The benefits of planning ahead
While you can manage projects as they arise there are major advantages of a ‘big picture’ strategy for improvements, writes Caleb Pearson.
28 June 2023
When it comes to property ownership, it is not without expense. Property materials deteriorate over time: paint wears thin, carpet wears out, and the day-to-day life of tenants takes its toll.
During the lifetime of a property investment there will almost certainly be a cost to maintain the standard of your property and its life expectancy. Many of these costs can give you a shock, along with uncertainty on how you will afford them, but they need not be a surprise. By taking a little time to develop a long-term strategy you can plan for many of these projects well in advance.
ABOVE Building a deck takes planning and may happen between tenancies.
As a landlord we commonly deal with projects and expenses on a case-by-case basis as issues are discovered and need to be addressed. Typically they are raised by the tenant, a property manager or from routine inspections. Repairs and maintenance should absolutely be dealt with quickly. If not, often they can create bigger, more costly issues. However, there are many projects that will not be immediate.
These most commonly come in the form of:
• Long-term and preventative maintenance projects. Re-roofing, re-painting, waterproofing, removing larger trees dropping branches or leaves in gutters, etc.
• Upgrades to dated or worn-out areas of your property. Internal repaint, kitchen and bathroom upgrades, lighting, etc.
• Add value projects, which will lead to increased rent or value to your property. Building a deck, reconfiguring layout, adding a carport, etc.
These types of projects commonly have a bigger impact on the overall property, your property’s value and potential rental income. They also typically come with a bigger price tag. A master plan provides a long-term strategy of planning, budgeting and completing projects on your property outside unforeseen or immediate R&M items.
ABOVE Property improvements will also potentially impact your rental income.
ABOVE An inviting outdoor space will be a value-add for your property.
ABOVE A kitchen upgrade will need scheduling with your tenant.
THE BIG PICTURE
While you can arrange and manage projects as they arise, there are definitely advantages to having a bigger picture strategy for improvements.
• Clear direction. A master plan provides a road map for work needed on your property and the time it takes. This removes uncertainty, and allows you to coordinate and action a strategy for your property that aligns with your overall vision for your property and portfolio.
• Prioritise required work. Not all projects are equal and not all will be as urgent. Plan work based on priority and as your available budget allows. Put money aside early, and stagger projects to smooth out expenses.
• Schedule work. Larger projects will have greater impact on your tenants, and may even impact their ability to stay. With a long-term view you can work with your tenants to plan for projects, or schedule between tenancies.
• Efficiency. With a clear plan in place you can avoid wasted time, resource and effort from making decisions on the fly. You have time to get multiple quotes and pick a good contractor, and schedule the timing of them around your own calendar (if managing yourself), your tenants, and the time of year. If you are unsure on costs, you have time to get estimates or pricing.
• Maintain and increase property value. A maintained and looked after property will perform better than a neglected one.
• Increased rental. While many projects are for long-term maintenance, you may have specific projects you want to work on to increase yield, such as reconfiguring layout, adding outdoor living spaces or building a carport or sleepout.
I am a massive advocate for planning when it comes to any project, big or small. There are numerous benefits, but there is no one-size-fits-all guide. So, remember these points:
• Be flexible: We often plan for the ideal outcome, but we all know there are always unforeseen challenges and issues that arise. This doesn’t mean planning is wasted, but be realistic, don’t stretch beyond what you can achieve, and learn to adapt plans when needed.
• Investment strategy: Certain properties can minimise the requirement for short/mid-term expenses, such as buying new, or targeting low maintenance properties. Many investors deliberately target this approach as there is less cash outflow required. This may be a preference for your investment strategy, but remember there is no such thing as a no-maintenance property.
• Make intentional decisions: We can’t do everything, and as an investor you need to be prudent with your investment to make sure the numbers still work. Be careful not to overcapitalise and spend too much.
• Be disciplined: Regularly put finances aside for your planned projects. You will be thanking yourself down the track by regularly putting aside a portion of your rental income to fund long-term projects.
Time spent planning is not time wasted.
ABOVE Tired areas will benefit from a repaint.