How to review the performance of your investment property
A lot of people think of property as a “set and forget” investment. You’ve handed the keys over to a property manager, a tenant has moved in and the rent is turning up in your bank account each week. But if you want to maximise the returns on your investment, it’s important to conduct regular reviews of your property.
The idea is to run through a checklist that will help to show how well your property is performing and whether there is anything you can do - from small tweaks to major changes - to improve its performance. If you run through the list below once a year, you’ll be in a much better position to identify ways to both save money and make more money on your investment property.
Am I charging the right 'market' rent?
Market rent is the amount a tenant would willingly pay and you would reasonably expect to receive on the open market. This figure isn’t set in stone but in fact moves with changes in demand and supply. When vacancy rates are low and properties in your neighbourhood are in high demand, rents often rise in response. Similarly, when vacancy rates are high, you might need to reduce the rent to retain an existing tenant or attract a new tenant.
Your property manager will be able to guide you in setting the rent and will also provide advice on raising the rent in line with inflation.
You can also visit property portals to see what similar properties are renting for in your area.
What condition is my property in?
It doesn’t matter if you bought a brand-new apartment, a newly renovated home or a neat and tidy character cottage, all properties condition will decline over time. The only remedy is regular maintenance. While a good property manager will help you to tackle repair requests as they arise, it takes a little extra attention to detail to keep on top of ongoing maintenance.
This might mean taking note of when the property is due for fresh paint, updated appliances, a carpet steam clean or new exhaust fans. Perhaps a pergola or deck has rotting timbers, or a tree has grown too large and now presents a hazard to the house.
A home that is well-cared for typically attracts better tenants and higher rent, so it’s well worth your while to be ahead of maintenance issues.
A home that is well cared for typically attracts better tenants and higher rent
Can I add value to my property?
One of the factors affecting how much income your investment property generates is how well it presents and how it compares to others available for rent in your neighbourhood.
It stands to reason that if there are two similar-sized properties to rent in the same street, one newly renovated and one tired and dated, the first will probably attract a higher weekly rent. It will also have a higher sale price.
Creating equity is one of the best ways to fast-track your financial goals and renovating an investment property is a proven strategy for creating equity.
If you have access to funds and the time to project manage a renovation, your annual performance review is a great opportunity to consider the merits of a property makeover.
Popular renovations include new or updated kitchens and bathrooms, the addition of a covered outdoor entertaining space, an extra bathroom and updating fixtures like floor coverings, door handles and light fittings.
To get the best bang for your buck, talk to your property manager and the agency’s sales team to find out which upgrades will add the most value and which are likely to have the most tenant appeal.
Remember to adjust your building insurance policy to reflect the higher value of your property post-renovation.
To read more about property investing success read our complete guide here.
What is the value of my property?
If the value of your investment property has increased, you may have enough equity to buy a second investment property.
Your property manager can help to organise a property appraisal and you can do your own research online to see what comparable properties are selling for.
Doing a yearly check on your property’s value will also provide important feedback on your choice of property and location. If you bought on the expectation of seeing strong capital gains, you’ll want to confirm the property is performing accordingly.
If it’s not, you may need to think about ways to add value, or you may even consider off-loading the property and buying elsewhere.
Am I doing my tax return correctly?
One of the benefits of owning an investment property is the ability to claim relevant expenses on your yearly tax return.
There are lots of online resources with tax tips for property investors and if you engage an accountant to complete your tax return, they can also offer advice.
If you have made capital improvements to the property, the cost of these can be claimed over a number of years. You can also claim a capital works deduction for the cost of the construction of a property for 40 years from the date construction was completed. So, if you buy a 10-year-old townhouse, you’re still eligible for a capital works deduction provided the property is used for income-producing purposes.
Be sure to keep appropriate records of all your income and expenses to support your claims.
Download our Property investing in NSW guide here.
Is my property manager doing a good job?
A good property manager is a key ingredient to your investment success. Their job is to help you to maximise your rental return, minimise vacancies and ensure your property is looked after by the tenants and well-maintained by you.
They should be pro-active in reviewing the rent, conducting routine inspections, and providing advice on actions you can take to get the most from your investment.
So when you conduct your annual review, keep in mind how well your property manager has performed and provide them with constructive feedback if required.
For more about the qualities of a high performing property manager click here.
Have you had a DiJones strategy session?
Talk to your DiJones property manager about having a one-on-one investment strategy session. Our team of experts can help guide you on where you can add value to your property or make savings to ensure your maximising its performance.
I’d like a strategy session with a DiJones property manager.
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