What can I do if a tenant commits a breach in a fixed term tenancy?

If the tenant is in a fixed term tenancy and they breach their agreement, do we need to keep them until the end?

No matter whether tenants are on a fixed term or periodic tenancy, if they have breached the agreement there can be steps taken to resolve the issue, including eviction if needed.  The only difference is under a periodic tenancy a tenant can be given 90-days-notice-to-vacate without a reason given.  We feel if a tenancy has been unsatisfactory enough to terminate, the provisions of eviction under the Residential Tenancies Act are preferable to issuing a 90-day-notice-to-vacate.

A dog for every hole?

What is 'below average'?

I’ve been doing a large number of rental appraisals, and recently was asked to view a property in Lower Hutt which was, ahem, below average.   It and it’s neighbor were both in a serious need of repainting, not to mention the rot in the exterior boards including a windowsill which had been repaired with tin.  The front ‘yard’ was concrete and filled with left-over bits and pieces, some weedy garden boxes, bonnets and other panels of cars, moss and slime.  The front door knob and lock had recently been replaced (the last tenants didn't return the keys), but daylight showed around the handle as it didn’t quite fit the hole.  Inside the picture wasn’t much better.  Cobwebs, dirty splattered carpet and walls, bits and pieces from the last tenants, including towels in the bathroom, a filthy toilet… you get the idea.  There was an open fire there, but the landlord said ‘I just tell tenants not to use it as I’m not sure if it is safe’.  I’d bet a dollar it wasn’t safe.  Why it wasn’t checked out or blocked up is beyond me.  If someone is cold, they’ll risk using the fire, safe or no. 

Building code, what building code?

The backyard featured more concrete and a shed constructed by some long ago tenant and used as an extra bedroom over the years.  It wasn’t to building code, needless to say.  The rent was about $100 per week less than it would have been if some really basic cosmetic stuff was deal with (i.e. clean up and chuck out the rubbish, put drapes back on the tracks), and then get a good deal on insulation and heat pump, and hell, maybe splash some paint around, particularly on the street frontage.  The landlord told me ‘it costs too much to do the clean-up.  I just tell the new tenants they can have the first week free if they clean the place up’.  I reckon it costs less to clean it than a weeks rent, and the additional rent by improving the property would pay it back in no time, the rest is then gravy.

Background checks are for wimps!

Obviously they haven’t heard that providing a property ‘reasonably clean and tidy’ is a requirement of the Act, and besides, any tenants who wanted to move into it in that state would not be the kind to do a great tidy up, and leave it tidy themselves, so perpetuating the problem.  How many free weeks do they want to give away?  The landlord went on to tell me that he doesn’t do background checks, because ‘if they can stomp up with the bond, and they seem OK, then they’ll be good enough’.  I hear drug dealers and pimps are pretty flush with cash, but hey, what would I know?  I do background checks and I don’t seem to get those kinds in our properties.

It's never cheaper than now.

I left the property smiling, glad that there are properties like these to take the tenants I won’t take.  I feel sad for the property owner though, they’re missing out on thousands of dollars every year, and getting bad tenants damaging their property to boot.  It’s never going to be cheaper to fix the issues there because they will just get worse in time.  If their plan is to sell the property at land value, then fine, they should keep improvements to a minimum.  However, every human being deserves a clean home.  Thank goodness they were only wanting dogs.

Bad Tenants = Short Term Investor (why choosing great tenants, or getting someone else to deal with them, is the key to staying in the game)

Wellington Property Investors’ Association recently had experienced investors come and talk to their meetings every Monday during May.  The plan was to reveal different investing strategies that work for investors and the plusses and minuses of these.  However, the unintentional but recurring theme throughout all the talks was the importance of getting good tenants.  Every single speaker mentioned just how vital this was to their success.  Many had developed robust strategies for choosing great tenants, often refined from making plenty of mistakes!  One warned about the perils of renting to family members.  Another found they had a brothel in their property, and a whole heap of unauthorized renovations.  Another had a tenant who infested the entire 11 room property with bedbugs.  Funny stories in hindsight, but all experienced their fair share of stress when it was going on.  It is often easy to give up and sell when a bad tenancy situation arises.  And many a landlord has used the old ‘house is going on the market, you’ll have to leave’ excuse to avoid confronting a less than perfect tenant.  Sadly, the market is not always kind to them, and their investment experience dints their confidence and their bank account.  I know several people who have sold properties for less than they paid for them just because they wanted the pain to end.

A bad tenant is a hiccough in your investment journey, it doesn’t need to be the end.  One bad tenant is an education and a valuable experience.  Two bad tenants, and you should consider doing things differently.  Three or more bad tenants?  For goodness sakes, improve your property (get advice on the top priorities) and get a competent property manager looking after it lickety-split.  Clearly you are not cut out to pick tenants yourself.  Can’t afford a property manager? Really?  How much does sorting things out after bad tenants cost you?  What damage was done to the property and your psyche?  What is the value of peace of mind? 

A number of our clients comment that our service is actually free for them, because things go so much more smoothly, they get better rent, the property is filled faster, and they get time with their families again.  One even credited us with saving their marriage.  We didn’t know we had, but nice to be able to help.

So if you have a bad tenant that is putting you under stress, don’t give up, get help.  Rental Results, that’s what we do.

How often do you go to Tribunal?

A client of mine commented recently that they had been to a seminar where another property management company was presenting, and they said they never had been to Tenancy Tribunal, and were promoting this as their point of difference. So, my client asked me, "How often do you go to Tribunal?".
Frankly, we go more often than we would like.
Accurately, even once would be more often than we would like.
Also accurately, we do very well at Tenancy Tribunal and have a very good success rate when there are issues that need to be resolved but couldn't be resolved otherwise.
Property managers who don't take tenants to Tribunal are perhaps not looking after their client, the landlords, best interests. I have seen for myself many instances where landlords are dissatisfied with the care shown by tenants, and by proxie, their property managers. Stains on carpets are left as they are, chalked up to 'wear and tear' rather than asking the carpets to be cleaned or paying for the cost of patching these to be paid. This is only one example of many where damage is in excess of 'fair wear and tear' and is the tenants responsibility to put right, but the property manager ducks the confrontation and lets them get away with it. Over time, these things add up, and the property rents for less and less, and attracts lower quality tenants, which further damage the property. Alternatively, the landlord needs to pay for these repairs, which erodes the income they are supposed to be making from the property. One way or another, a property manager who does not hold tenants responsible for their own actions costs the landlord.
The property managers who boast that they do not go to Tribunal will state this is because they are 'just that good' they never have any issues. Ha ha ha ha ha! Yeah right. That would only be the case if they were dealing with machines, not people. People are infinately variable and are motivated by a huge variety of factors. People have changing circumstances, which can sometimes mean they don't live up to their own standards, and may not leave a tenancy as they intended to. Another reason a property manager could boast such is they have so few properties they don't get much experience at all. Or they try to stay out of Tribunal as they know their own actions would not withstand scrutiny. Or, they failed to collect sufficent evidence to prove their case.
We're not afraid of such things. We know our processes and behaviours are robust. We know we have the evidence we need to prove our case. If tenants don't fulfil their obligations, we are not afraid to do what we need to in order to protect our clients.
We do go to Tribunal. It is more often than we would like. But it is not more often than our clients like.

How to check references

We think we are pretty good at reference checking prospective tenants. I know we are, because we guarantee it. If we were no good, it would cost us too much to do such a thing. So, what do you need to know about reference checking?

1. Do it. The quick look up and down and judging a person by their handshake just doesn't cut it. Do call their referees and ask about them. Be suspicious if they don't give you any details, or have no one they can offer, or phone numbers are all wrong. They won't have been born yesterday, so don't act like you were. Everyone has a history, insist on delving into it.

2. Qualify the referees. How much weight should you attribute to different referees? They are not created equally. I'd attach more importance to what their landlord and employer have to say about them than their dear old Aunt.

3. Know what information you can get on-line about someone, and if there is any restrictions on using that information. For instance, know how to look up their Tenancy Tribunal history. Know how to do a credit check (and make sure you have consent to do so, or you may never be allowed to do another one again). Is Googling them useful?

4. Have some good questions to ask referees, and know how to verify information. Perhaps you ask the same question in different ways. Or keep the questions open-ended.

5. Do ask questions of the referees to verify they are really who they say they are 'so, how long have you owned the property? Have you seen much increase in value for you during this time? Why did you decide to buy it? - all these can be asked of 'landlords' to check they really own the property. Pretenders will soon fall flat on their face).

6. Watch for inconsistencies. Don't try to explain away anything that is contradictory. Find out the real story by asking them about it. E.g. 'You said on your application you don't smoke, but one of your referees said you do - can you explain please?'.

7. Listen to your gut, as well as your ears. Do you sense hesitancy? Holding back? Outright lying? Warning Will Robinson! Either ask them about it, or choose someone else.

Reference checking too subtle an art for you? To confrontational for you? If so, get someone else to do it, like the team at Rental Results Property Management. We pride ourselves on our tenant selection.

It’s not just what you know, it’s who you know.

Very few landlords contact previous landlords of a prospective tenant to get references. While I think that is a more than a bit foolhardy, I know some landlords will just say nice things to get them out of their property, especially if it is not true. I was reminded of this recently while doing one of our background checks on a prospective tenant. The landlord was someone I knew, so for his protection, let’s call him ‘M’. The call went something like this:

“Hi M, how you doing? It’s Jackie here, I’m ringing because (tenant) has applied to rent a property from me. He’s a tenant of yours right now?”

“Oh hey Jackie, how’s it going? I thought (tenant) was looking around. He’s asked me for another place in my properties, but I’ve refused. He’s really grotty, our housekeeping team refuses to go into that apartment. He’s late with his rent and needs to be reminded, and he’s never set up an AP, although we’ve asked him to. I wouldn’t recommend him at all.” M spurted.

“Really, that’s a pity. Thanks for being so honest with me” I say.

“No worries. If you were anyone else, I’d give you the ‘yeah, their fine’ spiel, but because I know you… I wouldn’t do that to you”.

So, it pays to be well connected, you’ll get more honesty from other landlords. I’d like to say this was the first time I ever encountered such a thing, but it happens all the time. If you are a landlord, the best protection against bad tenants is to be well connected and do background checks.

To develop connections with other landlords, join a property investors association like Wellington Property Investors' Association http://www.wnpia.co.nz. If you don't know what background checks to do, research it on http://www.dbh.govt.nz or get property management from a company like Rental Results http://www.rentalresults.co.nz - our tenant selection is so good, we guarantee it.

No One Complains About You.

Over a few drinks recently, one of our regular tradespeople remarked to me "You know Jackie, I work with lots of property management companies all over Wellington".
"Yes, I know" said I, wondering where this was going.
"Do you know, when I'm at your properties, I never hear the tenants complain? I never have neighbours come up to me and tell me how bad your tenants are".
"Really? Surely that isn't unusual" I said.
"No," he said "It's very unusual. I always have other peoples tenants complain to me about their property managers. Never about Rental Results".
Hugely flattered, I turned to another Tradie in the room from a different industry and asked him if that was his experience.
He thought for a moment, and said "He's right. I've never had any complaints about you guys. Plenty about the other buggers, but none about Rental Results. When I pull up outside a property in my van, neighbours will come out and tell me what the tenants are getting up to, but not for your properties".
Now, it wasn't just that it was my shout for the drinks. These guys were genuine. And I have no reason to doubt them as we have very few tenant complaints to us directly either.
We manage to walk the line of looking after landlords interests at the same time as meeting tenants expectations for good customer service. That isn't an accident, it is something we set out to do each time we meet a prospective tenant. We have tenants remark to us that 'we have never had a property manager show so much interest in us and what we wanted before'. It carries on through the tenancy and we have a good record of getting back properties in good condition as the tenants care that we care.

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!