How should I maintain my investment property?

Tuesday 01 Sep 2020

I hate a dirty car, an untidy home, or a messy office, it is just the way I am, and when it comes to assets, I want them in first class working order, operating at their maximum. I work hard and so should my assets. It makes sense and I would like to share some thoughts on why you should constantly maintain your investment property.

Why should I keep my investment ready to sell?

I have seen many an investor discover a new investment opportunity and wish to quickly sell their existing investment property to invest in the new opportunity. In many of these instances the property has not been maintained in a sellable condition so the opportunity is missed simply because maintenance had to be done before the property could be put on the market, and it simply took too long.

Selling property is not like selling shares, it takes time, so make sure your property is in good selling condition.

Does maintenance effect a tenant’s attitude?
The answer to this is a big YES. It is hard to instil pride of possession in a tenant if the owner does not demonstrate pride of ownership. In other words, do not expect more from your tenant than you as an owner will give.

Better property gets better tenant
This concept is just basic human nature and really, “Real Estate 101”. All of us want to live in the best home possible. A property that is presented well, in good condition, with good appliances will attract plenty of applications, and you as an owner will have options as to whom you wish to live in your property. We see it time and time again. Poor property scares away good tenants. Not maintaining your property creates a sense in the tenant’s mind that it does not matter to you – so it does not matter to them either. On the other hand, if you are fastidious in maintaining your property then the tenant will reflect your attitude. A good property will attract a good tenant.

Better property gets better rent/lease
It also follows that if there is plenty of competition to rent a good property the laws of supply and demand will work in your favour. Your desire to maximise your rental return will be supported by the high interest in your property. This will allow you the opportunity to ask a premium in rent and get good terms in your lease.

Is maintenance legislated?

Smoke alarms are a good example of maintenance being legislated. Under legislation smoke alarms must be installed and must be checked. New Smoke alarm legislation comes into force on 1st January 2022. You should make sure you are compliant otherwise you will find difficulty in releasing and selling the property. Make sure to have a conversation with your property manager.

Pool certification is another example of maintenance being covered by legislation. Pools are required to have up to date safety certification. This is an important safety issue and brings up another discussion point, that of risk management. We will talk about this further.

Section 181-185 of the Residential Tenancies and Rooming Accommodation Act 2008 also addresses the issue of legislated maintenance and lessors’ obligations. This part of the act states that the property and inclusions must be maintained fit for the tenant to live in. 

Although not strictly a maintenance issue a landlord of a property fitted for gas bottles/cylinders should make sure a compliance certificate has been issued, and that a compliance plate has been attached to the property. If the plate is not evident then gas companies will not fill the bottle/cylinder. It is the gas companies’ responsibility to make sure the bottle/cylinder is still compliant.

National safety guidelines cover the installation of curtain & blind cords. These can be dangerous and have been the cause of several child deaths. Cords must be at least 160 CM from the ground. As you the owner are not supervising the daily occupation of your property do not leave this to chance- have the cords adjusted to meet the guidelines

Is risk management an issue for the landlord?

A good property manager will work with the owner to mitigate general risk. When we talk about risk, we are mostly referring to the risk of a person on the property sustaining injury due to something faulty. The risk usually comes in the form of a legal case for compensation due to not maintaining the property in a safe condition. A good example is a rotten stair tread. The stair tread has not been replaced when it should have been, and someone falls through injuring themselves. There are many such examples and when your property manager suggests maintenance of this type, deal with it quickly and comprehensively, as these sorts of claims can be expensive and cause serious anxiety. The most used example can be found in the Queensland State Coroners findings into the death of I W Diefenbach. This is a tragic and extreme case, but I have seen many similar cases, where the Owner has had to bear the cost.

https://www.courts.qld.gov.au/__data/assets/pdf_file/0019/163027/cif-diefenbach-iw-20120919.pdf

Can I get sued or charged with an offence?
Unfortunately, the answer in this case is yes. In the more serious cases where a lack of maintenance has caused a safety hazard or proper risk management has not been followed and injury is sustained, tenants have sued the owner. What will happen is that the tenant’s lawyer will sue the owner and the agent, seeking as much personally or from insurance as possible.

What if it is just a small issue?

Minor issues become big issues. Minor issues are usually cheap to fix so it makes sense to get them fixed before they become costly big issues. The best example of what I am talking about here are water leaks. There is a myriad of different water leaks that I have seen over the years I have been in real estate, but they all have one thing in common: they don’t go away and the problem just keeps getting bigger. If your property manager reports a water leak get it fixed and get it fixed fast, you will save money.

Another water issue that seems to cause issues is a simple thing like a leaky tap. As innocuous as this sounds, I have seen huge arguments between owners and tenants when the water bill is excessive, and no one wants to pay. Again, for the sake of a small amount get it fixed is my advice.

Is preventative maintenance best?

No one likes to spend money on something that seems to be operating, but preventative maintenance can save money in the long run. Things like air conditioners should be regularly serviced, as this will enhance the operational capacity of the equipment and also prolong its service life. Other items around the property that should be serviced include garage roller doors, electric gates, sliding doors and regularly check the grout in and around showers.

How should I deal with programmed replacement or maintenance?

This really should be a part of your long-term plan and budget. Items such as carpet, paintwork and appliances all have a serviceable life and as a wise investor you should plan for the expenditure. The Australian Tax Office and other bodies publish information about the service life of parts of a property. For example, paintwork has a life expectancy of 5-10 years, carpet 10 years, ceiling fans 5 years and an oven 12 years. Find out how old the items in your investment are and plan to either replace them or maintain them. Talk to your property manager about this. Just remember your oven may be still working at 12 years but is it dragging down your potential to get a good tenant and a good rent. More importantly will it satisfy a buyer if needed. This is just one example there are many parts of your property both inside and outside that have a service life.

What are my tax implications?

This is a subject that I am not permitted to give advice, so I suggest you speak with your accountant. Spending money on maintenance while you have a tenant in place and doing up a property after the tenant leaves for the purpose of sale could be treated differently.

Another aspect of taxation would be to speak with a depreciation expert so they can organise a depreciation schedule this will save you money.

What else should I look for?
There are some very common items that I would draw your attention to. Such as, Cleaning gutters before the wet season, trimming large trees and hedges, pressure spraying slippery surfaces, regular pest eradication, irrigation system annual check

Keeping your investment property at its optimal condition will mean your asset will work as hard as you do, and your rewards will be greater over the long term.

What are the implications if I do not maintain my property?

The major issue with not maintaining a property will be financial. A property that is not in good condition will simply earn less income and probably be worth less than a similar property in good condition. There are other ramifications that could end up with you or your representative property manager facing a QCAT hearing. For example. If a tenant rents your property that has three split system air conditioning units operational at the beginning of the lease. One fails some time during the lease and is not repaired in a timely manner, then most tenants will seek a refund of rent, as the property is not as per the original lease. The tenant would have a good case at QCAT. As mentioned previously in serious cases you could face legal action.

In my experience most landlords attend to maintenance in a very quick manner as they understand the ramifications of not keeping their investment in top order. If you think that you are being asked to do maintenance that you feel is not necessarily have a good conversation with your property manager, they should be able to help.

If you have any queries about anything contained in this blog please do not hesitate to contact me.

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David Forrest – Managing Director