Thursday, August 18, 2011

Leaving on a jet plane…

When you rent out your own home, there are some extra things to be aware of.

1. I’m pretty clean. Get a commercial cleaner to clean after you anyway. This way there is no disputes with the tenants at the end of their tenancy as to whether the property was clean or not. “But that was dirty when I moved in” is words your property manager hates to hear, and neither of you want to discuss your hair in the bath waste, so spend a few buck and save yourself time, humiliation, and hassle. When you are moving house you have enough to do, don’t risk fines at Tribunal for not having the property clean enough.

2. It’s good enough for me. Yep, I’ve lived with things thinking ‘I’ll fix that next weekend’. Guess what? It’s now that weekend. Fix it already so there are no issues for tenants. They won’t know to step around the rotting board on the deck, so you have a health and safety issue. As well, a property presented in good condition with no maintenance outstanding is more likely to attract careful tenants and it is easier to establish if something does go wrong who should be responsible for fixing it. If you’re not sure, ask your property manager for a list of things you must fix, and authorise them to deal with anything you can’t.

3. But that never broke down while I lived there. There will be a number of things that will wear out or break down after you leave the property, and that you had good use out of them is great for you. All items have a used by date, and they will continue to deteriorate while you are away. Expect to do a lot of small fix-it jobs if and when you return, and plan on repainting and/or carpeting some time soon. Time flies when you are having fun, but the property wears out all the same.

4. I remember it being a lot better than this. It is natural to idealise your own home – it is the sense of ‘home’ that makes it such a welcoming place for you. You also knew it best with all your belongings in the property, which make all properties look better. When you rent it out to someone, you need to separate ‘house’ from ‘home’, and this can be difficult. Be prepared. I know one owner found herself upset because the tenants arranged their furniture differently than she expected. Sounds silly until you’ve been there. Prepare to be a bit irrational, it’s normal.

5. That cost what?? A lot of those small things you would do routinely are either not going to get done or will cost you a lot to pay someone to do it. Think about how much it would cost to replace a light bulb. $1? Or $1 plus time to find out what kind of bulb needs replacing, phone tenants cell phones to tell them you are coming tomorrow, drive to pick up key from property managers office, travel to the shop which stocks the right light bulb, find the product, wait at the checkout, pay, manoeuvre through the carpark and traffic back to the property, park, take stuff you need to front door, clear a space to get the ladder into the room, set it up, climb up and remove the old bulb, climb down to get the new bulb out of the packaging, climb up the ladder insert new bulb, climb down, pack up ladder, dispose of old bulb and packaging, lock up property, return ladder to vehicle, drive through traffic to drop key back at the property managers office, go home to write up the invoice to send it to the property manager for payment? Phew, and that doesn’t even allow for parking meter money! Be prepared to spend more on maintenance than you think. Good trades-people are worth every cent.

6. Why can we only get a few dollars compensation from the tenant? They ruined it! Alas, that carpet may have cost you $5000 back in 1987, and you’ve certainly had good use of it. Unfortunately, there is a ‘lifetime cost’ for all items and it is measured by a set scale of depreciation, which varies depending on the item. Carpet has a deemed lifespan of 5 to 7 years only, no matter how well you cared for it. If it is older than that, it will be very hard to prove a claim of getting it replaced if it is stained. Good property managers try their best, but they can’t work miracles. Make sure you are insured to make up the difference if you need to.

7. The rent doesn’t cover my expenses! Whoever told you it would? Most people buy homes that would make bad investment properties as the yield isn’t good – I’m pretty sure the potential rent wasn’t a factor of your purchasing decision. Be prepared to top up the mortgage fund, and have a reserve fund for unexpected maintenance items - a burst pipe just won’t wait for you to save up. You also need to plan for what happens when the tenants don’t pay rent (it can happen to the best of people) or if the property is vacant. There is also the cost of finding tenants – advertising, credit checks, and any letting fees payable. Have funds set aside to cover those sorts of contingencies.

Hopefully you will be forewarned and forearmed about renting out your own home. It isn’t for everyone. Make sure you are aware of the pitfalls before you go down this path and know how you will cope when these things happen to you. And trust me, they will happen! It happens to me whenever I rent a house I have lived in, or even spent a long time doing up – an emotional bond makes it a bit more difficult.

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