Investments are thought of as money working for you. But property investments may be one category where you end up working for the investment. Managing a property – from buying, maintaining and selling – can be a chore. More so if the property is located far away from where you live.
It is possible that you bought the property and moved to a different country or city; or you own an ancestral asset in your hometown; sometimes good opportunities come up in other cities and you may have invested in it for income or capital gains.
No matter how you ended up with ownership of a property far from where you live, it is essential to realize the problems it may come with. You can then decide if the asset is worth the hassles and if so, what help to take to manage these.
Unlike financial assets, property ownership may entail active management and hence expenses. Taxes have to be paid to the local authorities periodically. If the property is a home, regular maintenance – painting, structural checks to verify there are no damages, plumbing related work to ensure there are no leaks or blocks in the system – are needed from time to time to maintain asset value.
Finding someone to handle these or taking time to travel, locating reliable local help to get these done can be a hassle for many home owners. It helps to take the help of professional agencies to supplement support from friends, relatives and neighbours.
Some of the problems in maintenance can be sorted easily if the home is rented out and the care is left in the hands of tenants. You can entrust the occupant to pay taxes and ensure good upkeep.
But having a tenant can cut both ways. Tenants themselves may raise many maintenance demands or increase the need for upkeep. For instance, a tenant may not be open to doing simple things such as fixing a faulty electrical outlet and demand your intervention, urgently. Or they may damage wood work and want you to remedy it. They may also create other disturbances and you may have to answer neighbours on the troubles and inconveniences created by your tenant.
Often, there is also a time factor constraint in getting fixes done. Broken water pipes cannot wait for few days that will take you to come to the site. So owners may find managing urgent fixes to be quite stressful. And when tenants refuse to pay their regularly, confronting them and ensuring payment is not easy remotely.
And when the tenant vacates, ensuring the house is handed over properly, cleaning up to make it ready for occupation, finding a new tenant and executing the rental agreement also require time and effort and often physical presence.
There are many professional agencies that can help with tenant management, starting from fixing up the house, tenant screening and ongoing support such as rent collection and regular checks while the house is rented. Fees may range upto 10 per cent of rent and extra charges for additional services.
If a home ownership comes with one set of problems, having a land comes with another. An unfenced plot can be a ripe target for encroachment. Fencing may still not eliminate risks if you don’t visit the site regularly. There are also taxes to pay to local authorities for the plot.
Another risk is Government take-over for infrastructure development. While there is not much one can do about this, handling the authorities remotely may not be easy. If there are legal disputes in the land that were missed during purchase, the pain of handling it may be worse when trying to handle it from a far away place.
Still, in spite of the many hassles, diversification beyond one’s place of residence does have its benefits. Buyers must however think through the likely problems based on the type, age and purpose of the property they want to won and put a plan in place to handle issues that may arise.