Page 12 - Welcome Home Magazine October 2021

6

LANDLORD BLUNDERS

& HOW TO AVOID THEM

Investment of any nature is never an exact science and the property market is no exception.

Interest rate changes, fluctuations in supply and demand, emotional decision-making, and broader econom-
ic shocks all conspire to make things a lot harder. However, there are still some tactics property investors
can use when seeking the best possible value from their investment. Below are some common mistakes you
should try and avoid when considering your property investment.

1. Repaying debt indiscriminately
Trying to pay down all your different sources of debt simultaneously can be tempting. However, not all
debt is created equal. Certain types of debt come with benefits others don’t have – such as tax deductibili-
ty.

One option is to use your spare cash to only pay down your non-tax deductible debt. This could include
personal loans – such as those used to purchase a car or holiday – or debt used for your principal place of
residence. Once this non-tax deductible debt is eliminated entirely, you should move on to your tax-de-
ductible debt – such as the loan on your investment property. That way, you’ll minimise debt that doesn’t
give you any extra cash at tax time and maximise the debt which can.

2. Forgetting about depreciation
Continuing on the topic of tax, many property investors often forget to capitalise on tax depreciation
deductions, which could mean missing out on thousands of dollars of potential returns. This issue could
be remedied by seeking the assistance of a qualified Quantity Surveyor, who will prepare a depreciation
schedule based on their assessment of your property.

3. Leaving rents to stagnate
What many investors often forget is that the rental market can move much faster than the property market as
a whole, which is why rents are often left to stagnate unchanged for several years.

This means that, by the time investors realise they should probably increase payments, they may have to do
so by $50 or $100 at a time – an amount that probably won’t be very well received by tenants.

A better approach may be incremental adjustments of $10 or $20 every time the lease is renewed. This is
likely to be every six or 12 months, depending on the lease period, and should be far more palatable for those
on the receiving end of the rise.

4. Holding out for an unreasolable rent

On the flip side, investors may inadvertently lose money by stubbornly clinging to their ideal rental asking
price, despite little interest from potential tenants.Often, such an inflexible approach will lead to extended
vacancy periods.

Source: Realestate.com.au 6 Common property investment mistakes and how to avoid them 26th Feb 2020