Property investment is a business and must be treated like one. Whether residential or commercial, a new property investor is now ‘in business.’ Not everyone is able to do this, because it’s not in their nature to cope well with such things. Dealing with tenants requires many personal attributes such as communication skills, patience, a working knowledge of the law, sometimes a very firm style of personal approach, and so on.
For someone on wages, when a customer leaves without buying anything because of the staff’s manner, or a lack of suitable product, there’s no immediate consequence to the staff pay packets.
But for a property investor, having a prospective tenant decline to rent the property because of the property investor’s manner, or because two windows are broken, there is an immediate consequence: no rental income, while the mortgage chews on.
Attention to detail is important. The pertinent laws often require many documents with precise items and language in them, especially with residential properties. NZ tenancy law is weighted in favour of tenants. Some speculate the reason is that property investors are in business, so have a greater responsibility than tenants.
Recording everything is important: expenses for repairs and maintenance items, rent received and in what form (directly into a credit union or bank account, or cash/cheque), receipts for cash payments, matters to do with bonds (if changed) and so on.
Computers with appropriate software and an Internet connection can make these tasks easier. Daily access to the credit union or bank account to check rent payments have been received is a modern technology boon for property investors.
Like many businesses, most everything can be done on a DIY (Do It Yourself) basis, perhaps more so when only one or two properties are involved. DIY covers everything from purchasing the property, obtaining a tenant, doing repairs and maintenance, to filing a tax return.
When or if the number of properties increase to the point where a DIY approach is not manageable, there’s plenty of people and companies around that will help with different aspects. A Property Manager is the most common, in such things.
However, there’s no need for an all-or-nothing arrangement. E.g. DIY everything except for using an accountant for the tax returns and a lawyer to prepare and execute the tenancy/lease agreements.
While there are Property Managers available to look after the routine aspects of tenants and property maintenance, utilising one does not free a property investor from all aspects of their business. Oversight of the property manager is important.
Liaising with a property manager does not mean interfering. It means being kept informed – both ways. A property investor should have a contract for service with the property manager and both should be sure of its contents and the obligations such a contract imposes on both parties. Being kept informed is of critical importance.
There is probably nothing quite so startling as a letter from the bank saying that no mortgage payments have been received for the last five weeks. Then the property investor realises that no rent payments have been going into the account (to cover the mortgage payments) and hurried calls are made to the property manager to find out what’s going on. “No surprises” is a good motto.
All businesses have their rewards and trials and property investment is no different. If ‘being in business’ is a scary thought, proceed with caution and lots of good advice from experienced people.