Real Estate Investor Magazine South Africa March 2016 | Page 31
A
ll businesses have assets. Asset management
is generally defined as the process of making
the best use of these assets to maximise value
and provide the best possible returns. In a buy-to-let
property investment business, the primary assets are
the physical properties, and these properties must be
managed and maintained on an ongoing basis.
Consequences of neglect
Financial constraints certainly curtail the ability to
tend to the seemingly never-ending requirements to
patch, paint, repair and replace fixtures and fittings,
and to deal with mould, pests and normal wear and
tear.
thoroughly and provide a report detailing defects,
repairs and maintenance issues, as well as the cost of
attending to these, to inform the buying decision.
Cash flow considerations
The cost of regular, ongoing maintenance should
be factored into the property cash flow projections
when considering a property, using custom-designed
software such as the P3 Property Wealth Manager.
This ensures informed decisions are made about
the return on investment of the property under
consideration, given the maintenance requirements
and the expected ongoing costs thereof.
Building up a reserve fund
In a buy-to-let property
investment business, the
primary assets are the
physical properties
As a property ages, the maintenance and repair
requirements increase. Recognising this risk, buyto-let business owners build up a reserve fund for
unexpected repairs or major maintenance beyond the
regular, ongoing maintenance budgeted for in their
cash flow projections.
However, the long-term consequences of neglecting
regular maintenance are far more costly. Experts
estimate that the cost of delayed maintenance can be
as much as 15 times more than the cost of the required
ongoing maintenance, as small repairs and routine
maintenance turn into major problems. Furthermore,
poor maintenance will dampen growth in the value of
the property and make it increasingly difficult to find
quality tenants and c