Most prudent owners of investment real estate have two primary objectives: cash flow and capital appreciation. Real estate, for most people, is their most significant investment and forms part of their wealth and retirement plan. Therefore, it’s essential to protect your property value.
With this level of importance, most landlords realize their investment needs to be maintained for it to be a sustainable entity. Prudent property owners know and plan for this maintenance. There is a physical component and a human component to maintenance:
1) The tenant; and,
2) The property itself.
Protecting Your Property Value with Good Tenants
We like to describe the ideal tenant as having ability, stability and longevity. They pay on time, don’t cause disturbances, and plan to stay for some time.
The property needs ongoing maintenance to attract this type of tenant, keep up with the market, and provide a stable income. A prudent owner sets up a plan to bridge these objectives. If you work with a good property manager, they will look after this for you.
Develop a Tenant Retention Strategy
The smart plan for wealth preservation in real estate investing includes a tenancy retention program. This is something we do on behalf of all of our clients.
A good tenant retention strategy has several steps. First, it ensures your property has everything in working order and smells, looks and feels good.
In order to make this happen, you need to inspect the property regularly (we do this at least annually). It’s also important to address all reasonable service requests immediately and adequately and ensure that the tenant pays promptly and respects the property.
Another critical factor is developing a relationship of mutual respect with the tenant, so they feel a sense of settlement and stay there for a good length of time.
Maintaining a good relationship with the tenant also helps you if you need to renew the lease with a nominal rent increase based on current market prices.
From a fiscal perspective, your tenant retention strategy should ensure, objectively, that your rent is in line with the market. You also want to have a full-year lease rather than a month-to-month tenancy for stability and longevity.
Property Maintenance Still Matters
To protect your property value, you need good maintenance of
-Plumbing;
-Heating;
-Electrical;
-Appliances; and
-The roof, gutters and downspouts.
You may also want to look at cosmetic work such as improving curb appeal, upgrading and painting exterior trims.
It’s important to keep track of required capital expenses for items that reach the end of their useful life and ensure you have made financial provisions for their replacement as required. Proactive planning is much more cost-effective than reactive behaviour.
More than Physical Upkeep
A sound real estate investment is a relationship exercise between you, your property, and your tenant.All three parts need to be in sync for a successful outcome.
When you preserve the property, you enable the property appreciation to continue. When you follow a good tenant retention program, you preserve the cash flow and hopefully have few turnovers and minimum vacancy loss.
You will always succeed when you take a long-term view of real estate investments. Short-term thinking/ planning and real estate investments are not compatible mates.
