Dear Landlords, Don’t Let Maintenance Be Your Achilles Heel
Although investment property maintenance might not be the most exciting part of being a landlord, it is certainly important. Whether you had a tenant that didn’t take care of the house during their stay or the weather conditions in Australia have been hectic, it is your responsibility as a property investor to preserve the value and good condition of your property. In April 2015 this year when Sydney was hit by a terrible hailstorm, the Insurance Council of Australia recorded a total of $389.3 million insurance being claimed. Although there was no data available on how much of this claim is from property damages, it shows that to avoid paying out of pocket due to situations that are beyond your control, landlords insurance is a must have. However, insurance or not, the price of neglecting your property is far steeper than performing regular building maintenance and repairs.
What Happens When You Don’t Do Regular Maintenance?
MaintenanceIn the best case scenario, the penalty for neglecting landlord property maintenance is that you will likely spend most of your days answering phone calls from your property manager regarding household emergencies. The worst case scenario is that the residential property becomes unsuitable living conditions and you will either have to spend more time getting the house into ship-shape, or it could become condemned if it is considered unlivable following an inspection by building inspector.
In the event that your investment property becomes unlivable, they will be a domino effect on your cash flow position. First there would be the repair cost or worse, a complete overhaul costs. Then, imagine the loss of rental income that would be funding your mortgage repayment. The damage is inconceivable but at the same time, this also highlights the importance of having a building and pest inspection before you purchase the property to reduce the risk of unknown damage.
Different Types of Repairs
When it comes to rental property maintenance, cosmetic and corrective repairs are the most common responsibilities, but not the only ones. Cosmetic repairs include things like a fresh paint, light fittings and an update of basic household hardware while corrective is a bit larger in scale. In addition, you can do preventative repairs that better the home for future tenants- such as servicing the water heater or replacing air filters. Preventative repairs are typically the easiest to avoid, you could just fix things as they happen, but sometimes it is better to deal with the problem sooner than later. When you lack the time, money and/or resources for any investment property maintenance, then you can defer them at a later time, just don’t forget what you need to do.
The Benefits of Preventative Repairs
Preventative repairs help you avoid having to make frequent trips for emergencies when something breaks as well as extend the life of several assets on your property. The best part about preventative repairs is that you can incorporate them in your regular landlord maintenance routine or you can do them infrequently, though the former is generally more advantageous than the latter. In a place like Australia, where residents often face extreme weather, preventative repairs can reduce the damage done by wind, rain, and even extreme heat.
There are at least nine different places in your home that are negatively affected by bad weather including the roof, siding, windows, foundation, electrical wiring, kitchen, doors, balcony and the front or backyard.
Windows should be regularly inspected for cracks, sweating and leaking which lets moisture inside leading to mold. Doors need to be strong and able to withstand strong winds and rain because they often bear the brunt of bad weather. As far as the foundation is concerned, it’s important to check for cracks and make sure to take measures to prevent rain water from collecting by installing a pump or designing the property so that rainwater naturally runs off with little problems.
What is Landlords Insurance and how is it Different from Homeowners Insurance?
Landlords insurance varies depending on your needs, but if you plan on renting out your property, you will need insurance policy in place to protect you from paying out of pocket expenses for property damages caused by destructive tenants, extreme weather, break-ins or fire. More importantly, insurance for landlords will also protect you from financial loss from late rental payment, reimburse you when the property becomes uninhabitable and against liability for injury claims, homeowners insurance does not. That is why at Empower Wealth, we always recommend our investor clients to organise the insurance right before the property settles because things might happen in between your settlement date and when your new tenants moves in. One of our clients actually encountered exactly that. After their investment property settled and before the tenants move in, there was a big storm and unfortunately, some of the branches from a nearby tree fell and landed on the fences. Thankfully, they had an insurance in place and were able to claim for the damage caused.
Although homeowners insurance can provide similar coverage, it is not as strong as landlords insurance and coverage is limited. You can add liability to your plan, but it costs extra, where as insurance for landlords includes those liabilities. However, when looking for an insurance provider, make sure you pay attention to the fine prints and understand what is being covered and what are not.
How to Deal with Damage Caused by Destructive Tenants
As a landlord, there might be a lot of scenarios that you wouldn’t accounted for and sometimes it takes a turn for the worst where you would need to evict the tenants. On other times, you might get tenants that are irresponsible, or their clumsy friends and family who would cause damage to the property. It is not uncommon to find a few holes in the walls, cracked windows, and a neglected yard but other damages can be far worse. This emphasize the importance of having an experienced and responsible property manager in place so that they can filter the rental applications and make necessary background check.
Nonetheless, there are times when the property is simply aging and you would need to do some repair. You can either do the repairs yourself, or you can pay a professional to fix the property, but make sure to keep everything documented. If the damage is caused by the tenant, send a letter to the previous renters that you will be sending them an estimation of the cost for the damages. If they do not agree to pay the difference, then it is best to take them to a small claims court. If you’ve engaged a great property manager, he/she would be able to advice if not manage the circumstances for you.
Routine investment property maintenance and repairs are just a small part of being a landlord, but with the right knowledge, you can protect yourself from the cost of these repairs. Once again, a good property manager will be able to guide you in their recommendations for routine maintenance and inspections of the property.