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.