Letting your Property? Get the Rent Right.

Did you know you can get a free rental appraisal from one of our property experts at Rental Results? Our team specialise in areas of Wellington, Hutt, and Porirua so you can get an accurate appraisal of what your property is worth.

Lots of landlords say ‘I can’t afford property management’, but they can ill afford the time to look after their property on top of everything else they do in life. The reason they can’t afford property management is that they are not getting all the rent they should from their property.

Here are some signs you are under-renting your property:

1. The phone rings hot/emails pour in when you advertise

2. You have queues of prospective tenants at the open home/showing.

3. Tenants offer to pay you more for the property.

4. The people who come to see it say ‘wow, I can’t believe how nice it is’.

5. People looking at your property are younger/not as financially established as you would have hoped.

While you could feel smug that your property is so great you are turning people away in droves, think of how much it is costing you. Ever $20 below market rent is $1,000 every year you are not getting for the property. Would you be happy to spend that much on advertising? Or accept that much rent-arrears without a second thought?

A new client told us they wanted $450pw for their Whitby property. We signed up a tenant for $530pw. That’s $4,000 extra each year! Did we just pay for ourselves? Heck yes, twice over.

If you have a vacancy coming up, ask us for a rental appraisal. You just might find that property management is effectively free for you too, or even find we are even paying you to manage your property with all the extra rent you get, just like we did for our Whitby clients.

How good are we really?

Net Promoter Score is an accurate unit of measurement of client satisfaction. It is worked out by asking clients 'the ultimate question' and based on the responses, getting a score which could range from negative 100% to positive 100%. Members of an industry tend to score similarly to each other, and their relative rank can be worked out. For instance, the banking industry has a range from negative 30 to positive 8. Used car salesmen would rank even lower!

A property management company in Brisbane surveyed landlords and discovered an average Net Promoter Score of negative 22% for property management locally. I think it would be fair to say this would be true all over Australia, and even New Zealand. Not many people have positive things to say about property management, sadly. Incidentally, the company conducting the Brisbane survey is regarded as the best in Brisbane, and they scored negative 11%. They were horrified by that, but it is all relative. They out-performed their competition significantly.

We asked our entire database 'the ultimate question' and had a representative sample of responses come back. Our score? Positive 36%.

Wow.

That means we wipe the floor with the competition. The majority of people on our database are raving fans of what we do (please note, we had responses from people who did not use us yet either. Had we just surveyed our clients, our score would have been higher, quite likely, 42). 56% of respondents rated us 9 or even 10 out of a possible ten.

What is 'the ultimate question'? No, the answer isn't the meaning of life, the universe and everything. It is simply "On a scale of one to ten, ten being the highest, how likely are you to recommend Rental Results to family and friends?".

So you can see why people from all over the planet (and soon, the Galaxy), like having Rental Results manage their property in the Wellington Region.

Essential Reference Checks

We are currently in the process of tracking down a tenant we inherited. The owner was dissatisfied with service they were receiving from their old property manager and passed the property and tenant into our hands. The tenant abandoned the property within a few weeks of us taking over management and the matter was referred to the Tenancy Tribunal.

As part of our application and the following debt collection of outstanding payment we needed dates of birth and other crucial information about the tenants. The previous Property Manager would not pass any information they had on the tenant to us beyond the tenancy agreement and rent record. Were they just being difficult due to the fact we had taken over management of the property? Alas, no. They did not have basic information that all Property Managers and Landlords should collect about tenants. This includes photographic ID (Drivers Licence or Passport) for all adult tenants. This would reveal their date of birth which is a key piece of information needed when chasing a debt. We also ask for several phone numbers and alternative address for service so that they can be contacted at the end of the tenancy. We also like to know all the names of the people who will be residing at the property.

These tenants were particularly slippery fish. Our research uncovered numerous Tenancy Tribunal applications against not only the head tenant but also of the other occupants. This should have been picked up when doing background checks and with the knowledge of the tenant’s history they should have never been offered the property.

As part of our regular checks we also check for aliases by combining first names and surnames of applicants. Doing this we uncovered several more Tenancy Tribunal applications against these tenants and currently have uncovered the total of 5 applications where they have abandoned property with rent in arrears and caused damage. This was in the last 5 years! No landlords should ever have to deal with these people. Unfortunately someone has rented them another property and we have a pretty good idea how that will end.

We also Google prospective tenants. This usually can confirm their place of work and other information they have put on the application form. It also can bring up information that helps you decide against them as tenants. The tenants mentioned above had a history of being director of companies that had been struck off and fraud charges brought against them. They changed accountants and addresses for service on a regular basis. Though this is not always an indication that a tenant is going to turn bad. Everyone can fall on hard times. But the information we gathered on these tenants movements over the last 10 years has revealed that they move around, are untrustworthy and would never be able to rent a property off us.

To save yourself undue stress and financial strain you must do the following before signing up a new tenant for a property:

Get a copy of their photo ID. This will confirm their full name and date of birth.

Check the Tenancy Tribunal website https://forms.justice.govt.nz/search/TT/ try variations of all tenants’ names. To get the most possible matches only use the first initial for the first name and first three letters of the surname. Also try the children’s names. If the family have different surnames search every first name with each surname. If you know middle names try them as well.

Do a credit check. Follow up any anomalies.

Google them and see what comes up. Check Facebook, Twitter etc. You could discover they hold a lot of parties!

Verify all referees are who they say they are. When checking work references call the reception of their workplace and ask to be put through, rather than call a mobile number. A mobile can belong to anyone.

If you don’t like what you are seeing, don’t go with the tenant, even if they give you a ‘perfectly plausible’ reason for all the stuff that happened in their past. Badly behaved people tend to attract bad luck. Don’t let it rub off on you.

How to make your rental investment more attractive to tenants

We have many ex-state homes on our books and in a few situations the homes are identical. This gives us a great opportunity to see what makes a property more attractive to potential tenants and what will increase its popularity and help it achieve a higher rent.

We recently added a new property to our portfolio. While visiting the property for the initial appraisal I had the odd feeling of deja vu. It wasn't until later that evening that I realised that though the cladding was different the basic floor plan was identical to a property that was only a 2 minute walk away. The previous owner had made some minor changes to the property. They had opened up the kitchen area by removing the laundry room. They had also modernised the bathroom and kitchen and installed a heat pump. Other than that the bedrooms and living room remained the same. This property proved very popular and we managed to rent it quickly for $350.00 per week. The property down the road was more attractive from the outside and had a fenced back yard but had trouble renting for $290.00 per week.

In another suburb we have another 2 properties that had the same original floor plan. The previous owner of one split the living area into two making it into 2 very small bedrooms and made the larger bedroom into the lounge. This made a 2 bedroom property into a 3 bedroom. They currently get around $315.00 per week for the property. The house is on a large bit of land and also has a garage. A few houses down the road is another house is on a subdivided section, which has no garage and is in its original condition. This property gets around $280.00 per week. All these properties are in a similar location so the potential to increase the rental on these properties is huge.

The third property is in a block of 2. The only difference between the 2 is that one has been well looked after. Maintenance has been attended to on a regular basis and the property has had good tenants in it who have looked after it well. This unit is the back one of the 2 and only has a carport. This is rented for $300 per week. The front unit on the other hand has a double garage and large storage area and it also has great sea views. On the downside maintenance has been neglected and the tenants did not take care of the place (please note: we were not managing this property!) This unit despite all the positives it had going for it was only rented out for $260.00 per week. Remember the other was achieving $300.00 per week.

We've just taken on the front unit. Under our care it has recently undergone a thorough clean and tidy and a modern paint scheme. The bathroom and kitchen are still yet to undergo modernisation but in its current revitalised state we have an applicant who is willing to pay $310.00 per week for the property. That's $50.00 extra per week or $2600.00 per year for a bit of well needed TLC. A recent valuation of the 2 properties revealed that lack of maintenance made a $20k difference between the units. Again, with the potentially better property being valued lower as it was neglected.

With so many houses available on the rental market its important as landlords that we make the right decisions with maintenance and work that is needed to our property. A small insignificant change such as a good clean and a fresh colour scheme can greatly increase the appeal of a property. When making substantial improvements to the property its important to investigate what the market wants as the wrong expensive renovation might not improve your rental yield. While other well thought out changes could not only put significantly more money in your pocket but may also significantly increase the value of your property and its appeal to potential tenants.

When we do rental appraisals we are happy to share our observations with clients and prospective clients on how they could improve their rental yeild and property value. Book your free appraisal today to get the benefit of our experience.

How important are the photos on your Trademe advert?

One of our landlords recently moved overseas and asked us to rent out his family home. The weeks before he moved the house was fairly chaotic with preparations for the move and the tidying up of the house. It was hard to take good photos of the property as the place was in disaray due to packing and construction work. I managed to take a few photos and listed the property on the Internet. Admittedly the photos did not portray the property in the best light as I was trying to avoid suitcases and boxes. There was very little interest in the property and I was contemplating having to reduce the price. Once the owner had moved out I went back to the property and took additional photos. Within 2 hours of uploading the new photos I had 2 inquiries and another 2 in the following 24 hours. These people were extremely keen to view the property. The wording on the advert remained the same. The only change that was made was clean uncluttered photos that demonstrated the best aspects of the property.

We frequently see adverts with dark dingy photos, photos tilted on the side, contain people or show unappealing parts of the property. People generally will inquire about properties that they can see themselves living in. They don't want to live in a messy cluttered house with dishes on the sink. They somehow think the house is messy, not the current tenants. They imagine when they move into the house it will always look messy despite how much of a neat freak they are. However it can work both ways. A house that is presented nicely, colour co-ordinated with "nice" furniture leads people to believe that it will still look like that when they move in with their old mismatched furniture and the current tenant has moved out with all their "nice" furniture.

To make the best impression and attract the best enquiries present your property in the best possible way. Have it clean and tidy, well presented, and clutter free.

The Spark of Curiosity

If there was a Pub Quiz on property issues, I'd bet our team would win it hands down. Why? We are absolute slaves for learning. We don't go a week in our office without a long and detailed discussion on some aspect of property investment. It might be about structures, mortgages, calculating yields, adding more value, why we buy what properties we do, which books are useful, maintenance issues and how to resolve them. In fact, this list is just things that spring to mind from office discussions in the last few weeks.

When our tradies come in to return keys and report on the jobs, they often give detailed explanations (complete with drawings) about what the problem was, what caused it, and how it was fixed, along with what we should look out for in the future. It is incredibly valuable as the team can know what to keep an eye on when doing inspections. No one wants their property to get damaged from ignorance on the part of the property manager.

Today we visited a property to see a new gizmo in action - an infra-red moisture detector. We had to resist the urge to grab this fancy thing off the technician and test out how long our foot prints stayed visible on the carpet and other interesting CSI-esque investigations. Even without our extra-curricular experiments, we did discover where insulation had been missed, the difference in temperature between inside walls and outside walls, and yes, even where the suspected leak was. I've been a property manager a long time, but this just does not get old.

I love sending the team to conferences to learn more as investors as well as property managers. There is many an 'a-ha' moment as something that confused before is illuminated. It might be an understanding of one of our clients investment strategies. It might be a better understanding of their own risk profile. Or realisation of different communication styles and how to work better with someone who seems to speak another language.

We belong to professional associations - the Independent Property Managers' Association (IPMA) and the Wellington Property Managers' Association (WnPIA) and the team regularly attends these meetings. Why? We love learning all there is to know, it makes us better property managers.

Sometimes at a professional development opportunity we encounter someone who we hope hasn't been in property management long, because every time they open their mouth some nonsense spills out. If they are your property manager, there is hope, come see us!

Earthquake Strengthening

In the last year Earthquake Strengthening has become a big issue for landlords and tenants alike. Many landlords in Multi-unit residential properties are having to get the building assessed by an engineer and hopefully removed from the "Potentially Earthquake Prone Building" list without too much cost involved. Other landlords may be faced with costly strengthening work which may result in large periods of vacant properties, the building may get stickered which would put off potential tenants or as a worse case scenario insurance companies may refuse to ensure the building.

We are dealing with several owners where the Body Corp Committee or chairperson was left in charge of dealing with getting the building assessed. In all but one case the Body Corp has dropped the ball and are totally unaware of the implications of not getting the process up and running as soon as possible. These building are all due to be stickered during peak letting season and I will hate to think what impact this will have on rents and vacancy levels. We believe in being open with tenants about the building they will be living and will be discussing with them the status of the building. Unfortunately there is a lot of fear out there when it comes to Earthquakes. Just because a building is stickered does not mean it it will fall over in an Earthquake. Getting a tenant to understand this is another matter.

Buildings that are currently on the "Potentially Earthquake Prone Building" List are typically buildings that are over 2 storeys high are commercial or multi-residential and were built prior to 1976. Your building could still at risk if it is a single unit dwelling or a house that has been split into several units. The Council will be moving on to creating a list for residential dwellings in the next phase of their Earthquake Prone Building Policy.

So as an owner of an investment property how can you mitigate your risk? As a designer in a previous life I came across many people who renovated their homes. They replaced old scrim walls with plaster board, made small alterations and additions and removed wall in the home with out getting building consent. (After all the walls weren't load bearing) On properties where I was asked to design and prepare consent documentation I always found it difficult to comply with the current building code in regards to earthquake and wind bracing with out relining several walls. If you are considering any work to your property, especially if you are relining or painting walls, take the opportunity to upgrade the bracing of the building and bring it up to current code. You may find that it is cheaper to install the required bracing now then do it down the track when the council requires it to be done.

Transparency Rules

Someone I know had a property manager taking care of their property while he and his partner were in the United Kingdom. While out of the country they assumed things were going fine, and didn't open up the statements they were sent each month to see what had been spent. They did know the property manager fairly well, and trusted them as a friend.

When they returned to New Zealand they prepared their tax returns for the previous year and opened up those statements. They were not happy with what they found. They knew their property had required repairs and maintenance. They did not know their friend the property manager sourced the parts needed from Trademe auctions. What's wrong with that? Goods sold at auction do not carry any warantee or guarantee, they are strictly 'as is, where is'. If you are paying for a trades person, you want to install parts that will last in order to justify the skill in installing them. That wasn't the case here.

They had assumed their friend the property manager had attached copies of their invoices to those statements. When they opened up the attachments they found all the invoices had been generated by 'XYZ Property Management', rather than the trades person who did the job. This is a problem because a) they do not know what the trades person charged or what had been added onto it by XYZ b) they don't know who worked on their property so future call backs to set right are impossible c) they don't know if the trades person was suitably qualified. The latter is important as you don't want your insurance invalidated by dodgy wiring, right as your house burns down.

At Rental Results we know how important these things are. For our clients peace of mind they get copies of all original invoices emailed to them with their statements. They can see exactly what the trades person said, charged for, discounted etc. We don't inflate the bills, and in fact we look for discounts and pass those on where-ever possible. Our invoicing is very clear.

All our tradespeople are suitably qualified, it is one of the many things we discuss with them over a two-page induction process. We like that you know who we are using - reputation is important, and shonky tradies don't get called back.

At the end of the financial year we send a summary to our clients, which makes it easier and cheaper for your accountant to prepare your taxes. Our clients can email their accountant the invoices as well should there be any questions about what was done.

If you are considering property management, do ask how transparent their processes are. The more transparent, the better.

No Children, Thanks.

Did you know some people deliberately break the law? Yep, they utter those words 'sorry, no kids at my property'. Sounds innocent enough, but it is contrary to the Human Rights Act 1993 Section 21 (1) (l). Doing so could result in prosecution and damaged awarded.

From time to time clients instruct us that they don't want children at their properties. That's nice, but no dice. We won't follow unlawful instructions. Most of our clients are pleased to learn we are protecting them from their own ignorance of the law. Some decide to look for another property manager who will not allow children in their properties. To those I say 'Good luck!'. I know there are some property managers who will attempt to defend themselves with 'I was just acting on my clients instructions'. It is no defense. And worse, they did not educate their client, so both are likely targets for prosecution.

If you don't want children in your property, don't buy property that would suit them. A three bedroom home in the suburbs is going to attract families. If you don't like that, then get something else, perhaps a hostel as they have more power to discriminate. Frankly, I'd prefer to deal with a family with a whole bunch of kids than the young or disenfranchised.

So what can you discriminate on?
Number of occupants. You can limit the number of people living in the house. A rule of thumb is one person per bedroom. Don't try to say only 2 people in a 4 bedroom house, you won't succeed if challenged.
Ability to pay. If they can't afford it, you don't need to take them. This is different from being unemployed. Our rule of thumb is 1/3 of income is the maximum spend on housing.
Smokers. Yep you don't need to take them.
Pets. These aren't children, no matter how much they are a part of the family. Wolf children are a grey area. If you encounter any, let me know how you go.

Generally speaking, take the best applicant on merit. And that's a topic for another blog.

The Cascade of Errors

I was talking to a DIY investor last night about an issue they were having with tenants in a property. I suggested a solution to their problem, and they said ‘yes, that would work, except…’ and then added a bit more information about something else they had done which meant they couldn’t do what was suggested. “In which case, you’ll need to do this instead” I suggest. “Will that work if I have also done...?” asked the landlord. Yep, another issue to complicate matters. This went on until there were about four or five issues all of which impacted on or complicated the original issue. I offered what help I could, but I came away thinking “We don’t get compacted issues like this, why not?”.

A big part of the answer is experience. We have the ability to avoid a lot of issues by simply anticipating what could go wrong and acting to prevent it. That’s not to say our psychic abilities are such that we can predict every outcome. But, we have been around the block enough times to identify recurring themes.

One of the problems for the landlord above was she didn’t put things in writing. We have this down to an art-form, with many standardised letters for just about every issue, from breaking leases to being late with the rent payment. What do tenants think of this? They like that we are professional and consistent. They know where they stand with us. In many of our letters regarding a breach of agreement we cite the part of the Residential Tenancies Act which applies and we encourage tenants to call Tenancy Services. Could you be so confident with your process that you can encourage a tenant to get independent advice? We can.

Another thing that makes us different from this DIY-er was that we look at the big picture, the lease overall, where she reacted to the situation at hand. She wanted to keep her options open (only for the sake of having the options there, in reality she was not going to exercise them in the timeframe created by the lease duration) which meant she wasn’t decisive when she needed to be, and that led to complications. It is a relief to limit your choices and live with the decision made than be indecisive and be railroaded into a bad situation or be overwhelmed by the choices before you.

The final difference was that we don’t care if we are liked. Sure, we like to be liked, but we would rather do what is right than popular. We don’t need the tenants to like us, we do need them to do the right thing. Our DIY Landlord did care. The relationship was important for her, and she would rather compromise her rights than have a difficult conversation.

Ask yourself:
Are you experienced enough to foresee potential problems and head them off at the pass?
Do you put agreements in writing every time?
Do you consider the big picture when you make decisions, and can make decisions without regret?
Can you tell tenants ‘no’ without feeling bad about it?
If you have answered ‘No’ to even one of these questions, consider getting help from someone who can say ‘yes’ to all four of these. You'll be much better off.

Bills and more bills!

At a property investor conference recently, a speaker was discussing how much to set aside for maintenance. One of the gurus the speaker studied suggested $500 per annum. The speaker thought this was on the light side by at least $1000. I tend to agree, although more is recommended, particularly if your property is older.

Last year, my partner and I spent $20,000 on R & M on our properties. To be fair, that included a total bathroom renovation including a new hot water cylinder, and insulation ceiling and underfloor in a couple of properties, and practically nothing on others.

What do I normally spend on my properties? It is really variable from year to year. On one, I had a new concrete drive and carpad laid. It was the first time any maintenance was done on the drive in the 11 years I had owned it, and it was pretty rough when I bought it. I inspected the same property last week, and I rang the plumber immediately, another hot water cylinder was needed. That's what I get for buying properties built in 1965 - all the hot water systems have reached the end of their lives now. It is optimistic to think it will be 2057 before I need the next one, they just don't make them how they used to. I also called the locksmith as one of the locks had stopped working, and noted the windowsills need painting just as soon as my tenant moves. That could be a long while away. In the past, I have insulated the property (about $2000 if I remember right), and installed a heatpump ($2500). Painted the interior (did it myself, cost couple of cans of paint and a lot of my evenings and weekends). Had the plumber clear the drains and gutters (did you know pohutukawa roots can climb drainpipes 2 stories high?), and a million other things that have long faded into away, some of which are coming around again, like painting the outside ($10,000 last time).

I want to change the embassasingly shoddy carpet, but my tenant tells me to wait until her kids are grown so she doesn't have to worry about ruining it. The last one is going to start school soon, so it's on the horizon. I will certainly need to replace the roof, the current one doesn't have much life left in it, and I do need to refit the bathroom soon. The current fittings are near 50 years old. If only a new bathroom would last as long! I'll need to update the wiring and put in new power points as it woefully lacks them, and pull down the old chimney to make the property safer.

With all I spend on it, am I making any money? Well, my tenant has been there for 7 years and 3 children with no sign of moving any time soon. They pay the rent every single week without fail. The rent has increased to just about double the value it was when they moved in. The house value has more than doubled since I bought it. I sleep easy at night knowing the tenants are taking care of things. The back section is big enough for me to put another house on, and I have the plans drawn. When the time is right, I'll do it to increase the rent and property value.

Have I been lucky? Nah, just good at recognising when money should be spent. It keeps the tenant happy and my property value high. Has the cash-flow management always been easy for me? No, not at all. That's why I have a revolving credit at the bank, and put some of my own money into the property. I like to have a buffer to ensure that if I have a big expense, or the tenant doesn't pay the rent, the council rates, bank loan, and insurance all get paid. I consider that to be sensible investing. It works for me.

Do you know what expenses you have coming up on your property? Does your property manager tell you about long-term issues that are creaping your way? Or do they spring them on you at the last minute - 'you must reroof now!'?

Worth a walk in the snow

When I was a kid, my dad used to tell stories of trudging miles in the snow to school, barefoot and sharing a coat with his brother, to demonstrate 'just how easy we had it'. I never thought to question just where this snow was alleged to have fallen. Well, I finally have my own snow story.

Wellington was treated to the most amazing snow storm for decades, and we had properties to let. Our open homes had been booked before the snow set in, but we were not deterred. I left the city 45 minutes early for a journey that normally takes 20 minutes. The radio was a constant source of anxiety “Wellingtonians are being urged to leave work early today in order to avoid the worsening conditions” and “Snow storm conditions are expected to close roads, power is out in…” and so on, for the whole long, slow journey. As I wound through the suburbs and approached the street the property was in, the snow had settled onto the road in a thick white blanket, and was even covering the tracks of the cars in front. Finally, I reached the street. One last hill to climb, and I would be there. Oh! No! My car lost traction on the steep incline and started to slip. Back, back, back I went to the bottom of the hill. The snow continued to fall.

I phoned the property occupant – yes, the prospective tenants had turned up, and they loved the place and wanted to talk with me about it. Well, that’s good at least. Now, do I stop where I am, or go up the previous hill I came down so I have at least a hope of getting home tonight? Normally I take the most sensible option, but it wasn’t clear which one that was with the snow still falling. I opted to drive back the way I had come and crested the previous hill before parking. Zipping up rain jacket, pulling on hat and gloves, winding scarf around my neck, I set out for the property on foot, grateful for sensible shoes. I trudged down the hill I now successfully drove twice, and up the steep part to the property itself. I could see why my car failed to get traction, my feet failed as well, and I almost ended up on my bottom. That would have amused the neighbours making a snowman. I noticed several other people had abandoned their vehicles to walk the steep road as well. If these prospective tenants still want it after seeing the issues with access, then great!

At the property I dusted the snow off my coat and met the prospective tenants. They were lovely, thought the property was divine, and had no trouble getting up the drive in their ute. In fact, they offered to drive me back to my vehicle. Fantastic, but I declined, stopping to talk with the occupant before trudging back out into the snow, again. Back on with the hat, gloves and scarf, zip up the jacket, and home safely at last. Within 9 days, our very keen tenants were moving in. Fortunately the snow had melted by then and I didn’t need to repeat my slippery walk.

Here’s to my dad, who told tall tales with real lessons. Some things are worth travelling through snow for. Although mine will never be as good as his - after all, I had shoes and my own coat on - I can tell it to my kids to show them how good they’ve got it. I might even embellish it, just a little.

Cheaper Better?

When is a good deal a really good deal? And when is it really too good to be true?

Someone who really values the effort we are putting in at their apartment complex to improve it for all the owners has not yet brought their properties over to our company, despite being more than impressed by us. Why not? “Because I only pay 6.5% management fee at the company I am with”. Fair enough. What rent do they get? “$660 per week for 4 bedrooms”. Each week they pay $42.90 for management, leaving them $614.10. Sounds alright, but let’s run the numbers for our clients at those apartments. We manage an identical apartment and we get $695 per week rent. Our fees are higher at 8%, but the money our clients get is $639.40. That is $25.30 per week extra, or $1,315.60 each year. Which is the better deal? The one with the higher management rate!

So when you are shopping around for property management, don’t just go on the fees. Find out how proactive they are about rents, because that makes a much bigger difference to your pocket. Want results? Get Rental Results!

Why trust is vital.

All relationships are built on trust. Frankly, I think relationships should start with healthy level of trust, and it moves up or down from there. Why start at an optimistic mid-point? It makes you a better person. It encourages the other party to live up to your expectation. And really, do you want to be that suspicious Gollum type? Precious…

If you are naturally the sort of person that likes people to prove their worth for you, do you homework first. Want to know which company is the best in dealing with tenant enquiries? Phone them up about an existing advert yourself, but please, don’t ask for a special viewing and not show up. You wouldn’t want someone wasting the time of someone working for you, so be considerate. Some companies blacklist timewasters, and you don’t want to be blacklisted by your preferred property management company.

If you are going to act the part of a prospective tenant, have a good story. Please don’t say it is ‘for a friend’ – your friend is unlikely to get the time of day if they are incapable of lifting a phone themselves. Why can’t they? Are they in traction? Gaol? Outer space? Just being ‘too busy at work’ does not say to a property manager the ‘friend’ will take the time to report maintenance issues or meet when necessary, so don’t be surprised if they don’t leap to lay down the red carpet. Does that seem a tough stance to take? We don’t think so. It is vital for us that we meet the actual occupants of a property. Too many stories abound of the pretty girl tenant who gives the property to her scary mob boyfriend. So bear in mind if you ring a property management company ‘for a friend’ – are they mindful of your properties security and who will be living in it? If so, you could be in good hands.

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.