Buying an investment property is often high on the wealth wishlist for Australians of all…
By Kristen Amiet
As seen on SMH.com.au
Whether it’s your first or your fifth, purchasing an investment property is time consuming and rewarding in equal measure. There’s inspections and auctions and lawyers to contend with, and that’s assuming you’ve actually found the property that best meets your investment goals.
But all of that said, property investing is an incredibly rewarding experience and one that deserves to be celebrated – though it’s completely understandable if you’re a little unsure what to do after you’ve collected the keys.
Carolyn Parrella is Terri Scheer Insurance’s Head of Niche Distribution and offers these insights to help property investors start their journey the right way.
Make a management plan
“The very first step is deciding how you’re going to manage [your property] – that is, whether you’re going to have a property manager or do it yourself,” Parrella says. “As an investor myself, I would recommend a property manager.”
Both scenarios have benefits and challenges. If you decide to self-manage your investment property, securing tenants, planning ongoing maintenance and the administration of legal commitments is on you. On the flipside, a property agent will do the heavy lifting when it comes to day-to-day management, but you’ll need to put in some work to find an agent that knows the area well..
The “it won’t happen to me” mindset is dangerous in property ownership. While investing is one of the most effective ways to meet your financial goals, investing in landlord’s insurance from the get-go can help to mitigate risk.
“Insurance is really important to consider straight away,” Parrella says, explaining that the type of policy differs if it’s an apartment or house. Common areas of apartment buildings and complexes are covered by their body corporate’s building insurance, but that doesn’t extend beyond the front door of individual units, meaning the landlord and your property’s contents aren’t protected.
Insurance considerations for investors include covering any unforeseen rental losses or damage caused by tenants. In the case of a free-standing house, you should consider an extended building insurance policy to protect you in the wake of weather-related damage such as storms and floods.
Know what you’re on the hook for
Parrella adds that future landlords should also consider their liability.
“As soon as you advertise that property and you’ve got it open for inspections, you have a liability risk. So having the insurance in place before you start doing that is going to protect you in the event, for example, that somebody trips over and breaks their leg in your property and you’re found liable for it.”
It’s worth noting that even the most comprehensive landlord insurance policies won’t – nor are they intended to – cover general wear and tear.
Find good tenants
Securing tenants is probably the step most investors jump to after signing on the dotted line, but it pays to take your time and ensure you’re renting to people you can trust.
That said, Parrella warns that a tenant’s good rental history doesn’t necessarily mean the agreement will be trouble free.
“And that’s the thing about insurance – it’s there for the unexpected. Somebody might have a long tenure in the same company, for example, but two years down the track, they could lose that job and be unable to pay the rent. So, it’s important to think about the unexpected things that could occur in future and be aware of them,” she says.
The professionals you engage play a crucial role in ensuring the property is maintained to a high standard. “That’s where it’s really important to have a property manager doing regular inspections or, if you’re managing it yourself, to regularly inspect the property and make sure that it’s being maintained to a reasonable standard,” Parrella says.
Insurance issued by AAI Limited ABN 48 005 297 807 AFSL 230859 trading as Vero Insurance. In arranging your insurance, Terri Scheer Insurance Pty Ltd ABN 76 070 874 798 AFSL 218585 acts under authority given to it by Vero Insurance. Read the Product Disclosure Statement before buying this insurance and consider whether it is right for you. Contact Terri Scheer on 1800 804 016 or visit our website at www.terrischeer.com.au for a copy.
The information contained in this article is intended to be of a general nature only. Terri Scheer does not accept any legal responsibility for any loss incurred as a result of reliance upon it. This article has been prepared without taking into account your particular objectives, financial situation or needs, so you should consider whether it is appropriate for you before acting on it. The Target Market Determination is also available.
For further information, call 1800 804 016.