Earthquake PROOF?

Recent repeated large earthquakes affecting Wellington were a good reminder to property investors to check their policies and to have a plan in place for upgrading their properties.

While we are fortunate to escape the devastation Christchurch suffered so far (partly due to a justifiably paranoid City Council), there was still a reasonable amount of building damage in the form of cracking in plaster, cracks in chimneys, leaking pipes around hot water cylinders, and other minor damage.

We recommend getting properties checked by a suitably qualified tradesperson should tenants report any damage as you will want to assess the seriousness of the issue correctly.  Tenants are not necessarily a reliable source of information about property damage – we’ve had a number report cracking which were there prior to their tenancy, and others who want to move out of modern buildings which were not affected because of the ‘earthquake risk’.  We wonder if they are leaving the planet too, because there are few places to go where earthquakes are not a reality.  

Under the Residential Tenancies Act, tenants and landlords may give 3 days’ notice if a property is destroyed.  Christchurch has redefined ‘destroyed’ as after the big quakes there tenants would move into a property more nervous tenants left, being grateful it was better than the place they just at.

Things to check when assessing buildings for quake damage: Cracking in concrete; in foundation, in chimneys, in pointing on roof, in any concrete walls or floors.    In plaster: cracking, usually on joints, particularly around doors and windows.  Also check ceilings.  Leaks in pipes, particularly around hot water cylinders (the cylinder moves differently from adjoining building elements due to weight and inertia), and in pipes, especially waste pipes.  Check windows for cracked glass.  Check doors and windows are able to be opened and closed easily, they haven’t become stuck in the frame.  One of our tenants reported the door frame was moving so much during the quake they couldn’t get the door open.  It’s a good time to get hot water cylinders strapped, chimneys strapped or removed, and header tanks restrained, to avoid more damage next time.  Yes, another, bigger quake can happen:  You don’t need a long memory to remember Christchurch’s experience.

If you have a qualified tradesperson assess any damage, you can give more assurance to your tenants that they property is safe and fit for habitation.  Do be quick about getting assessments done, it’s good to get any EQC claims in within a month of the event.

Rental Appraisals:

Did you know Rental Appraisals with Rental Results are free?

Brilliant for checking if you are getting the right rent currently, if you wish to refinance, you are thinking of renting out your property, or you are doing your due diligence on a property purchase.  Our rental appraisals are more than just a number.

We’ll point out marketable features of your property tenant’s desire, and also what you could do to improve the desirability of your property.  We love it when you get the ‘most bang for buck’ so we will tell you plainly what is the most cost effective changes you could make.  We’ve saved people the expense of replacing kitchens with a few helpful suggestions, and increased rental yields substantially, so we know our appraisals are worth thousands of dollars.

Book your appraisal today by emailing Jackie or phoning 04 4711880 to get enormous value for a small cost of your time.

Lease renewals for a happy new year

Each December marks the start of our busy season as we work to renew tenancies for early next year.  We end tenancies in what we term ‘peak letting season’, when there is highest demand by tenants looking for properties.  This means our clients get the best rent possible and the best tenants possible, because we think carefully about maximising return on our clients investments, and use fixed term leases to great effect.  If your property management company doesn’t use fixed term tenancies, or doesn’t end them in the peak season of January to March, you need to be talking to us about getting better rents and better tenants.  It can make thousands of dollars difference to your pocket every year.

We are proactive on getting new leases in place for properties.  Right now, we are notifying our clients (landlords) about the up-coming end date of their leases, and asking they confirm they are happy for a renewal where we recommend it.  Why do we ask?  We understand the requirements and restrictions on fixed term tenancies as well as periodic tenancies, and we know sometimes plans change.  It is important we are kept abreast of such plans so we can manage the tenancies with our client’s best interests in mind.  Does your property management company inform you of upcoming lease renewals, and checks your plans coincide with their planned actions?  If not, you know who to call.

Once clients have been informed, we send lease renewal offers to tenants we’d like to have stay on at the property (N.B. not everyone is so lucky to get an offer of renewal – why keep less-than-desirable tenants?), and they have until a certain date to return the paperwork to secure the property for another year.  If they don’t, we confirm the end of the tenancy and send them information on what they need to do in order to get their bond refunded in full.  We simultaneously advertise the property to minimise vacancy time – there is no point in waiting until the tenants have left.  This is another way we maximise our client’s rental income.

It’s a good time of year for you to have a think about your rental property for next year.  Would you like it to perform better than it has?  Call us now on 04 4711880 to book an appointment to discuss your property management needs, and experience Rental Results Property Management Excellence for yourself.

Are your gutters clear?

It’s a good idea to check.  From the ground you can tell if they need clearing if you can see grass or other vegetation growing in them.  Also, if it is raining and water is coming off the edge of the gutter in a waterfall, get them cleared out immediately.  

What’s the harm if they are not clear?   Blocked gutters can allow water to flow under the roof and get into ceiling spaces and wall cavities, rotting framing and wall linings, causing mould and mildew, and other unpleasant and expensive side effects.  Water sheeting off the side of the roof can also undermine your foundation, causing cracks, subsidence, and other issues.  Underpinning the foundation is very expensive, so avoid it by clearing gutters.  

If your roof is too tall for you to tackle, ask a plumber to do it for you.

Do you have trees and shrubs at your investment properties?

Do you have trees and shrubs at your investment properties?
Tenants may have different ideas about landscaping than you do.  To prevent a chainsaw massacre, put a clause in your tenancy agreement that tenants are NOT to trim or remove trees or shrubs.  Establishing value of plants is very difficult, prevention is better than cure.
If tenants request permission to trim trees (some will), ask they use Dazzle to mark what and where they want to cut, and email you photos for your consent and to keep a record of what was agreed.  If they are serious about doing it, they will comply.  If you never hear again, make sure you check on your next inspection that they didn't go ahead anyway.  We know a landlord who had the unfortunate experience of a tenant 'trimming' a lovely garden full of established 5-7m high trees with a chainsaw.  To waist high.  Every single one.  Surprisingly, the tenant asked permission and received it first , there was mis-communication about what a 'trim' involved.  The garden lost a decade of growth.  So use the Dazzle trick to prevent this sort of problem on your property.

They’re a good tenant, but…

If I had a dollar for every time I heard this, followed with ‘they are behind on the rent’, I’d have enough to clear some of those rent arrears.

There have been some tragic cases.  

Try this one.  The social worker:  This landlord took pity on someone who suffered a tragedy in Christchurch earthquakes and put her in his property.  She never paid rent, and after six months, the landlord finally kicked her out.  She then disputed the amount of the rent, claiming it was $100 per week less than he had signed her up.  It’s still going through the Tribunal, causing the landlord considerable emotional and financial stress.

Or this one.  The automatic payment:  The landlord checked the rent came in every week for about 8 weeks for their new tenant.  At this point they relaxed, knowing the tenant had it sorted.  Three months later, their bank rings, their mortgage is in default.  The tenants seemed to have stopped paying the moment they stopped checking.  Tears all round, and no, they never recovered the debt owed.

Or the one where the landlord can’t afford property management. I call them the Conflict Avoider: That’s because his tenant had racked up close to $50,000 over a five year period.  That’s about three years of rent.  They also hadn’t inspected during that time, because, well, they’d need to discuss the rent arrears then.  So they had no idea what state the property was in.  On the plus side, they’d spent nothing on maintenance either.  Somehow, I think this will simply cost them more due to problems being left unattended.  Yep, can’t afford property management.  More like, can’t afford not to have it.

So, if you find yourself identifying too closely with these real life landlords, get help!  Call us now on 04 4711880, we can save you from the rent arrears blues.

Saving Fees Costs Money

So, our dream clients who are thrilled to bits with the increased rent we get them have their property in an apartment block with around 20 other apartments.  One of the other owners of an apartment in the block has worked with us on a number of issues with common property areas, and he was seriously impressed with what we had done to improve the property overall and make headway where his efforts in the past had not.  He had his property managed by another company.

'Well, if you like what we do, let us do it for you', we urged.
'I'd like to,' he responded, 'but I get a better rate for property management with the other company, they are several percentage points cheaper'.
Gulp.  How do we compare then?  We had to find out.
'How much rent are you getting for your property?' we asked.
He told us, and we told him how much we were getting for a property the same as his in the same complex.  He was impressed.
'But I get a cheaper rate with the other company' he repeated.
'How much do you make from the rent after your management fees are considered?' we asked him. 

He calculated and came up with a figure.  While he was doing that, we were calculating how much our other clients with the same property got in-hand.  Guess who got more?  Our clients, who paid more in fees.

Was he convinced?  Maybe.  Did he take action?  Not yet.  Is it costing him?  Certainly.  Is his cheaper management rate better?  Heck no, you get what you pay for.  Not only was he not getting as much in hand from his property, he wasn't getting any action from his property management company on the issues that bothered him for years.  Sure, he wasn't paying as much, but he wasn't getting as much either.  He really needed to figure out if a smaller piece of a bigger pie was better than a bigger piece of a smaller pie.  In this instance, his bigger pie meant a much bigger serve for him.  But he couldn't see it, as he was hung up on the percentage fee.

If you want to know how much bigger his pie would have been, it was in the four figures range, and went up from there.  Yep, percentage matters, but not as much as what you get for that percentage.

Dream clients

I have a group of clients I consider my ideal clients.  They live out of town and don't fancy the idea of sorting out anything to do with the property themselves.  They leave all that stuff to us.  They don't ignore it, they do know what is going on with their property, they just know they have the right people looking after it.  For them, it is about the numbers.

One of these clients wanted to sell their property.  They needed to improve their cash situation.  We'd done all we could by renting the property out at a good rental, increasing it every year for the last three years, but it wasn't enough.  So, near the end of the tenants lease, they put it on the market.  Some bites, but nothing of the sort to solve their financial issue.

We checked in with them as to whether they wanted us to lease out the property for the following year.  They decided they were likely to sell to an investor, so they agreed to re-rent the property for another fixed term. 

From our point of view, it was business as usual, with the real estate agent occasionally popping in to grab the key to show a prospective buyer through.  The property has security keys, you know, the 'do not copy' kind, and getting copies needs permission.  We ask the owner, our client, if they were happy for us to give the agent a key so it is more convenient to get buyers through. 

They respond with:
'That's a good thought, but we've withdrawn it from the market today'. 

This was the last thing we expected.  When we asked why, they responded with:

 "why would we sell when you guys are doing such a neat job and have increased the rental again!!!"

  Aww, shucks.  That's why we love them, and they love us!  Financial problem solved.  Happy client.  Happy property management company.

I have another story to tell about the apartment block this property is in, so read the next blog!

When to apply to Tribunal for Rent Arrears

Here's a useful process to follow for chasing up rent arrears.  It solves the majority of rent arrears issues in the first few steps, but still gives you the security of going to Tenancy Tribunal as quickly as practical so rent arrears don't get too out of hand.

Firstly, I'm going to assume you check rents the day they are due.  If you don't, start doing that now.  Keep forgetting?  Set a reminder up on your calendar to check them.  Never assume the tenant will pay, Sods law will have it that the minute you stop checking will be the minute they stop regular payments.  Some tenants are frustrating in that they don't have an automatic payment (AP) set up, but just pay when they remember to.  Don't put up with this.  Follow the plan below to motivate them to pay the rent in full and on time.

So, you've checked the rent on the day it's due, and it isn't there.  Step one is contact the tenant.  We use email or text on the first day, because the first reminder is usually all that is needed.  Something as simple as 'I notice your rent didn't come in today.  Please make payment immediately' does the trick most of the time.  Don't add 'or tell me if there is a reason why not' - there is no reason good enough.  Maslow says shelter is right up there on the hierarchy of needs, without it, nothing much else matters.  No rent, means no shelter.  Simple. 

Step 2: check the next day if rent came in, or the tenant has told you when they will make payment. If it isn't the next day, have your B-S-ometer on.  No one who doesn't have the rent today has twice as much next week, so don't agree to that.  Instead, ask how much they are short by today, and they should pay the rest of the rent to you immediately.  Sometimes just being $10 short in the bank account stops the rent leaving the account.  So get all but $10 rent now, and they can pay you the extra $10 on top of next weeks rent.  Much more affordable, and the rest of the rent is less likely to disappear too.

If the rent hasn't come on day 2, ring them up if you haven't already spoken to them.  I suggest something like this:  "Hi, your rent didn't come in yesterday and I sent you a text about it, but I see it hasn't come in today either.  Can you get to the bank today and sort this out?  I'm going to send you a 14-day-notice-to-remedy because rent arrears are a serious issue.  If you get it paid today, I'll cancel the 14-day-notice.  Thanks".  Note at no point have we asked why the rent wasn't paid.  Asking 'why' just puts people on the spot and compels them to tell us something that might be intensely private, embarrassing, or paints them in a bad light.  Who wants to do that?  No wonder people lie about rent arrears.  Don't ask, don't make them feel bad.  Guilty people tend to bury their head in the sand, not solve the problem, and you want the problem solved.

So, immediately issue them with a 14-day-notice-to-remedy-rent-arrears, that's step 3.  The funny thing about 14-day-notices is that they are actually for a lot longer than that as you must allow service time.  If you post them, it is another 4 days you need to add on, after the day you send it.  This means the date to remedy the issue may be 19 days away, and you already have a day or two of rent arrears, and worse if day one was Friday, as the weekend will be in there too before day 2 has started.  You can get a sample of a 14-day-notice from Building and Housing Group.

So, the 14-day-notice is out there in the world, now what should you do?  Don't wait around.  We run on the principal that if the tenants have been un-contactable, and they haven't sorted out the rent arrears, we are preparing to apply for Tenancy Tribunal.  If they miss their next rent payment, apply, even though the 14 day notice has not yet expired.

"What?  But I thought I had until the letter expired before I need to pay rent?" says your tenant.  Yes, the missed rent.  The current rent is still due on time.  If they have skipped their next rent payment too, you are pushing your luck to get now two weeks rent arrears paid, especially if they are not trying to keep to their obligations. 

By applying for Tenancy Tribunal early, you shorten your exposure to rent arrears.  Lets say you apply as soon as rent arrears exceed one week.  You potentially have another 14 days to go on the notice to remedy because you issued it on day two.  Tribunal staff receive the application and process it.  This takes around 3 days.  They may schedule mediation, this takes around 2 weeks.  If you don't resolve it in mediation, it will be scheduled for a Tribunal hearing, which takes another 2 weeks or so, if you are lucky and the load is light.  If your tenant hasn't paid any rent in this time, you are now facing rent arrears of 5-6 weeks by the time you reach a hearing.

Now imagine if you hadn't applied for Tribunal at the beginning of the second week of rent arrears, but instead waited until the notice expired.  You issue the 14 day notice on day 3 of the rent arrears, and the end date is 19 days away, bringing you to 22 days arrears.  You apply to Tribunal at this point, which takes 3 days to process, making 25 days, and then you are offered mediation which happens within one week because the arrears are so great, bringing the arrears to 32 days (but could be a week more), but you don't come to an arrangement, so it is put to Tribunal two weeks later, bringing the rent arrears to a whopping 46 days.  At the New Zealand national rent average of $350pw, that is $2300 rent arrears at the time of hearing.  I'm not exaggerating, the average claim at Tribunal is for around this amount.  The adjudicator will give the tenant several days to move out, increasing this amount by the daily rent rate of $50 for every extra day they are in possession.  If they don't leave, you need to get a bailiff to get rid of them, and they require the order to have been sealed for a couple of days before acting.

No tenant I know of who has been evicted for rent arrears feels any need to leave the property clean and tidy with all their possessions and rubbish removed.  They rarely return all keys too.  So, you'll be back to Tribunal to claim for all those things, or you just sigh, and give up.

If you haven't collected the maximum allowable rent of 4 weeks, you are really considerably out of pocket.  Even with 4 weeks rent, you will have some collection to do, and that costs too.  But that is the topic for another blog.

The point of this one, act swiftly on rent arrears.  Don't let them get out of control.  Use all the tools at your disposal.

What are your options when a lease is going to end, and you want to sell?

When you are going to sell your property, and you are coming up to the end of a fixed term tenancy, you need to think about how you are going to deal with the lease renewal.  You have what is called 'the effective period' which is 90 - 21 days prior to the fixed term lease ending in which you can renew or end the tenancy with your tenant.  If you miss this window of time to sort it out, the tenancy will become periodic.

Each choice has different benefits and disadvantages.  The options as I see them are:

1. Renew the current tenants for a one year lease.
Advantage: Certainty about cashflow.  A good option if you are not serious about selling, or confident of your chances of getting the price you want.
Disadvantage: Buyers may want to move in, and tenants are protected for duration of their lease, unless you successfully negotiate an earlier end with them.

2. Renew for a shorter fixed term, e.g. 3 months.
Advantage: Cashflow during sales process, buyers don't have to wait long to move in.  Good if you want to hedge your bets during the sales process, and possibly renew your tenants again at the end of the extended fixed term when you take the property off the market.
Disadvantage: Tenants may leave at end, and if you still own the house, and it can be harder to find great tenants at that time of year and rent may drop outside peak letting season.

3. Allow the tenancy to go periodic.
Advantage: If sold, just need to give tenants 6 weeks notice.  Good if you have a sympathetic real estate agent who works well with the tenants, and if your house is likely to sell quickly.
Disadvantage: Tenants can leave at any time with only 3 weeks notice, which means it may be empty while selling, and hard to re-rent while on the market to sell.  Which means your cashflow is detrimentally affected, possibly making you a motivated buyer.

4. Ask the tenants to leave at the end of the fixed term.
Advantage: Will be able to show buyers through without notice, can have short settlement if it suits the buyer.  Again good if you are confident of selling quickly, or have the funds available to wait for the right buyer.
Disadvantage: No cashflow, empty property could be vandalised or broken into (and there are a lot of things in an empty property to steal, smash or stain, don't be fooled into thinking there is not). If it is empty a long time, your insurance can be compromised.

It is best to talk through these options with your property manager, partner, and real estate salesperson so you can fully understand the pro's and con's of each option. I can't say which one will be better for you - it will all depend how keen you are to sell, and how many buyers are out there in the market with the money to spend on your property, and whether you want to have the back-up plan of re-renting it should it not sell (e.g. you don't get offers you are happy with, or you don't get any offers at all). In all, you would need to have a crystal ball to know which option is best. All of them involve some level of risk. I'm sure your real estate agent is good at what she or he does, but no one can promise a sale within a certain amount of time (unless you give it away for free, of course! In which case, we could take it off your hands...).

Selling with a Fixed Term Tenancy

We have experience in working with real estate agents when clients want to adjust their portfolio.  A common question we are asked when clients are looking to sell is 'what do I need to know about selling my property with a fixed term tenancy'.

Once you are certain you are going to list it for sale, make sure you inform your property manager as you have a legal obligation to inform the tenants, and your property manager should do that on your behalf.

The real estate agent will need to touch base with your property manager to get tenant details for access.  The property manager can also provide them with any details they need.

Your tenant has a fixed term lease which is likely to continue past the hoped-for sales date.  This means you will need to sell the property with a tenancy in place, or end the tenancy early by mutual agreement (otherwise known as ‘make them an offer they can’t refuse’ – could be expensive, or very cheap).

If you sell it while you have a fixed term tenant, and you can’t reach agreement with the tenant about ending the lease early, the options for dealing with it are either that the settlement date is pushed back until the lease end date (and you need to wait for your money until then), or the new owner becomes the landlord for the duration of the lease.  Obviously this will require some negotiation with the prospective purchaser as to their preference.

Of course, there is another option, offer the property to the tenant to buy.  You may want to get an independent valuation to set the price, and have your lawyer do the negotiating if necessary, or use an agent to facilitate the sale.  Let your property manager know if you want them to sound out the tenant as to this option, and potentially save you sales fees.

If you are a landlord with a fixed term tenancy and you are wanting to sell, get in touch.  Great property managers, like us, have good solutions.

The cost of not getting property management

A couple of things I’ve noticed about people who manage their own investment properties.  Firstly is they rarely get the rent they could.  They seem to take how much the rental appraisal says, then discounts off the property management fees to charge tenants lower than market rent.  What does this do?  Well it costs the same, without any of the benefits.  Personally, if I am paying for something, I like to get the return on my investment.

Secondly, self-managing landlords don’t inspect.  How do I know this?  We reference check every tenant we take on, and often ring two landlords per tenant, current and former, for a reference.  We always ask them how was the last inspection.  For most, the last inspection was the first inspection, when the tenant moved in, and just trusted them to tell them when something goes wrong.  

Unfortunately, most tenants don’t know what is a serious issue in need of attention before problems and costs escalate, and what is just a minor inconvenience to them.  Most landlords don’t know this either.  We’ve had a number of situations where a landlord is facing a serious repair bill because they just didn’t know how serious something was.

Having a systematic approach to inspecting properties top to bottom on a regular basis is the secret to lower maintenance costs, increased property values, and happier tenants.  Inspections should not simply be about whether the tenant has cleaned the oven lately – they should be a way of dealing with maintenance issues as they arise.  Most people don’t know this, and feel funny about invading the tenants personal space.  No wonder, if they are the cleaning police.

While checking cleanliness is important (and that’s a topic for another blog) doing inspections for maintenance and damage is vital.  Paying the rent is a fine attribute in a tenant, but if they have caused more damage than they paid in rent, you aren’t making money, are you?  Likewise, I am sure you want to know if they are doing something unlawful – better to move them out before trouble moves in.

If you think you might not be getting the rent you could, and you haven’t visited the property at least every 4 months (every 3 months is even better), pick up your game, or get someone suitable to do it for you.  You are paying for someone to neglect their duties if you continue as you are, and you’d fire that person, wouldn’t you.  Do yourself a favour, hire a good replacement, like, well, us!  www.rentalresults.co.nz

Should I sell or should I hold?

The thing most people forget about property investment is that it isn't really a liquid asset.  Yes, you can sell it, but it doesn't necessarily get snapped up, unless buyers can smell that you are desperate to get rid of it, and you accept a ridiculously cheap price to get it off your hands.  Classic case of smart buyer, desperate seller.

When people are thinking of selling a property, the reasons are usually these:
I need the money for something else (I can't afford it)
I'm going to invest the money in something else (this investment is doing badly and I can't afford it)
And the more direct people say:
This investment is doing badly (I can't afford it)
I can't afford the maintenance on it - it always needs something done to it (I can't afford it).

I'm usually a bit surprised by this, but then, I like to buy property with my worst case scenario in mind.  What if interest rates rise?  What if rents drop?  What if insurance costs skyrocket?  What if the rates go up?  What if it has long vacancies?  What if it is vandalised? What if it is damaged by tenants?  What if a meteor falls on it?

I'm yet to have the last one happen, though it would be pretty cool, hey? Particularly if it was empty and vandalised and damaged and rents dropped and interest rose, but my insurance paid out.  Can there be an Act of God if you are an atheist? I'm sure I could sell the story to Woman's Day or some such mag if insurance did let me down.

I've noticed though, that many people have a limited idea of what is 'can't afford it'.  For some it is "I'm not sure how I'm going to feed the family or fill the car this week" and that is hard to argue with, they are really making fundamental choices on priorities.  For others it is 'I had to put in $20 once to stop the mortgage bouncing, when we did the entire repaint and rewire and re-roof that year".  Really?  Doing OK then.

What if we looked at affordability in a new light.
If property values double in general every 7-10 years, then we could take this as a measure of whether or not the property was performing.  Simply ask these questions:
1. What is the current value of my property?
2. What is that divided by 10 to get my 10 year doubling*?
3. How much have I spent on the property this year in rates, insurance and repairs?
4. Is the answer to question 3 more or less than the answer to question 2?
Regardless of the answer, question five is:
5. Can I live with that?

If I was to plug in the numbers using a realistic rental property, it would go like this.
1. Current value = $200,000.00
2. Ten percent of that is $20,000
3. It cost $3,000 in rates, insurance and repairs each year.
4. $3000 is way less than $20,000 for sure.
5.  You mean I really made $17,000 in unrealised and untaxed capital gains?  Wow, this property investment thing rocks!

Wait, you forgot to ask, 'how much rent did you make?'  That question is important.  This property made $14,000 (or $270 per week).  But there was also interest on the mortgage of approximately $10,000 (5% of $200,000), so that was only a pre-tax profit of $4000.  Or $75 per week. In other words, profit.

If I add in the $325 of capital gains each week ($17,000 divided by 52 weeks), and I'm feeling pretty prosperous all of a sudden.  Hmm, I can afford that!

Now some years this story isn't going to be as rosy.  We've done a gross assumption that capital gain is linear for a start, but also If I repaint the exterior as I need to every 10 years I will have zero real or 'imagined' capital return that year.  Is winning nine times out of ten worth playing for?  I think so.  I'd need to re-roof every fifty years, which will also wipe out a years worth of return or gain, and reclad just as often.  So really, every fifty years, I make a profit for 43 years, and break even or slightly lose in seven.  Sounds pretty good to me.  If I knew I could never sell it, I still think I'd be happy.  What do you think?

I welcome your comments on this blog post.  It is just my opinion and certainly you'd be a fool to rely on it as any sort of financial advice.  Certainly it contains assumptions about capital gains, interest rates and costs and so on.  But I do hope it gets you thinking.


* Hopefully you know 'The Rule of 72'.  I've used 10% here just to simplify the math for me and others who can't be bothered with complex calculations, but I really should have said 7.2% in order to double the property value every 10 years with compound interest.  I'll explore the rule of 72 in a future post.  Promise.

Camping takes the cake

Usually my stories are about things tenants have done, because usually tenants are the hardest thing about being a property investor.  Occasionally though, there is a client who takes the cake.  This is one of those occasions.

I have a client who has, lets say, a different world view.  They just don't seem to grasp some concepts, like, maintenance work needs to be done, or no, you can't stay at the property while you do it, because the tenant lives there.  I have explained the latter several times, let me tell you about it.

On the first occasion, the landlord wanted us to rent out the property, but not the downstairs bedroom, accessible from the laundry, because they wanted to use it when they came to town.  "So you will go in and out of the tenants laundry to get to your room?" I clarified.  
"Yes, indeed" the landlord said, glad I was getting their intention.  
"What will you do for food?"  I asked.  
"I'll bring my own sandwiches and stuff, it will be alright",  the landlord assured me.  
"And what will you do if you need to use the bathroom?" I asked, wondering when it would click that this was absurd.  
"Oh, I'm sure the tenant wont mind if I pop in to use the bathroom" was the reply.  Oh yes they would!  I had to explain long and loudly that this would not be OK, it was a complete breach of the tenants peaceful occupancy of the property.  In addition, it would not be appropriate for him to use a corner of the section, public indecency, health and safety and all that.  I had to add that in, because he thought very differently than most of us do. After about two hours of my lecturing, he finally said "fine, I'll get somewhere else to stay, or come when the property is empty".  Fine, I thought, this is sorted.

Fast forward a year.

The landlord is coming to town to do some essential maintenance.  He lets me know by email, and I respond with "Where are you staying?", the memory of my long lecture still fresh in my mind.  I get no response to the question, so I ask it again, and add "you can't stay at the property as it's tenanted".  Still no response.

On the day the landlord is due in town, I get a phone call from the tenant.

"The landlord has turned up to do the work" they say.  
"That's nice, hows it going?" I ask, wondering if this is just a 'touching base' call, or if it is another chapter in the comedy that is this client.  Turns out to be the latter.
"Ah, fine, but he wants to camp on the grounds, with his whole family" the tenant says.
"Right, I see" I say, this is definitely the latter.  "I'll try to call him.  In the meantime, stand up for your rights, he cannot stay there, and you have our full support to tell him to go away.  If I need to, I will come around myself, so let me know if he starts to pitch a tent".  In my mind, I have visions of the cops being called. I left a message for the landlord on his cell phone asking him to call me, and find somewhere else to stay.  I could just imagine that he would be staying with me at my house as a result, but I was firm in my resolve.

Unbelievably, after he and I talked and I made it clear that there were things he could do, and things like stay at the property he could not, he gets grumpy at me that I am not allowing him to use his property, and he threatens to go elsewhere for property management.  "Thank you" I say, "I don't want to have our reputation damaged by someone who refuses to obey the law and ignores our advice on this topic, please do get another company to manage your property.  I don't want to have to defend you and us against the tenants very strong case for compensation in Tribunal".  Well, that was a wake up call.  He backed down and finally agreed to do what we asked, until the next episode, anyway.  Don't think I haven't heard the end of the complaints about how much his accommodation is costing him. 

I have made it very clear to this client that he is on probation.  Any more issues, and he is finding himself someone else to argue with over his tenants rights.

Christmas Pressies

I think it is a really good idea to give tenants a gift at Christmas to say ‘thanks’ for being your customer.  Box of chocolates, grocery or gift basket/voucher, it is all a good idea.  Like all gifts, there is beauty in the execution of it, so make sure the wrapping and the presentation is all in keeping with the manner you intended for maximum good will.

Don’t do what this Auckland landlord did.  He put together a gift basket and took it around to his rental property, only to find the tenants were not home.  Not wanting to leave it on the doorstep for it to get rained on or go walking off by itself, he let himself in and left it proudly presented on the kitchen bench.  When the tenants returned from holiday, they were less than impressed with the unauthorized access, and took the matter to Tribunal.  They won.
 
Lesson?  Call before you drop around, and if the tenants are not going to be at home, get explicit permission from the tenants to leave your gift inside (i.e. talk to them) before doing so.  You can imagine the landlord felt pretty hard done by in being penalized by doing a good deed.  However, he really should not have gone inside without notice or permission – no amount of gourmet olives or chocolates would make that right.  Remember, it may be your house, but it is someone else’s home.  Keep out of trouble this Christmas by respecting that.

Why inspect every three months?

There is a temptation for landlords to not do regular inspections, particularly if the tenant has been good for the previous inspections and they have been there a while.  If you fall into this category, you are not alone.  My estimate from talking with landlords is that 90% do not inspect every 3 months.  The worst I've heard is a landlord that hasn't inspected the property in the 15 years his tenant has been in there.  Not surprisingly, it was 'a bit of a tip'.  So take this tip:  Regular, frequent inspections are vital.

So why don't people inspect regularly?  Well, I think it has something to do with intruding on the tenants life and being judgemental about how they live.  Certainly it also has something to do with there being more exciting things to do in life, otherwise known as 'being lazy'.  

So, how do we avoid the discomfort that comes with doing inspections?  Turn around the purpose of the inspection.  It isn't about checking up on the tenants and making sure they are looking after your house (well, maybe a teensy bit of that).  It is about ensuring maintenance is kept up to date to give the tenants a quality product.  When you inspect, the way the tenants are treating the property is a by-product of your inspection, not the focus.  We want the properties to be nice and tidy when we go inspect so we can get to and check all the likely problem areas in a property.  What are these?  I can hear the cynics say 'the tenants'.  Read and learn.

Inspection hot spots are the places where there is a lot of use, a lot of water, or a lot of movement.  So, door handles and hinges are checked to make sure they are performing correctly.  Light switches are not loose or damaged to make sure they are safe.  All taps are checked to be functional, not dripping, and not too hot.  Under sinks are checked to make sure there are no leaks.  Hot water cupboards are checked for leaking valves or pipes.  Cupboard doors and drawers are opened and shut to make sure hinges and runners are fine.  Likewise window.  Curtain linings are checked for signs of mould, a sign of moisture issues in the property.  Hallways are checked for wear to the walls and flooring - a good sign of when to redecorate.  Toilets flush and don't leak or smell from bad connections.  Externally, gutters, spouting, and gully's are inspected for blockages... you get the idea.  If you happen to notice the tenants have damaged the property during this inspection you can address it.  It is much easier to hold tenants accountable for damage if you are always keeping the property in good condition.

Some will say 'but the tenant will tell me if something goes wrong'.  Will they?  I don't know about you, but there are parts of my house that I rarely venture into.  My partner will tell you that's the kitchen.  But, realistically, how many times in the last year have I had reason to open the hot water cupboard?  Maybe twice?  The cupboard under the laundry sink?  We just keep our emergency water there, so probably not since I last filled it (I think I filled it after Christchurch's February 2010 Quake.  Which reminds me...).  And this is me, property manager extraordinaire who knows what problems can occur, and I can't help but spot issues in every house I visit, even if socially.  Tenants can't be relied on to check every part of the house regularly, or even to realise there are problems when they are occurring.  It's just not in their job description.  Unless someone knows what to look for, they might not even see it.  I've seen lots of examples of slow leaks that no one noticed until it was pretty darn apparent, carpet rotting, mould everywhere, bad smell, wall crumbling.  Its a lot more common than you think.  You can't rely on a tenant picking up these issues.

Things can also change.  I had a lovely tenant in one of my properties.  Sweet young thing, very pleasant.  Had been there for over a year, and along we came for our routine inspection to discover her brother was now out of jail and was doing unauthorised renovations which included a kick-@ss security system around a specialised hobby in the garage - you can guess what.  Lucky we knew it wasn't there 3 months previously.  Neither of them were there three months on from the inspection.  Just because we were checking the house for maintenance didn't mean we were blind to the tenants actions.

Insurance companies love property inspections.  They probably reason why should they protect your asset if you wont?  So, don't get caught out by not inspecting.  Do document your inspections so you can prove you were there.  Keep copies of your notice letters to the tenant.  Take photos of the property with a time and date stamp, if for nothing else but monitoring the condition.  If the property looks fantastic, take photos to use in your next marketing.  We make sure we take photos of things that may be degrading, for example, cracks in a driveway, so we can tell if it is stable or continuing to get worse.  Leave a thank you note for the tenant and take a photo of the note on the kitchen bench - you never know if you need to recall it as evidence.

Good inspections are a lot of work, they do take time and forward planning to do properly.  If you can't be bothered, outsource it by getting great property management to do it for you.  Yes, it may cost money to do it.  But, the report you get each inspection should be a good piece of evidence for your insurance company, and that could be worth thousands of dollars to you.  If you ask your property manager not to bother inspecting regularly and they agree, change to a better property manager.  Great ones will never act contrary to your best interest and best practice, even if you ask them to.  They know how much not inspecting costs.

Keeping Safe with Strangers

We’d like to think ‘dicey’ situations are rare in New Zealand, but they are a lot more common than we’d imagine.  When dealing with prospective tenants, it pays to keep safety in mind.  Here are some tips for keeping safe when meeting with strangers:

1. Let someone know where you are, who you are meeting, and when you are expected back.
2. Keep your exits in mind.  It is better to leave a stranger in your house, than not leave at all.
3. Keep your cell phone on you, charged, and ready to dial emergency numbers at speed.
4. Have a ‘safety phrase’ that everyone knows, and you can use to alert someone when you are in trouble. "Help Help, call the police" is probably not subtle enough if you are trying to avert disaster.  Try ‘Darling, I’m running late, can you pick up the kids from preschool?’ if you don’t have preschoolers.  The recipient of the message should understand they are to send the police immediately to your location.
5. Be ready to run.  Keep your shoes sensible, and your belongings on your person.
6. Park your car where you won’t be blocked in, and don’t have to reverse to exit quickly. Don't park in the driveway, garage, or pointing the wrong way in a cul-de-sac.
7. Don’t be confrontational.  If a situation is escalating, keep calm and be non-threatening, but stay in control.
8. Use social niceties to your advantage – ‘thank you so much for coming’ while moving towards the door can be more powerful than ‘please leave’ if you use it at the right time.
9. Don’t comply if someone wants to take you in their vehicle, get in your vehicle, or tries to restrain you.  Avoid being an easy victim.  If this happens, fight, loudly attract attention, and escape.
10. Walk behind strangers, not in front, when showing a property so you’re not surprised from behind.
11. Trust your instinct.  Wouldn’t you rather feel foolish than feel pain?
12. Call the police.  The police strongly encourage people to call when threatened, and you will be taken seriously.  Chances are you are not alone in your experience with this person.  Report it to the police, you may save someone else a whole heap of grief.

Remember, bad situations are rare, and you can do something to keep them that way.  Stay safe out there.

If you have any other safety tips, feel free to post a comment!

Halogen Hell.

If you want to get to know the clerk at your local light shop really well, install halogen lights.  Halogens can be relied on to last about as long as it takes to drive back from the store with the replacements for the last ones that blew.  If you are lucky, you’ll have time to find the step ladder too before ‘pop’ there goes another one.

Not only is this wasteful of resources – all those bulbs in landfill, all the trips back and forth to the light shop, it isn’t all that energy efficient either.  I’d argue you get more usable light from one 100w incandescent bulb than you do from two 50w halogens.  Not as romantic a light, but more practical.

If you are serious about developing a romance at the light shop, well, sometimes the planet needs to take second place to true love.  If love is off the cards, think carefully about the type of lights you install.

Tenants hate halogens.  Not only do they need replacing every 4.3 seconds, they cost more than regular bulbs to replace.  They are also really hot to touch, so they can’t be replaced the instant they blow, they need to be allowed to cool down first.  Halogen burns – I have a number of scars on my inquisitive fingers to prove it.  That’s what I get for touching the merchandise when I’m light shopping.

They can last longer if the cotton gloves literally go on when changing bulbs.  The oils from your skin can create hot spots, and that’s not a good thing for delicate bulbs.  I’d hate to think of the effect of kitchen splatter.  But, better yet, just install ordinary fittings, not halogens.  You can also fit these with compact florescents too, to save energy.

Have you got what it takes to be a Property Manager?

Rental Results is an award-winning property management company offering high quality property management service to investors with property in Wellington, Hutt Valley and Porirua. While Rental Results is relatively new, the director is widely respected for her expertise, professionalism, and quality of service, and seeks person cut from the same cloth to join our small team.

Our property manager would be responsible for all aspects of residential property management, including but not limited to:
• liaising with clients
• finding and managing tenants
• regular property inspections
• arranging maintenance with trades people
• applying to and attending Tenancy Tribunal
• project managing renovations
• related administration duties
If you have a broad skill-set, this is the role for you.

The person we seek:
• has a positive attitude - no problem is too hard to overcome, and they seek win-win outcomes
• takes pride in their work and has a strong sense of responsibility (sleepless nights if they don't do what they said they will)
• is assertive and can say ‘no’ when necessary
• has sales skills to rent property and gain new clients
• has great time management and organisational skills (we're not kidding)
• has great customer service and ability to relate to a wide variety of people
• has a good judge of character (can spot a liar before it’s too late)
• is calm under pressure and many demands on time and attention
• has good computer skills, including internet and Microsoft Office Suite
• has excellent communication skills, particularly written
• has a clean drivers licence, good credit and no criminal history (we will be checking)

Ideally they:
• have some experience with renovation or maintenance (you know a paintbrush from a plunger – although you won’t actually use either on the job)
• have experience or interest in property investment
• are mature (attitude, not necessarily age)
• are able to have fun, even when the whole world seems to be against them

We will extend your comfort zone and your skill set - if you love being challenged, you'll relish this. This is a position involving a high degree of trust and responsibility, and you will need to be an ambassador for the company at all times. There is no ‘job description’ – you are expected to do what needs to be done. Hours are somewhat flexible, with this full time position conducted any time between 7am and 7pm Monday to Friday and there is occasional 'on-call' work involved on a rostered basis. You will be provided with a cell phone and there is a work car available for use.

We won’t lie to you, with every job there are downsides. From time to time the role can be stressful and disheartening. You may be shocked by what you find on occasion and there will be some long hours in our busy season. However, if you can find the funny side of most situations you will find yourself in an exceptionally fulfilling position. We have a very supportive tight-knit team with a great sense of humour. We do things differently and think outside the box. At Rental Results we work together and capitalise on each individual’s strengths.

You will get to go to conferences and other development opportunities where you will develop a greater financial literacy and will learn a lot about property management and investment- while having a whole lot of fun! You will have access to professional associations and their benefits and you will meet a large number of people, many influential (as they say, you are who your friends are).

We offer comprehensive on-the-job training, so no previous experience as a property manager is necessary. The role would suit someone changing careers, leaving tertiary study, or returning full-time to the work force.

This role can be challenging, but also immensely rewarding. If you take pride in your service apply now with your CV and cover letter emailed to annelise@rentalresults.co.nz. Position to start ASAP.

You must be eligible to work in NZ to apply for this role.

*** Applicants please note: ***

We have an incredible team in place. If you think you have what it takes to be the best, impress the heck out of us! Please research us before putting in your application. To get an interview, show you know your stuff.

Jackie Thomas-Teague
021 681 481
04 4711880

Real Estate Agent Friday, Property Manager Monday.

Last weekend I was looking at a property with a real estate agent.  ‘I’m intrigued by your car’ he said, commenting on the sign-writing, ‘is it your business?’.  I explained that indeed I ran a successful property management company in the Wellington area.  ‘Fantastic!’ he said.  ‘I’m in that industry too.  Our company property manager resigned on Friday, so the office manager said come Monday morning, I’m it’.  Not surprisingly, this was the extent of his knowledge about his new career.  Yup, that’s the quality of property manager some companies have.  Not a career choice, certainly not a vocation, or a calling, but ‘bugger, the seats empty, who’s fool enough to say yes to sitting in it?’.  Sigh.  It is this sort of recruitment process that makes me weep for all the landlords and tenants and houses damaged by such lack of care and passion.  It makes me weep for all the property managers who do give it their all but are tainted with the same brush.  It makes me weep about all the wannabes who apply to work at Rental Results without a clue about what it takes.  That X factor is hard to describe.  I tried to explain the other day to someone that it takes an iron fist in a velvet glove, but that doesn’t really capture it.  Take a look at our recruitment advert here to learn more about the skills and attributes we look for.  Not surprisingly, there are few who fit the bill.  But that’s fine.  We know it takes a special someone to be part of the team and give it what we do.  If you know that special someone, show them our advert.  We are dedicated to having the best property management team in the country.