the pavers with high pressure water. Now they offer gutter-cleaning too. They call me once a year in September (our springtime) and two guys come and spend the whole day cleaning the gutters, then the walls and pavers and finally clean the windows. It costs about $800 after I get a discount for being a regular customer and packaging all the services together. They call me every year and we agree on a day. Set and forget. Now I just got back four weekends I can spend with my family and friends.
OMG my tenant died!
My tenant was 54 years old and lived on his own. I had only met him a week before he passed away. I got a call from my onsite manager advising me that he had just found the tenant sitting on the sofa wearing only a singlet. The onsite manager called the police and they came over to verify the man was deceased.
The coroner’s office came out and investigated the scene. They concluded there was no evidence of foul play and took the body away.
The onsite manager then arranged for the carpet and sofa to be removed. We agreed to tile the floor instead of using carpet again. The tiler could start straightaway and the floor was tiled within two days. The tenant’s family visited the property and removed his remaining possessions.
After the cost of the new tiles, rubbish disposal and unpaid rent I was out of pocket $500. The onsite manager who took care of the management of the unit was very professional at a difficult time. I really appreciated his efforts to show the appropriate respect for the tenant and his family while also getting the property ready for the next tenant and keeping me well informed.
I have seen tenants make a huge mess of a property and cause tens of thousands of dollars in damage. This damage usually occurred over many years and the rental agreement was usually a handshake agreement between family or friends without professional property management.
Do you need the “extras” on your Landlords insurance?
The bond of one month’s rent is woefully inadequate when you get significant property damage. Landlord’s insurance is essential. Some policy extensions include malicious and accidental damage by tenants. I recommend getting these extensions if possible.
Also take out building and contents insurance. I recommend that you obtain a replacement estimate from your building inspector.. Insurance companies sometimes have online calculators to help you arrive at a replacement value. In your estimate, don’t forget to allow for architects’ fees, demolition, council fees and rent for another property during a rebuild.
Ask your tradie for proof of license and insurance
When engaging tradespeople. Always ensure they are appropriately licensed and insured. For jobs that cost more than $500 I will usually get a comparison price or two. Be respectful of people’s time and refrain from getting five quotes. The insurances that tradespeople need include: Workers Compensation, public liability insurance and home warranty insurance in some parts of Australia.
Who is responsible for maintaining common property areas?
If you buy a unit, flat, townhouse, apartment or other property that has common areas then I consider it essential that you arrange for a search of the body corporate records. These will help you to understand if there are any issues that may impact upon you or your decision to purchase the property (if you are in the process of purchasing the property). Often a search can be arranged by your solicitor as part of the conveyancing process. The building inspection will generally not include common property areas. Its a good idea to put all Body Corporate (Community) rules and correspondance into your inndox.