MISTAKES HAPPEN, SLOW DOWN

By Juli Anne Tolley,

Principal Owner Quinovic Tauranga.

This was a road sign that grabbed my attention on the weekend while driving some of the lovely roads to and from Rotorua. I pondered how that message applies to so many things including business and life. After all, mistakes can be made by anyone, and the impact can involve others without warning.

In driving, the “slow down” here is interpreted as following the road rules and keeping that margin of error that you need to keep in order to safely handle the unexpected. With property investment, it is keeping that reserve and not maxing out your credit to anticipate movement in interest rates, as well as increases in rates and insurance, and other costs. Doing so will help prevent situations of forced decisions and eliminates the pressure and anxiety that accompanies such decisions.

With residential property management, it is doing regular inspections, completing regular and timely maintenance, and reserving a cushion to handle the unplanned maintenance events such as a burst pipe, roof leak, or a tree suddenly uprooting and crushing everything in its path. These things do happen, and often, they are at the worst timing for the property owner. Having a cushion relieves financial stress.

We typically recommend earmarking 5% of the rents for maintenance. Most years you will not spend this amount unless your property is an older home with a lot of maintenance needs. However, by putting it aside on a regular basis, you are slowing down the possibility of a sudden and unexpected event throwing your cashflow off-balance and derailing your investment plans.

From my perspective, slowing down here means expecting the unexpected, and planning and budgeting for those possibilities. That is not always easy to implement especially now when costs are rising, but speaking from experience, the alternative is far more difficult. Small steps lead to big steps and allow us to “slow down”.