Expect The Unexpected – Property Investment In 2020
If there’s one thing we’ve learned in 2020, it’s that life is full of curve balls.
Just as we were picking up the pieces from the deadly summer bushfires, along came a pandemic that changed life as we know it. Suddenly things we had taken for granted for all our lives – going to the pub or café, travelling to see friends, even buying toilet paper- were no longer an option.
The economic flow-on effect was enormous. Businesses closed down, thousands queued at Centrelink, tenants couldn’t pay rent, banks granted people mortgage repayment holidays and waves of government stimulus packages helped Australians stay afloat, at least for the time being.
New threats for property?
As a nation, we are heavily invested in real estate and markets around the country took a hammering thanks to lockdown. Values and asking prices came down, along with rent and property investors found themselves blindsided. If people couldn’t afford to pay rent, how would landlords pay their loans off? And if they had to sell, would they make a loss that they had never dreamed possible before?
However, these concerns are nothing new. Any property market can be exposed to a fall in value or sudden lack of rental demand, it’s just that the pandemic saw them all happen at once. We can invest in what we think is a good, safe asset, but the truth is, we never know what’s going to happen for sure. So here are some property hurdles you should try and prepare for.
When we buy a property, we don’t often expect the value to go down. However, markets generally move in cycles, with a growth period, followed by a plateau, occasionally a value fall and then a flattening out before the next growth period.
The reason Binvested clients often make instant equity is because we help them access properties for less than their value. If you buy at the bottom of the market, you can get in cheap and be there in time for the next growth period.
But if you buy at the top of a market growth spurt, you should be prepared for a fall in value before the next cycle kicks in. This is a concern if you’re a chance of needing to sell in the short term, but if buy and hold is your strategy, you will benefit from multiple property growth cycles.
No Vacancy? Think again
Picture this, you’ve bought a property that has been tenanted by the same couple for 6 years. They love the place, want to stay forever and the rent they pay makes the place positive cashflow. It all seems perfect. Then suddenly, they decide to move out. They were no longer on a lease, so they give you minimal notice and leave. Turns out there is a lot of work to do at the place to make it ready for new tenants and before you know it, you are facing months of vacancy, which can bring you undone if you’re not prepared.
When you buy a new investment property, make sure to get the tenants onto a lease and purchase landlord insurance to cover you for rental losses (or ask us about the promo Blink Property has in September 2020 – where you can get free landlord Insurance for 12 months!). Factor in a month a year of anticipated vacancy to make sure you can cover your costs if you need to.
Repairs and maintenance
The broken fans, plumbing leaks and chipped paint of the world are inevitable and will cost you money at regular intervals over the course of your property investing journey.
But choosing the best possible tenant is the key to minimizing damage and extra maintenance. If you have to accept $10 or $20 less a week to keep a good tenant in place long term, this will cost you less in the long run.
If your property manager has a good vetting process in place that is a start, but they also need to be thorough with the lease entry report, so that you only have to pay to fix the things that are your fault or responsibility.
Can I see the manager?
A good property manager is essential if you are not able to manage your own investment property.
Your property manager should be carrying out regular inspections, keeping abreast of market rent and making sure your tenants are doing the right thing. They can also give you advice on what is happening with rent, vacancy rates and other economic conditions in the local market so that you get the most out of your investment asset.
If you’re trying to figure out how to navigate the world of property investment in 2020, at the same time as everything else that is happening in the world right now, we might be able to help!
Why not book a free consultation with our team to discuss your goals and how you might be able to achieve them in the current economic climate.