Letters to Tully #4: Watching your Bank Account

Listen in as Graham “educates” his eldest child on the ins and outs of buying investment property. Lesson #4: Watching Your Bank Account.

 

Dear Tully,

This month’s tip is about keeping an eye on your bank account. 

To kick off, let me tell you about rent weeks. If you own a house that is rented out, there are a maximum of 52 weeks in a given year in which to collect rent. If it is occupied 100 per cent of the time, you get 52 rent weeks.

People often ask me how many rent weeks they can expect to have on their rental property, which, of course, is another way of asking “how many rent weeks will I not collect each year?” 

 

We did a survey in the office … we have 20 houses between four of us. 

 

20 houses x 52 rent weeks gives 1040 total rent weeks that we could receive, but how many will we actually receive?

 

When we tallied up the total weeks, it turned out that we got 1020. That's right, we were just 20 rent weeks short over all the 20 houses. One of the houses accounted 13 of those weeks. This was a house in Christchurch. The staff member at the time had an average property manager but she did not keep an eye on the bank account. It took her three months to discover that she wasn't getting the rent from the house. 

 

The two things that come out of our little survey are 1) that houses stay rented pretty much all the time. You will have some vacancies, but clean, warm and appropriately priced houses stay rented. And 2) keep an eye on that bank account. That's where you’ll see if anything is going wrong.

 

That's all. Cheers!

 

Graham Goodisson is a Registered Financial Adviser with Velocity Financial. No investment decision should be taken based on the information in this blog alone. A disclosure statement is available free of charge upon request.