Are private landlords disadvantaged? Know the rules, costs and implications for being a property investor and landlord and keep the priorities for managing a landlord business.
Private Landlord vs. Landlord Business
Landlord a dream job or by accident?
Not sure about you - I didn’t have many options when my property manager failed to deliver. When people rent out their home for various reasons, they have to learn dealing with people’s issues. It can be sometimes tough and true, being a landlord is not a job for everyone. Well, every investor has got a story to tell. Most awkward is investors have a job or doing contract work. That limits the time if they want to be a landlord, too. When developing a passion for properties at some stage the decision has to be made—developing a full-time landlord business or delegate the property management side on to somebody else, a professional property manager.
Not knowing very much about properties, I did make lots of mistakes and as you may imagine sorting things out when having a day-job was not always easy. Weekends and holidays are short, tenants are demanding and the support of the family does not last forever. Well, one day it hit out of the blue when my wife said - “if you carry on like this, our relationship is over”. Whew, what would you do when you love doing it?
I call it turning point for giving up or changing to get it right. As with all matters of the heart, you will know when it hits you and when it is right. As they say, a great marriage is not when the perfect couple comes together, it is when imperfect couples learn to enjoy their differences. With landlording it is not different.
As you know, you don’t need to know the Relationship Act for having a good marriage, and so I learned for running a landlord business I don’t need to be an expert in everything. For everything you can engage a professional. Important at each stage is to figure out when help is needed or taking the risk. I hope my blog posts help you on your journey as investor and landlord.
Are private landlords disadvantaged?
What struck me most at the beginning was that a private landlord can claim rent deductible expenses paid to service providers but not for work done himself. Any work a landlord does to keep the rental property in good working order is in fact FREE.
From taxation point of view all expenses to the rental property classified as improvement are not rent deductible either. These two examples are just the beginning and should encourage you to study the taxation rules.
From investor point of view you need to know everything that may or may not affect your legal position and the outcome from your investing activities. I talk about investment structures, tainting rules, asset protection and so on, but importantly how you are being taxed.
At the end everything comes down to one single question— Is it worth spending more time to earn in a day-job or building a full-time landlord business?
Running a landlord business
A landlord business has compliance costs for the business (company), asset protection (trust) and legal obligations (Company Office, Inland Revenue, etc).
Because of those running costs a business becomes only profitable if you have cumulated a sufficient investment stock and income that pays the bills. To improve the cash-flow you could
· Remove property management fees
· Tax invoice all work done by the company
· Streamline company’s operation by a cost effective mixture of employments and contractors
One word regarding property investments run on auto-pilot; the moral of all those stories you can read on Property Talk is - people pay a very high price for failures to care for a business.
Managing properties and priorities
Cash-flow (yield) is king for a landlord business. The value of a rental comes with the right or desirable tenants. The opposite is true choosing the wrong type of renters who abandon a damaged property with rent arrears. So, what are the priorities to meet your ultimate goals?
· Marketing and advertising to attract the right type of renters
· Tenant Screening and selection process for the preferred tenant
· Property specific tenancy agreements to support both parties
· Communication by agreed channels
· Property inspections to enforce tenancy agreements and regular maintenance
· Record keeping and tenancy administration
· Adhere strictly to law and regulations (Residential Tenancy Act, Taxation rules, and business regulations)
To look at those priorities in greater details — follow this blog. Good luck.
Property Investor’s Blog
Investor’s & Landlord’s Luck and Failure
Klauster Blogs lead to a real person, IT professional, investor, landlord and business owner with interests in technologies, properties and trading.
His passion, making experiences available and helping people like you, comes from extensive travelling and the principles of life—how to avoid pitfalls in unfamiliar territory when investing or forming relationships.
The philosophy to treat life, partnerships and hobbies as an investment has helped people in his circle. Life is a dream with a deadline, happiness comes from making the right choices and having realistic expectations.
Come along and share your views—learning for success and confidence