What’s the best way to manage your rental properties? Should you do it yourself or use a rental manager?

This is a question you should not answer lightly. While there are some benefits to self-management, not everyone is cut out for it. Even those who have the skills and experience to do it well may end up slowing down the progress toward their longer-term investing goals.

Here are a few questions to consider if you’re trying to decide whether to self-manage your rental properties or to delegate the job to a professional:

1. Is your investing strategy scalable?

Every entrepreneur in a growing business quickly learns if they fail to delegate, they fail to scale. Your property business is no different.

If you keep buying properties without building a team of helpers and advisors, you will eventually find yourself unable to cope with all of your responsibilities. After all, there’s only so much that one person can do. Unless you start delegating specialised tasks to experienced professionals, the growth of your property business will eventually stagnate.

In Steve’s McKnight’s Property Apprenticeship course, one of the repeated questions throughout the training material is: “Who will you partner with?” For investors who want to build a scalable investing strategy, one of the most crucial professionals to partner with is their property manager.

2. How much time do you have available?

Managing your own rental properties requires a considerable investment of your time and energy. Because the workload increases with each new property you buy, you’ll want to count the cost early on in your investing journey.

Be sure you’re clear on exactly what it takes to manage a property effectively and efficiently. Your tasks will include:

• Learning legal rights of tenants and landlords.
• Valuing market rent.
• Advertising and marketing your property.
• Screening multiple tenant applications by contacting references.
• Signing appropriate paperwork.
• Collecting bonds.
• Carrying out condition reports.
• Responding to tenant questions, complaints and repair requests.
• Organizing tradespeople.
• Collecting rent in a timely and efficient way.
• Keeping appropriate paperwork and documents.
• Regularly inspecting the property.
• Enforcing the lease before a tribunal, if necessary.
• Maybe even evicting tenants.

Carrying out each of these tasks with excellence will carve time out of your already-busy life. Be sure you have the time, and can also give your emotional best to each of these areas of responsibility equally.

3. How much aggravation can you endure?

Managing rental properties means being available at virtually any time of the day or night. You’ll never be able to fully switch off from the responsibility.

You will be the first person your tenant calls when there is an emergency or they need you to do an urgent repair. Whether you’re out for drinks in the evening with your mates, or sleeping soundly at 3 a.m., you’ll need to be available and to respond promptly to these situations when they occur.

If you’re going to self-manage, you must be willing to open up your life and have your time inconveniently invaded from time to time by another person’s needs.

4. Do you have marketing skills?

One of your most important responsibilities as a self-managing landlord will be to advertise the property effectively in order to attract the right tenants. This may be especially difficult if you’re in a market with a higher vacancy rate.

Failing to market your property effectively will increase your vacancy rate and could end up costing you thousands of dollars per year in lost rent. If an extended vacancy due to poor marketing costs you as much as you would have paid a professional property manager, you’ll end up working for free for the remainder of the year.

5. Do you have a system for screening tenants?

You don’t just want any tenants; you want the right tenants. This will require carefully sifting through the many applications you may receive, so you can make the best choice.

Ideally, you want tenants who will make timely rental payments, but you also want tenants who will look after your property as if it were their own. Therefore, discerning the character of prospective tenants is paramount.

The first step is to have a thorough tenant application form. You’ll want to collect both personal information, and a list of references to confirm both character and income. Next, your job is to pick up the phone and ask those references the right questions about each applicant.

You can also access tenancy databases, like TICA, to confirm whether someone has blacklisted a prospective tenant. The cost of such services may range from $200 to $500 per year.

6. Are you clear on the legal requirements and documentation?

Managing your own properties will require you to educate yourself thoroughly on your legal rights responsibilities as a landlord, as well as those of the tenant. You will also be required to gather and keep the proper documentation related to tenancy agreements, bonds, condition reports, maintenance requests, inspections and dispute resolutions.

One eye opening experience well worth a landlord’s time is to review the list of reasons they can ask a tenant to vacate, as well as the notice they are required to give by law. So take a moment to look up the requirements in your state, or check out the laws in Victoria.

7. Do you have the personality to be a good property manager?

I once mentored a property investor whose day job was property management. She absolutely hated her work because she was not a people-person. She didn’t enjoy being around others, and preferred to work alone. Obviously, she chose the wrong career.

The best property managers enjoy being around people and have the heart to serve others. Being a people person means you can maintain a good attitude and demeanor and be polite, no matter how difficult the situation or how trying your tenants are being.

You will need to do two things: build rapport with new acquaintances in a sales role and cultivate long-term relationships in a management role. There are few people who have the natural ability to do both of these tasks well.

8. How much is your time worth to you?

This is the ultimate question.

If you have a property that rents for $500 per week, you may end up paying out $2,000 per year in fees to a rental manager. That amounts to just under $40 per week or about $165 per month.

If you must spend an average of four hours per month managing a property, you’re essentially getting paid $40 per hour to self-manage. If your time is more valuable to you than that, perhaps you are better off delegating the job to someone else.

Conclusion

Smart investors recognise where they can use their time and talents best, and where they need to delegate other tasks to the experts who can deliver optimum results.

Your ultimate goal is to work smarter as an investor, not harder.

In the beginning, low value-add administrative duties may be necessary, or even beneficial for you to do yourself; however, as your property portfolio grows, you’ll eventually hit a wall unless you learn how to delegate.

Only you can decide whether self-managing a property is right for you. In our Property Apprenticeship course, Steve McKnight has written an entire session on “Self-Managing vs. Rental Managers.” He also includes a template detailing exactly how to screen tenants effectively.

The post DIY Landlording: Questions to Consider appeared first on PropertyInvesting.com.

Having coached hundreds of students in Steve McKnight’s training programs, I’ve had the privilege of learning from both the successes and the failures of other investors.

Early in our Property Apprenticeship course, Steve lays out some of the most dangerous pitfalls for first-time investors. One of the most common responses I invariably hear is, “I wish I would have done this course before buying that last property.”

Let’s face it. Making mistakes in real estate is easy to do. There are plenty of sharks out there that are keen to take advantage of unsuspecting first-time investors.

Even for those who are smart enough to not be taken for a ride, the waters are still dangerous. Most investors enter the property market having bought into some commonly held myths like, “negative gearing is a wise strategy,” or “once you buy, you should never sell.”

If you have a property that you now regret buying, here are seven strategies that may help you turn that losing deal into a winner:

1. Build a Granny Flat To Boost Your

Cash Flow

Depending on where you invest, you may be able to add a secondary dwelling to increase the overall yield of your investment.

Last year I was mentoring someone who converted her existing detached garage into a second dwelling. She and her partner carried out much of the renovation work themselves on a bare bones budget, and then rented the “garage” out for $190 per week. This provided a massive boost to their income on this property.

Granny flat laws vary from state to state, so be sure to research the laws of your particular area. If you live in South Australia, Victoria, or most of Queensland, only family members can rent secondary dwellings. However, if you live in the Australian Capital Territory, Northern Territory, New South Wales, Tasmania or Western Australia, you can rent it out to virtually anyone who will pay you.

For more creative ideas, a step-by-step guide for how to get started with this strategy and the most common pitfalls, check out an article I wrote here.

2. Add Value for Your Tenant in Exchange For a Rental Increase

Tenants usually aren’t too happy about paying their landlord more money. But if you’re a landlord, you likewise should not be happy about receiving too little rent.

Many property investors grow complacent and fail to raise rents in fear of losing a tenant, but it’s actually wiser to train tenants to expect regular increases.

If you don’t raise rents regularly in line with the market, in the future you’ll find that you’ll need to increase by a large amount, just to catch back up with the market. Smaller regular increases are a much easier pill for tenants to swallow.

Even if the market doesn’t demand that you raise rents, you can still find creative ways to do so. Find out what kind of improvement your tenant wants in the property and agree to add value to the place in exchange for an increase in rent.

I wrote here about one of Steve’s students who improved his annual cash flow by $2,340 just by raising rents. All he had to do in one of his properties was install an air conditioner in the master bedroom.

3. Negotiate Lower Interest Rates And Management Fees

The same investor also improved his cash flow by $2,184 per year after negotiating a lower interest rate with his lender and lower management fees with his property manager.

First he contacted his property manager to say he was speaking to other agents in the area. At the time he was paying a six percent management fee. After gaining several quotes for five percent, he took this back to his existing property manager who lowered his rate to match the competition.

The process was just the same with his bank. He spoke to a few mortgage brokers to find out what other rates were available. Then he simply went back to his bank to have a face-to-face conversation. The bank manager matched the best rate that he found in his research.

4. Renovate the Dwelling to Increase the Property’s Perceived Value

Renovation is all about adding more in perceived value than actual cost. You may be able boost your property’s value or increase your rental yield by improving the property. This may attract a more discriminate buyer or tenant willing to pay a premium.

There are certain improvements that will bring you more bang for your buck than others. As one renovator that I interviewed shares here, you should focus on street appeal, walls and floors, and kitchens and bathrooms.

5. Subdivide the Land

If your dud property is on a larger block, it may not be a dud after all. Subdivision can be a lucrative way to add value to your property if land in the area is in high demand.

You should proceed with caution, however. Subdivision can be a lengthy, complex and expensive process.

You should enlist the services of an experienced town planning consultant to research the local council’s requirements, such as minimum lot size, storm drain regulations and sewer placement. Costs can easily blow out, which can defeat the whole purpose.

6. Offer the Property on Vendor Finance Terms

Offering a property on vendor finance terms is another strategy to boost a property’s cash flow in the lead up to a final sale. For the right buyer, vendor finance can also be a huge win, enabling someone to secure a home for purchase rather than being a renter.

You can learn more about how vendor finance works here. Laws vary from state to state, so be sure to do your homework. You’ll also want to seek the advice of a qualified and experienced solicitor.

7. Sell the Property and Move On

Sometimes you must face the fact that a bad investment will always be a bad investment. If this is the case, perhaps it would be best to sell the property, and redeploy the equity into a more profitable strategy.

Deciding to sell can be difficult for investors because of the costs involved and the capital gains tax implications, but these are not reasons to remain in a losing deal.

If you’re struggling to decide whether or not to continue holding a property, ask yourself this question: “Would I buy this property today at its current price?” If the answer is “no,” then the obvious next question is, why would you want to continue holding it?

Conclusion

Once you have the courage to admit that you own a losing property, the most important thing is to be sure you never make the same mistake again.

Learn from the biggest lesson of many our Property Apprenticeship students: “I wish I would have done this course before buying that last property.” Before you buy another property, be sure to educate yourself.

Here are a few questions for you to ponder:

• What did I not know when I bought my last deal that I know now? How will this information keep me from making the same mistake in the future?

• What myth did I believe about investing that led me to buy my dud property?

• What kind of due diligence should I have done that I failed to do with this property?

• Who did I allow to convince me to buy this property? What was his or her motive? Did I get taken for a ride?

Answering these questions will give you some valuable insights for the next time you contemplate a property deal. By understanding your past mistakes, you can avoid making them again in the future.

The post How to Turn a Losing Deal Into a Profitable Money-Making Machine appeared first on PropertyInvesting.com.

We have four primary ways of dealing with risk. We can avoid it, accept it, reduce it or transfer it. By purchasing insurance, we are transferring risk to an insurance company.

Insurance is a brilliant invention for sharing risk with others. The insured pays the insurance company a premium in return for the insurer accepting the risk. The insurer then agrees to pay the insured for any loss suffered if the risk eventuates. The insurer uses the collected premiums from all of its clients and income earned from investing those premiums to compensate the insured individuals who end up suffering losses. It’s a true win-win.

The following are seven types of insurance that every property investor should consider carrying. These ideas are for educational purposes only and are not intended to be financial advice. They are not recommendations about financial products that you should buy. Before making any financial decisions, you should consult a qualified professional.

Public Liability Insurance

Public liability insurance protects you or your business from the financial risk of being found at fault to a third party for death or injury, loss, or damage of property or economic loss.

For instance, if your tenant or their guest was injured at your home or their belongings were damaged due to faulty maintenance or unsafe conditions, you could be found financially liable.

One example of a liability claim might be if the ceiling in your garage collapsed and damaged your tenant’s car. Another example might be if a tenant’s guest falls and breaks her leg on a broken front door step.

Even if you’re not at fault, you could incur substantial legal and court costs while defending yourself. Liability insurance will generally cover these legal costs associated with claims against you.

Most policies have options for coverage in the range of $5 million to $20 million.

Building Insurance

Building insurance covers your dwelling against incidences of theft and against damages, such as from vandalism, fire, flooding or storms. Most policies exclude coverage for significant natural disasters like river flooding, earthquakes or cyclones, especially if your property is in an area prone to these types of occurrences. Additional policies can be taken out; however, to cover these specific events.

Policies will specifically state what is covered. Be sure you clearly understand what constitutes coverage of flood damage, and whether the policy covers damage to additional buildings on site that are not attached to the main dwelling, such as a shed or granny flat.

Contents Insurance

Contents insurance protects against loss of items that you own inside your property, such as furniture, appliances or other personal items. Claims can be made if these items are either stolen or damaged by fire or water.

Contents insurance for landlords is generally only necessary when you are renting out a furnished property or offering appliances, such as a refrigerator or washing machine as inclusions.

Landlord Insurance

Landlord insurance is a catchall policy that covers the previous three areas of risk mentioned above, as well as other potential losses faced by landlords. The following are the key areas of risk covered by many landlord policies:

• Public liability cover
• Damage to buildings by fire, water or theft
• Contents cover
• Damage caused by tenants
• Loss of rental income from unpaid rent
• Legal costs of action against tenants
• Replacement of locks
• Re-letting expenses
• Tax audit costs

Of course, every landlord policy is different, so be sure that you are covered at least against the basics of legal liability, the building and any contents you may have in the property. Some landlord policies require additional premium payments for building insurance. Be sure to read the wording of the policy carefully, and then clearly identify any risk factors that may be excluded from coverage.

Life Insurance

Under a term life insurance policy, the life of an individual is insured for a specific amount.

In the event the insured person dies or is diagnosed with a terminal illness, the insurance company will pay the benefit amount to the surviving policy owner, the estate of the deceased or the person nominated as the beneficiary on the policy.

Total and permanent disability policies are also available that pay out in the event that the insured is unable to ever work again.

When determining the appropriate level of cover, consideration should be given both to paying off household debts, as well as covering ongoing cashflow commitments that would be required to be paid by the surviving spouse and children. Property investors generally carry a significant amount of debt, and have further considerations beyond the typical family.

If you carry debt on your investment properties, it’s important to consider the financial impact on loved ones from your death. Are your properties negatively geared? If so, your portfolio relies heavily on your future earning potential. Carrying additional life insurance can pay down those mortgages to improve cash flow, or the funds can be used to meet cash flow shortfalls.

If you are a member of a large joint venture development, it may be wise to consider carrying life insurance on those parties who are integral to the success of the deal. Generally, you can insure the life of those for whom you have a personal financial interest.

Income Protection Insurance

One of your greatest assets is your ability to continue earning an income. Income protection insurance provides a monthly benefit of up to 75 percent of the insured’s earned income, in the event of being unable to work due to sickness, illness, injury or accident.

When determining a level of cover, be sure to take into consideration not only your normal living expenses, but also your costs of owning investment properties. If your property portfolio is negatively geared, you will ideally want a solution for paying these ownership costs if you were to lose your income.

Because income protection cover is limited to 75 percent of your income, if you have a significant cash flow loss on your properties, you may remain unprotected, to some degree. This is one of the risks of holding negatively-geared real estate.

Construction Insurance

Construction insurance covers you as an owner builder while you are building or renovating property.

If you employ the services of a fully licensed builder, your builder is required to insure the dwelling until the handover. They must also carry builder’s warranty insurance to cover loss or damage resulting from the non-completion of work, a loss of deposit or a breach of their required warranty, due to either death or disappearance of the builder,or if the builder becomes insolvent.

However, if you are an owner builder, you are responsible for insuring the building yourself. Similar to building insurance, construction insurance protects the owner builder during the building process from risks of malicious damage or vandalism and theft, as well as damage from fire, storms, wind and water.

As an owner builder, you are also required to carry home warranty insurance. This is a legal requirement for owner builders in every state but Tasmania.

This cover is for the benefit of the subsequent purchaser of your property, not for you as the owner builder. The policy covers the subsequent owner in the event that you die, disappear or become insolvent, and your building works are incomplete or defective.

If you are renovating a pre-existing dwelling and using the services of a builder, unless the contract states otherwise, you are responsible for insuring against damage to your property. Be sure to sort this matter out with the builder prior to the commencing the work.

Conclusion

With an insurance policy, you are buying peace of mind. Investing in real estate can be stressful enough for most people, so transfer as much risk as possible to insurers. If you can’t afford insurance, than you probably shouldn’t invest in the first place.

In Steve McKnight’s Property Apprenticeship course, we devote an entire session to covering in depth the topic of insurance for property investors. We include insights on all of the following and more:

• where to find the right insurers
• why insurance is important
• the jargon and terminology of the insurance industry
• the types of insurance property investors need most
• when it is vital to insure, and
• how to reduce risk to minimise insurance costs

When it comes to property investing, knowledge is power and profit. Make sure you understand what your responsibilities are as a property owner, so you can reduce your risks.

The post 7 Types of Insurance Every Property Investor Should Consider appeared first on PropertyInvesting.com.

One of the many practical tips that Steve serves up is how to increase rents while keeping your tenants happy. If you own rental properties, you understand the importance of boosting your cash flow. There’s only two ways to do this: decrease expenses and increase income. I wrote about a few ways to decrease expenses here. But that’s only one side of the equation.

Here’s a quick overview of 11 win-win solutions from Steve’s book for increasing rents and boosting your property’s cash flow:

1. Offer A Longer Lease In Exchange For A Higher Rent

A longer lease may or may not be a value-add for a tenant, depending on the market. For instance, I once negotiated a lower rent as a tenant in exchange for a longer contract.

At that time, it was the landlord that wanted to minimize vacancies, and he was willing to give up cash flow to get it. Besides, he was a high income earner who believed in negative gearing.

But if the market has a low vacancy rate, and you offer a home for rent that is in short supply while rents are appreciating, the ball may be in your court as the landlord. In this instance, a greater sense of security and peace of mind may justify a higher rent, in your tenants mind.

2. Offer A Rent-Free Period As An Introduction To A New Higher Rent Lease

Tenants never like to receive word that their rent is increasing if they want to stay. It’s an open door for them to leave, which could mean a period of vacancy for you, the landlord.

A rent-free period at the beginning of the new lease can ease the shock of this transition. You may only end up slightly ahead in the first year, but you’ll be better off in the years that follow. This is an especially useful strategy if you believe you have a long-term tenant on your hands.

3. Offer A Rental Rebate As A Reward To Good Tenants

The best tenants not only pay their rent on time, but they also look after your property as if it was their own. Tenants like this deserve a reward because they will cost you less money in the long-run.

One way to do this is credit part of the rent each month to a holding account, and then refund it back to them after every inspection, provided they’ve paid their rent on time and looked after the property well. Be sure to have a specific objective check list, so they know exactly what to do in order to receive the rebate.

4. Improve The Property In Exchange For A Rental Increase

Unless you’re in a market where rents are appreciating across the area, you may be better off finding a win-win when increasing rents. Here are a few ideas to add value in the eyes of the tenant:

• Improve the lighting.
• Upgrade the heating or air conditioning.
• Lay new carpet.
• Add a coat of fresh paint on the walls.
• Improve the kitchen or bathroom.
• Add a remote garage door opener.
• Spruce up the landscaping.

5. Offer Quality Tenants A Bonus For Recommending Their Friends And Family

Great tenants often have friends and family members who will make great tenants. If your tenants are moving out, offer them a referral bonus of some kind for recommending friends or family.

You could offer them cash, or even tickets to a show or a sporting event.Before signing a lease with new tenants, use idea number four above, and offer the option of paying a higher rent in exchange for an improvement or luxury item.

6. Offer To Rent Furniture As Part Of The Agreement

Unless you’re servicing a niche market, you rarely find a tenant who needs an entire house full of furniture. It might be only a couch or dining suite they need, but temporarily renting the item from you may be better than buying it themselves.

When setting the additional rental price, you’ll want to aim to recoup the cost of the furniture within about 18 months.

7. Rent The Home By The Bedroom

If you own a rental property near a university campus, this can be a great niche strategy. There are some potential vacancy risks, as these types of tenants tend to be more transient, but if you can make up for it in a higher overall rent, then it could pay off.

Be sure to check with your local council to ensure there are no compliance problems. You’ll also want to read the fine print of your insurance policy to confirm there are no restrictions.

8. Provide Access To Technology

It’s not uncommon today for homes to be wired with Ethernet access points in living areas and bedrooms. Wireless high-speed Internet included in the rent can also be a value-add, and can put some extra money in your pocket each month.

If you’re offering student or shared accommodations, unlimited Internet is a standard expectation.

9. Provide Quality Second-Hand Appliances Or Electronics

For some tenants, offering a refrigerator, or washer and dryer can meet a basic need. If you know where to look, you can purchase these items for much less second-hand.

Check your local classified advertisements or Gumtree for deals.

10. Charge A Premium For Allowing Pets

Pets increase the likelihood that your property will sustain some damage. That risk can be more than offset by charging a premium for pets. Besides, pet-friendly rental homes are in high demand.

Paying a pet bond should be a condition of the lease. Conduct at least quarterly inspections, and be sure to repair any pet-related damage promptly.

You can also include a clause that stipulates tenants arrange to treat the house for fleas annually and upon vacating at their own expense.

11. Rent The Garage Out Separately

I wrote here about building granny flats to boost a property’s cash flow. Depending on your state’s laws, a prime granny flat strategy is to convert the garage into a second dwelling.

This is potentially a low cost option, as long as the slab and frame are structurally sound. You’ll need to have a structural engineer certify that the building meets compliance requirements.

Or if you want to take a simpler approach, you can rent the garage out separately for storage only. Storage facilities make big bucks using this strategy, so why not employ it on your property? Just be sure to check how this might impact your insurance policy.

Conclusion

If you want to delve deeper into improving your property management skills, Steve has an entire session in his Property Apprenticeship course called Strategies for Increasing Rent Returns. It is just one session in an entire module on Managing and Reporting on Property.

Have you used any creative techniques to boost your investment property’s rental income? Please take a moment to share your experience, ideas or comments below.

The post 11 Ideas to Increase Rents appeared first on PropertyInvesting.com.

According to one summary of their report, the average Aussie property investor lost $4,146 for the year. Their stats also revealed that 66.8 percent of all property investors were negatively geared. Each of them lost on average $10,895 for the year.

In Steve McKnight’s Property Apprenticeship, one of our primary initial pursuits is to help investors break free from the mindset that leads so many down this path of losing money.

Even for those who start the course already holding low-yield properties, Steve teaches some highly practical strategies to help investors increase rental income immediately on their rent properties. As the ATO has revealed, the average investor needs all the help they can get.

One of our graduates who took action on Steve’s strategies is a Melbourne-based investor named Con Kalavritinos. When Con started the course, like many others he had two rental properties, both returning relatively low yields.

One property was a two-bedroom unit in Thornburry earning 4.2 percent gross. The other was a house in Northcote earning 2.7 percent gross.

The only reason these properties were not negatively geared was because his LVR was very low, at around 31 percent. After implementing only three of the strategies that Steve teaches, Con turned his annual cash flow around by a total $4,524. Doing this not only reimbursed him for the cost of the course fees, but these strategies also continue to pay him year after year.

Con was kind enough to allow me to ask him a few questions, so that I could share his valuable experience with the PropertyInvesting.com community.

Interview Questions and Answers With Con Kalavritinos

1. Con, Can You First Give Us A Summary Of Your Three Strategies?

Sure. It was very simple really.

• I increased the rent.
• I negotiated a lower fee with my property manager.
• I negotiated a lower interest rate with my lender.

The beauty of applying Steve’s strategies is that it shows how in any situation you can increase your cash flow with some quick and creative thinking.

2. How Exactly Did You Go About Increasing The Rent? Sometimes Tenants Aren’t Too Happy About Paying Their Landlord More Money.

The house in Northcote was easy because it was due for an increase anyway. That one was renting at $730 per week for a while, but the market changed.

After pointing to the CPI and providing evidence of increases in land tax and rates, I told the agent it was time to raise the rent to $760, and she made it happen.

Steve teaches that it’s important not to grow complacent, but to train your tenants to expect regular increases in their rent. Otherwise, if you wait too long, you’ll need to increase too much all at once to catch up with the market. Smaller regular increases are a much easier pill for tenants to swallow.

The unit in Thornburry, however, required a little more creativity. I learned in the course that sometimes you might need to add value for your tenant before asking them to pay more rent.

The tenant wanted a new air conditioner in the main bedroom. I agreed to that on the basis they pay me an extra $15 per week. The agent backed me and sold it easily to the tenant. The A/C unit cost me about $1,500. But, it is making me an extra $780 per year. That’s a solid return on my investment.

All up, I improved my annual cash flow by $2,340 just by raising rents.

3. Walk Us Through The Process Of Negotiating Lower Management Fees. How Did That Conversation Go?

Basically, I told my property manager that I was speaking to other agents in the area who offer the same, if not even better, service. I was currently paying my manager six percent.

I made it clear that two other property managers in the same area were ready to take my business at five percent on the basis that I give them both properties.

To avoid losing me, my agent immediately lowered the fee to match the five percent offer. This saved me an additional $624 per year in management fees.

4. Your Third Strategy Was To Bargain With Your Lender To Lower Your Interest Rates. Was That Easy To Do?

Yes, it was quite simple. I had my loans with a traditional bank at an interest rate of 5.3 percent. I did some research by speaking to a few mortgage brokers and familiarising myself with other competitive rates.

Once I knew which lenders were offering the best rates, I went back to my bank to sit down face to face with someone. I wanted to put them on the spot.

Once I put the facts on the table, they had no option, and they instantly matched the best rate at the time, which was 4.9 percent. When you’ve done your research and confront them with the cold hard truth, it’s difficult for them to push back. Otherwise they risk losing you.

This 0.4 percent decrease in interest is saving me an additional $1,560 per year.

5. One Final Question: What Would You Say To Anyone Who’s Contemplating Enrolling In Steve’s Property Apprenticeship Course?

The practical assignments simply force you to learn. It covers all facets of successful property investing. The course notes themselves are to be used as the Bible. You can always go back to them.

Once you begin to apply the theory to the practical research assignments, and then follow through into your real life opportunities, you’ll be surprised at how quickly you improve your communication and negotiations. You’ll become proficient without feeling overwhelmed.

Without Steve’s course, I’d still be throwing blind swings. It provides real clarity, direction and sanity.

In Summary

Con took action on three simple strategies, and in a matter of six weeks, he increased his rental income by $4,524 per year. The average investor in Australia is losing $4,146 per year, which means billions are being left in the coffers of tenants, property managers and banks.

What Are You Doing Now To Increase Your Skill As An Investor?

Today Con has moved on from a simple buy and hold strategy to focus on more quick cash deals, like subdivisions and developments.

Having coached him for the last year, I can tell you that before Steve’s course, he had nowhere near enough confidence to even consider these more advanced strategies. Now they have become his standard.

If you’re looking to learn practical actionable skills, but also need to massively boost your competency level as an investor, let’s catch up for a chat. Follow this link to set up an appointment with me, so that we can talk more about whether Steve’s course would be the right choice for you.

The post 3 Creative Strategies to Instantly Increase Your Rental Income appeared first on PropertyInvesting.com.

This simple strategy significantly boosted the overall yield of their existing investment property. Depending on where you live and invest, you might be able to do the same.

What Is A Granny Flat?

Traditionally, granny flats were just for grannies and grandpas. But due to the explosive growth in Australia’s population, many local and state governments are relaxing granny flat restrictions to meet the demand for affordable rental properties.

This presents opportunity for investors like you to maximise your income potential by getting creative and thinking outside the box.

In general, most local governments use specific criteria to classify a structure as a granny flat. A granny flat must:

• Be self-contained, having its own separate access, bathroom, kitchen, bedroom and living area.
• Exist on the same title, with the same ownership, as the main residence.
• Reside on residential property and not on property used for commercial purposes.
• Be limited to only one granny flat per property.
• Sit on a traditional Torrens title, not a strata or community titled property.

But just because you can build a structure to meet these basic qualifications, it doesn’t mean you’ve got an instant income-generating machine at your disposal. Not every state is granny-flat-friendly.

Granny Flat Laws Vary From State to State

If you live in South Australia, Victoria, or anywhere in Queensland except Ipswich, I’ve got bad news for you. Your state’s granny flat laws are very inflexible. You’re welcome to build a second dwelling, but if you rent it out to someone who isn’t a household dependent, then you’re breaking the law. Your primary takeaway from this article should be to lobby your state government to loosen this restriction.

However, if you live in Australian Capital Territory, Northern Territory, New South Wales, Tasmania or Western Australia, congratulations, you actually have some land ownership rights – pardon the sarcasm. You can build an extra dwelling, and then use it to earn rent from virtually anyone who will pay you.

Here’s a breakdown of the basic granny flat requirements for each State:

Be sure to check with your local council for site-specific details related to setback, floor to ceiling heights, energy efficiency and other requirements. You’ll also want to confirm that the above information has not changed since the time of writing. Many of these standards are recent changes, and some are currently under review.

What Type of Granny Flat Should You Build?

When most people think of a granny flat, they think of a detached dwelling. But there are multiple ways to meet the qualifications of building a self-contained unit.

1. Convert Your Garage

This is potentially a low cost option, as long as the slab and frame are structurally sound.

You’ll need to have the building certified by a structural engineer to meet compliance requirements.

The down side is that this is the most restrictive option since you’re essentially creating a home from a square box. You’ll also need to sort out a plan B for covered parking.

2. Convert Part of Your Existing Home

This can also be a low-cost option, because it involves making internal changes to the existing structure.

Simply adding an unobstructed external entrance and building a small kitchen and laundry could be enough to add a second self-contained dwelling. Bear in mind that some floor plans will be more conducive to this strategy than others.

3. Build an Extension Onto Your Existing Home

This strategy involves extending the existing structure to create new rooms to form a new, self-contained dwelling.

Depending on your plans, build costs can blow out quickly, as you may need to make structural changes to the existing home to ensure its integrity.

4. Build a Detached Granny Flat

This is the traditional approach and involves building a new separate dwelling on the same block of land as your main home. This provides a greater feel of independence for the proposed tenant, especially if you build it on a larger block. A detached unit also offers the flexibility of giving the occupant some private garden space.

A low cost solution might be to purchase a kit home, which could range in price from $25,000 to $50,000, or more.

Keep in mind that this doesn’t include the internal fit-out, such as the kitchen, bathroom, laundry, carpet, electrical, plumbing, drainage, tiles and painting. You’ll also have to sort out the on site labour and construction.

If you want the new dwelling to have a certain look and façade, perhaps to match your existing home, you can have it built from the ground up the old fashioned way. Many quotes float around the $100,000 mark.

5. Build a Dual-Living Dwelling from Scratch

There are some smart builders who takes advantage of the generous New South Wales granny flat legislation by offering dual-living floor plans built from scratch.

These dwellings look like a traditional single family home from the street, but actually contain two separate units. One is a three-bedroom and the other is a two-bedroom, both with single bath and single car garages.

Depending on inclusions, you’d be looking at a build cost of about $300,000 or more in today’s market. This doesn’t include the land component. Your accountant would probably also be quite excited by the depreciation benefits.

Where Should You Start?

1. Consult Your Local Council. Be sure you’re clear on the minimum lot standard, the maximum dwelling size and all other requirements for granny flats in your state and suburb.

2. Assess Rental Demand. Talk to local rental managers and ask for a rental appraisal – not only for your new proposed dwelling, but also for your existing property after the granny flat is complete. You must be confident that your new one-or two-bedroom unit will be easily tenanted. You should expect a rent below other one-or two-bedroom units in the area that may have a more desirable living space. Alternatively, you could consider renting out your secondary dwelling as short-stay accommodation through a platform like Airbnb.

3. Assess Cost And Potential Value. Contact several qualified and trustworthy builders to bid on the construction of your new granny flat. Be sure to factor in all potential costs, including plumbing and sewer, utility connection and council fees. Many builders will be able to provide a turnkey solution.

Next, contact an agent to appraise the value of your entire property after the project is complete. Ask for a valuation that considers both the investor market and the owner-occupier market.

4. Crunch The Numbers. Make sure the deal stacks up. Although your primary concern is cash flow, your secondary consideration should be the impact of adding a granny flat on the overall value of your property. If you’re not sure how to do this, read From 0 to 260+ Properties in 7 Years.

5. Secure Council Approval. Once it’s time to move forward, before commencing construction, you’ll need to secure development approval. In granny-flat-friendly states, you can do this in as quickly as 10 days.

You’ll need to submit architectural plans, specifications and associated documents with your application. You’ll need a qualified draftsman and possibly an architect and planning consultant, as well.

A word to the wise: Don’t attempt to bypass council approval. If you’re converting a garage or an existing home, you might be tempted to try to fly under the radar and take the easy path. But failure to obtain the necessary approvals prior to construction is an offence in every state and carries heavy fines. If you rent out an unapproved dwelling, you’re exposing yourself to a civil lawsuit and possibly even criminal charges if something goes wrong.

6. Engage Your Builder. You might find it helpful to engage your builder before applying for council approval. Many experienced builders will already have a system in place to manage the compliance process for you.

If your project doesn’t require the skill of a builder, you might be able to supervise the project on your own. Just be sure you’re aware of all compliance issues and you know how to manage your team well.

Potential Granny Flat Pitfalls

As with any property investing strategy, you need to be aware of the potential pitfalls of building and renting out granny flats.

1. You Might Need To Find New Tenants. The tenants in your existing property might not like giving up part of their backyard in exchange for a new neighbour. You’ll need to give them notice of your intentions and make provision for them to move out if they so desire.

Because your existing property will likely have a lower rental value after adding the new dwelling, you could offer to lower the rent in hopes that your tenant will be willing to stay.

It may also be useful to offer a rental discount during the construction phase to compensate them for the aggravation. Either way, it would be wise to budget for a period of vacancy.

2. You Might Find It Challenging To Sell Your Property Down The Road. The value of your property is directly related to its demand in the market. It’s like this expert says, “Who wants to buy a granny flat property? It has to be a buyer who doesn’t mind someone else living in their backyard and the various annoying behavioural traits of each new tenant. That buyer probably is not a young family, a baby boomer or a young professional couple.”

When it comes time to sell, your target market will primarily be investors, or maybe secondarily creative-thinking first-home buyers without kids. The largest market is made up of people who just want a place for their family to live.

3. You Could Face Some Legal Hassles, Even If You’re Only Renting To Granny. As these people learned the hard way, even our closest relationships can break down. Be sure to always enter into a clear legal agreement with all tenants – even if it’s family.

Have You Owned a Granny Flat?

If you’ve built a granny flat or currently own a dual-living property, take a moment to leave a comment and let us know the good and the bad. Regardless of your experience, there’s likely something others can learn from your story.

The post Build a Granny Flat to Boost Your Property’s Cash Flow appeared first on PropertyInvesting.com.

What do I need to know before I begin a subdivision?

How do I get approval for a subdivision?

Preparing for subdivision

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When it comes to making a property investment, you might want to appoint a real estate agent to manage your property – this is particularly true if you live in a different state, or even in a different country.

But there are a number of things to consider before you appoint an agent to manage your rental property – not least of which is their agent’s licence.

The post Property management fees: What every investor should know appeared first on PropertyInvesting.com.

Nobody wants to be the bad guy. But sometimes owning rental property requires you to raise rental prices to stay profitable.

Responding to the market is key, so chances are you will have to increase prices in the middle of a long tenure, meaning you will have to inform your loyal tenants, that the rental amount they’ve grown accustomed to paying – is going to increase.

This can be achieved without any major dramas – often tenants are aware of the state of the market and will respond amicably to a reasonable letter.

However, this is not always the case and even if they understand your reasoning, it does not mean that they will not move out.

The cost of losing your tenant must be factored into your cost-benefit analysis – if you have to do the whole marketing dance and any maintenance necessary to attract someone new, the increase should account for this.

It is vital that you go about raising the rent professionally and legally and do not cut any corners. Word of mouth remains an important referral process, no matter how broad your market may be.

Here are a few tips for sending out a rent increase letter:

1.    Know your stuff in case things go south. Familiarise yourself with your state tenancy laws and learn the extent of your rights.

2.    Give plenty of notice. No one will respond well to a sudden demand for more money.

3.    Be honest. Let your tenants know why you are raising the rent in specific terms. People feel valued when someone takes the time to explain a significant change such as rental prices.

4.    Let your tenant know how much you appreciate them by saying so, and maybe even offering a small renewal bonus with your rent increase letter, like a gift card.

The post Sending a rent increase letter appeared first on PropertyInvesting.com.

The #1 question I’m being asked at the moment is: ‘how do I turn around an under performing property’? Here’s my answer…

There are two reasons why people invest in property: to save tax, and to make money. Many want both, but as you must select one over the other, I recommend choosing ‘making money’.

‘Fixing The Problem’

When it comes to ‘fixing the problem’, you need to identify the effect (what’s going wrong?), and then identify the cause (why is this happening?).

For example, if your property is under performing because it’s vacant and not bringing in any income, then the cause is simple: you don’t have a tenant. The fix is to find a tenant by working out who (or what) best suits the property, what rent works for them, and then go find ’em. Go door to door if you have to.

Here’s another example: If your property is not recording capital growth (effect), then it may be that it is not ‘wanted’ by the market (cause). The fix? Make it more desirable.

Is it really so simple? I argue ‘yes’, but because there is ‘pain’ associated with dealing with the problem, the tendency is to put off taking action and this always makes things progressively worse.

Sometimes we look to others to solve the problem for us. My experience is that this seldom works. You got yourself into the mess, and you need to get yourself out of it, so roll up your sleeves and get to it!

‘Firing The Problem’

If you can’t or don’t want to fix the problem, then the only alternative (other than denial) is to ‘fire it’. No, not literally setting fire to it, but rather deciding to sell and re-deploy your funds in more profitable assets.

This sounds easy, but it’s not. Psychologically, it is extremely hard to fess up that you’ve stuffed up, and it’s more common for folks to ignore the issue and hope that ‘time and trend’ will fix the mess.

‘What To Do?’

Here’s what I’d do:

1. Do something. Blissful ignorance is not a solution if you continue to leak money.

2. Revisit your strategy. What were you trying to do, and why, when you bought the property?

3. Thinking about your strategy, figure out ‘what went wrong’ so you can avoid making the same error in the future.

4. Figure out what, in an ideal world, would need to happen for your property to be back ‘in the money’ and link that outcome to controllable and actionable tasks you (or your team) can perform.

5. Look over that list and decide what is the biggest impact item that’s easiest to implement, and get to work

– Steve McKnight

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