Moving into Home Ownership has Social, Health, and Economic Benefits

This article made me laugh:

“MOVING INTO HOME OWNERSHIP HAS SOCIAL, HEALTH AND ECONOMIC BENEFITS

“Getting lower-income families into home ownership won't just ease the housing crisis – it will have social, health and economic benefits across the board, new research says. Modelling done by economic research firm BERL  for the foundation also shows moving renters into homes could save the government millions in hospital, jail and welfare bills, while boosting jobs and the tax take.  Moving 1000 social housing renters into home ownership could produce a net fiscal saving of $11.1 million over 15 years, BERL's data shows.“

http://www.stuff.co.nz/dominion-post/business/residential-property/91450578/everyone-wins-when-lowerincome-families-own-their-own-homes-says-study - 12 April

http://www.nzhf.org/recent-news/80-new-housing-research - 12 April

http://www.radionz.co.nz/news/national/328722/better-access-to-home-ownership-%27could-save-nz-millions%27  12 April

Don't get me wrong, I'm all for improvements to society, health, and the economy, as well as the environment for that matter.

But, that’s saving 1000 people $2 per day?  ($11.1mil/1000people/15 years/365 days).  I think finding loose change down the back of the couch could make just as much.  I’m not sure how much home maintenance could be done with couch detritus, so for some people owning a home would be a backwards step financially.  Maybe it would suit those who don’t believe they could own a house, but would make an effort if they already had one?  How do you find such people for this?  My feeling is other people would react a bit like the family in Million Dollar Baby when 'given' a house - they'd moan about the expenses, and not appreciate the benefits.

There is plenty of data that shows that renting is often cheaper than owning, and any new home owner will tell you the same once their first maintenance bill arises.  Houses can be scarily expensive to maintain.  Most properties have some 'deferred maintenance' as few ever fixes something the moment it breaks, for time, money, or 'it's not important' reasons.  If we are talking about psychological improvement homeowners enjoy, then yes, I think home owners usually have a stronger sense of permanence and security in their community.  They also have the stress of bills and greater responsibility. But that attitude of permanence and security isn't exclusively the realm of home owners, plenty of tenants have long tenure and love the location of their home.  The flipside? Other people love they can step in or out of a community easily as they don't have the hassle of 'what to do with their property when they go'.  Three weeks notice and it becomes a memory.

And if that ‘good for everyone’ figure is used and NZ’s population is assessed for net benefit, wow, we save cents per person with this analysis.  It surely won’t cost more than 5 cents per member of population to get 1000 people (or is that ‘families)  into a new home, will it?  Surely??  (Let me see, $350,000 say per home, x 1000 /4.5 million Kiwis =  $77 per Kiwi, yeah, that's about the same as 5 cents).  

I think there may be more cost effective ways of achieving this benefit.  I just loathe 'poor' reporting beating up a story without checking facts, or doing simple math.  No wonder we as a nation are in such dire straits financially.

Is anyone bothering to do the math?  Always question what you read, including this statement of my own opinion!

The battle cry of every caring parent

When we managed student rental properties, this was an all too common response to any situation where the student had not kept to the agreement, and parents stepped in to 'help'.  It usually goes something like this:

"Please don’t treat my children like they’re stupid children, except when it’s my poor child who doesn’t know any better, because despite the fact I also work in the industry (or at least, in something vaguely related, close enough that I know enough jargon to hopefully scare you into submission) and I have first hand opportunity to teach them how the world works, but I didn't take it.  I chose instead to manipulate and misconstrue every rule in the book to have exemptions made for my child and teach them that personal responsibility and accountability apply to everyone but them.  So while you’re not allowed to discriminate against them because they’re a stupid, sorry, student, you MUST make exceptions for them because they’re a student, and most importantly, my child.  I will fight you to Kingdom Come if you dare try to get them to act like an adult and take responsibility for themselves.  Even though technically they are an adult and entered into a contract as an adult.  But they didn't know what they were signing because they didn't run it past me first, and if they had I would have told them to sign it anyway and we'd deal with the consequences afterwards, like I am doing right now in haranguing you until you find it easier to give in than continue to fend me off.  I can't believe you actually asked me to butt-out, which although you did that professionally and with some delicacy, it offended my parental sensibilities, as this is my child we are talking about, my precious child, and they are special and different from everyone else's.  And anyway you are being unfair and picking on unfortunates who cannot defend themselves (not that I've given them a chance to, don't worry Dear, I'll handle this), and you are exploiting them and their vulnerabilities, and we'll sort this whole matter out later anyway, when I've talked to my lawyer, when we return from our family Canadian ski holiday."

Yes, this really happens.  So many times it was a cliche.

I can count on one finger of one hand the number of times a parent said to us 'Yep, fair enough, my child didn't do what they agreed to do, and this is the consequence.  Please carry on teaching them about life, contracts and moral obligations, well done and thank you'.

I loved that parent.  The 'kid' took their parents advice and did as they were asked.  It all ended well, and I believe the world was a better place for it.

As for the others?  All special snowflakes melt down at some point, right?  I wasn't there for their particular Spring, thankfully.

What makes resilience? Can it be learned?

When I think of my own attributes, resilience is probably my most treasured.  It is what gets me back up when I've suffered a setback.  I don't consider it an option to slink away and put my tail between my legs, instead, I get on with things, but with more knowledge than before.  It's my grit, my core, and the very key to my success in every aspect of my life.

Resilience is a tough thing to learn.  But I believe it is a learn-able skill, and I certainly didn't always have it as strongly as I do now.  These are the things I think build resilience:

Resilience can come from mental preparation - even just knowing what could potentially go wrong can help buffer against things going wrong, surprise can be a nasty emotion.  Looking only at what you hope will go right leaves you vulnerable to shock and rebound decision-making.  Not good.

Resilience can come from being financially prepared - a realistic budget for vacancies, maintenance, willful damage, and improvements goes a long way to being able to weather bad tenancy moments or Murphy's Law moments.  You don't need to have cash, but you need to know where you can get it when things go wrong without digging an impossibly big hole.

Resilience can come from having support, a network of people who understand what you are going through, and have been in a similar place themselves, and got through it rather than gave up.  It pays to hang out with the successful group, rather than those who ended up where you don't want to.  I recommend your local Property Investors' Association for this peer group.

Resilience can come from not being too hard on yourself - mistakes are an education, it's not the end of the world.  If something doesn't work right now, there is still time on your side to make it better, or try again with a different strategy.  If other people look to be more successful, it's because you are only looking at them in this moment, not at the time they stumbled.  Everyone stumbles from time to time, it's how you pick yourself up that matters to your long term success.

Resilience comes from having a good insurance policy to cover your risks.  Don't believe "it won't happen to me"; that's what people who lose everything think.  Insurance is the best waste of money ever.  If you don't need it, fantastic.  If you do need to claim, fantastic!  It's great you have cover.  The only insurance policy not to have is the one for the things you won't regret losing.  It isn't an optional outgoing.

Resilience comes from having experts do things for you that need expertise.  While we all live in houses, we don't know all aspects of the laws around this, and a sometimes innocent mistake can have serious ramifications.  If you don't know what these are, then you don't know enough to do this yourself.

Resilience comes from having a plan, and sticking to it.  It has a clear beginning (acquisition and or growth), middle (development and/or improvement), and end phase (maturity and/or disposal), and rules for what to do when things happen.  Those rules are not to be broken under any circumstances.  They take into account 'what if we break up' and 'what if we win lotto' and 'what if we are a lot more successful at this than we expect to be' and 'what if we are not'.  It is essentially a space shuttle launch manual.  Clear protocols and a systematic program to work though without deviance will lead to a successful launch.  There are clear triggers for change, and an understanding of the need to pause before pressing the big red button to ask yourself "is the right thing to do?".  Of course you can change as technology changes or your knowledge improves, but you don't change on a whim or out of fear.

Resilience comes from recognizing fear for what it is - False Expectations Appearing Real.  Fear makes bad decisions because those decisions are based on bad data.  Being able to identify your concerns and check the facts on them one at a time can help overcome fear.  If you find you are thinking 'but I still don't like it' then check what assumptions you are still making.  This is different from following your gut instinct - if you trust your gut, you'll know how fear feels, and how it differs from instinct or intuition.

Resilience comes from knowing your comfort with risk, and not dangling too far outside your comfort zone.  By all means challenge yourself, but not by jumping off a cliff if you are scared of standing on a chair.  Small increments of challenge will bring your A-game, too much will be a disaster.  Don't gamble what you are not prepared to lose, it doesn't make for sensible decisions - see insurance again for more on this.

Resilience comes from remembering that 'I've survived every single day of my life so far, and I will continue to survive every day until my end'.  Giving up isn't an option yet.

Resilience comes from knowing you are loved and supported by family and friends and colleagues.  If you aren't loved and supported, something needs to change.  It's easier to change yourself than them, so start there.  Invest time in people who nurture you, avoid those who poison.

Resilience comes from knowing you did your best, and if you had your time over, you wouldn't regret any of your actions.  Regret isn't helpful, learning from mistakes is.  Behaving ethically, honestly, genuinely is the best way to be at peace with yourself and your choices, and allow you to accept the outcomes.  If there is something after this existence, you wont be worried about how you might be judged.  (As an aside:  I prefer to think this existence is heaven, and we need to behave ethically to be allowed to continue living in paradise, otherwise it becomes your own private hell.  Food for thought).

Resilience comes from knowing I have the power to make change - I am influential on my world, and I can make things happen, or prevent them happening, if I take appropriate actions.  It's motivation to do what must be done.

Resilience comes from freedom - I am not oppressed, silenced, controlled, or discriminated against, unless I allow myself to be.  I allow myself to be free, and I allow others to be free, they can do, think, and feel whatever they want to.

There are probably a lot more things that build resilience - feel free to comment with what you feel makes you resilient to what life brings.  You are welcome to disagree with my comments too.

Most Kiwi's invest in property like this.

I was at a meeting with MBIE today, and they were asking questions about how many landlords quit the industry before really getting to grips with their responsibilities as landlords.

My impression is 'most of them'.

Lots of Kiwi's do-it-themselves when it comes to managing their own property.  They own their own homes, and they've been tenants, so how hard can it be?  It is only a matter of time before they find out.  It was very enlightening to us that many don't realise how emotional this is for property investors.  When you are buying property for the purpose of your future security, your retirement nest egg, something that stops you from thinking cat food is one of the main pensioner food groups, you get really rattled when things go wrong, and that disaster jeopardizes that security you are working towards.

The vast majority of Kiwi property investors own one investment property in addition to their own home.  A few own two or three investment properties.  Only a small number of property investors own more than that.

So this blog is for the 'one or two' investors.  The newbies, or the cautious.

I get it.  I know what you feel when everything seems to go wrong.  The tenant left owing rent, damaging the property, and taking your stuff.  They left rubbish and long lawns, and a cat with a litter of kittens behind them to compensate you though, so that's something, right?  And you are too scared to go to Tribunal to set matters right, because in the heat of things you lost your cool and said or did something you really regret, and you worry it will count against you.

So you start setting things to right, and you tidy it up again, and borrow more money from the bank to fix things, and spend your weekends and evenings sorting it out.  You plot what you'll do if you bump into the tenant at the local swimming hole, when no one is around to see... no one would know, would they?  But you stop yourself, this isn't TV-land, that isn't OK.  You continue your work to tidy up the property, feeling jaded about humanity.  And while you do so, your mind is dwelling on 'what will I do if the next tenant is as bad as the last one?' and you don't know if you or your relationship with your nearest and dearest can take it again.  So you think 'That's it, I've had enough, I'm selling'.

You put it on the market, the agent says 'you'll need to tidy it up more to get a good price' so you spend weeks of your personal time doing just that, but it doesn't make a difference to the offers you get.  You haven't been advertising it for rent, because the thought of that leaves you cold, and anyway, you'll be selling it soon, right?  The weeks of marketing it drag on, with you visiting frequently to mow the lawn, dust, work on just one more thing that might make all the difference to a buyer.  You desperately want a good offer, because all you can think about is your mortgage payments going out, and no income from this property coming in to help cover it.

If you are steadfast, you stick it out for months.  Then, in a fit of desperation, you take the next offer, which while on the low side, will at least let you break even financially, if not emotionally, and it certainly doesn't cover the hours you've spent working on the property.  But you take it because at least you are finally free of the burden of holding this wretched rental property.

If your spouse isn't constantly asking you, you are asking yourself 'what was I thinking?  Why did I think owning a rental property was a good idea in the first place?  I can't do this.  I'm certainly never going to do that again.  Couldn't afford to anyway even if I wanted to, as prices seem to have jumped the instant my place settled'.

You decide that property investment isn't for you.  You'll invest in the sharemarket, once you know how to do that, once you get a hot tip, and once your kids are out of school, out of university, married, the grandchildren are secure, oh, and what's just happened?  You hit retirement age without any assets, without any investments, and with plenty of regrets.  Your grocery list consists of 'tea, bread, baked beans, cat food, milk', and you don't even have a cat.

Pretty grim eh?  That is the reality for the vast majority of people who buy investment property.  They get one without knowing what they don't know, they don't pay for good advice from experts, they change their strategy when something goes wrong, and they lose out, often with a large amount of emotional fallout with their loved ones.  So much for 'lucky, greedy, wealthy landlords'.  They don't exist really.

So what separates the average property investors with a successful one?

Yes, there may be some luck involved, but mostly luck you get is what you make by being prepared.  Would we say a kid who scores top of their class is lucky, or paid attention and did their homework?  Of course we'd praise their work.  It's the same with successful investors.  They educate themselves, they get experts to help, they have a sensible strategy, and they have resilience.

Education should be pretty easy, there are plenty of resources out there freely or cheaply available, as well as plenty of people willing to put a high price on education.  Don't run the risk of thinking you are smarter than Jack and you have a way that no ones thought of before that will make you a killing.  More likely than not it has been thought of, is illegal, and might even kill someone.  Your outsiders perspective is most likely ignorance.  Get the insiders perspective, and follow their wise words closely.  Once you've become the master, then you can forge new paths. Not before.

I'm thinking of renting to a family member... it'll be OK, right?

“I’ve had a cousin express an interest in renting my property – do you think it is a good idea, or too many complications?”

Complications is understating it!

I'm yet to hear a good 'renting to friends and family' story from someone who isn't a professional property manager, and my story below is the closest I’ve ever heard to a good outcome.  Perhaps because there is nothing to say about good news stories, but more likely because 'happy ever after' stories don't happen often with the ‘too close to home’ group of people family members and friends are.  I have an encyclopaedia's worth of stories of bad situations.  Like the time the family members had the place for cheap rent but left it a mess, never did the lawns, let weeds take over the gardens, didn’t fix things they said they would, didn’t report broken things, didn’t help the rest of the family return the property to lettable condition after the tenancy ended, caused a long vacancy due to their lack of care, guilted the landlord into allowing a pet (or just got one without permission), sublet the property for a profit, and on and on.  Sometimes this all happens to one person, but I have heard variations of this story again, and again, and again from many different people.

So, if you don't like your family much and are not concerned about awkward family Christmases forever after, and are pretty sure you’ll never need to ask for a kidney, then sure, rent to someone you are related to and presumably like.  But if you value family harmony, renting to strangers is the way to go.

If you think this won’t happen to you, ask yourself if you'd not want to put up the rent because you know their personal circumstances and what will the family think of you if you do an increase at a bad time - and let’s face it, there is never a good time for a price increase on anything.  Maybe you think 'this will just be a temporary thing', and you won’t need to increase the rent during their short tenancy.  Well, I don’t know anyone who willingly moves on from a good wicket.  If the rent is low, the place is comfortable, they will stay.  And stay.  And stay.  Until your rent moves, they won’t.

Visiting your tenant/friend/family member socially would be a no-no, in case you see something that you'd rather not see in your rental, but wouldn't care about so much, or even notice, if it wasn't your property it was happening in.  Don’t assume that just because you are related you both keep house to the same standards - so far no gene has been identified for cleanliness.  It’s likely you’ll be more offended by anything they do or don’t do because of your relationship and expectation that they should treat you fair because you are kin.    Visiting socially also makes it tricky to define as to whether your visit is a social one, or actually an inspection or maintenance visit.  If the relationship goes south, do you think your tenant/friend/family member won’t be resentful of your lack of appropriate notice for those landlord visits?  This is a serious offence, so don’t get it wrong.

I once had a friend enquire about renting a property I manage for a client.

I rang the owner to tell them my friend was interested, and they said ‘great, do it, any friend of yours has to be a good tenant’.  While I was flattered at their faith in my and my circle, I was actually ringing to first try to get them to say no, and let me avoid the whole awkward situation without me needing to be the bad guy.  There is a lot that can go wrong, and as good friends are hard to cultivate, I didn’t want to risk losing mine over a tenancy issue.  As the property owners were delighted with the prospect instead (damnit!), we let them know what safety nets we were putting in place, should they want us to proceed. 

What were our safety nets?

Firstly, we did full background checks, and she wasn’t allowed to use me as a reference.

This proved awkward, as her current landlord gave her a mediocre reference.  My first test as her potential landlord, and I already had a stumbling block.  Well, that made a short story, it would end there.  I screwed my courage to its sticking place and told my friend that unfortunately her references didn’t check out, so I couldn’t proceed.  It just didn’t match my picture of her as a person, but hey, that was that, over and done.  My friend was highly surprised, and quickly surmised what the problem was.  She rang her flatmate, who rang their landlord, and asked ‘what the hell, we’ve been your tenants for years, why did you give us a below-average reference?’. 

I soon received a call from the remorseful and embarrassed landlord who admitted they were the best tenants she’d ever had there, and she was hoping if they couldn’t get another flat they would stay.  That was a new one for me, and it made me wonder just how many other below-average references I’d had in my career were also for self-serving landlords sabotaging their tenants.  I’d like to think she’s the only one, but bet she's not.  A lesson to landlords everywhere – when your tenants want to go, be gracious about it, and tell the truth about their tenancy.  And if you get a poor reference, ask if the landlord are telling you the truth, or do they really want their tenants to stay?

So, the ‘bad reference’ sorted out, we proceeded.  I insisted on having a few more people to call, because I didn’t want to worry that they’d just bullied their landlord into calling me back to say nice, but untrue, things.  While a poor reference and bullying would be completely out of character for my friend, I had to be sure to prevent any worries by me or my client.  The rest, of course, were sterling.  Of course they were.  I now had no excuses, and had to sign her up.

We put in place a couple of rules to keep things clear between us.

We had a rule that I would never visit her home for social purposes, because for me, it was work.  I would be doing property inspections there, but never going around for a cuppa (or even accepting one when there for an inspection, it blurs the lines), let alone an evening event.  I just didn’t want to witness, or be involved in, something that was a problem for my client, the owner of the property.  I have a vivid imagination, and my mind went to the worst possible scenarios, even though my friend could best be described as a librarian type.  I like to think that makes me an amazing property manager, because I can prevent problems before they even happen.  Could you imagine going to a party at your friend/tenants place, getting ‘a tummy bug from something you drank’, and throwing up on the carpet?  I could, and worried ‘who exactly is responsible for that?’  The tenant, as they are responsible for their guests, or you, because you should have never been there acting like an idiot in the first place if you had any brains?  The only person who isn’t responsible for this is the landlord… which is also you, who did the throwing up.  Dang.  Much easier and simpler to just never visit socially.  So we met at public places or at my house, never hers during her entire tenancy.  It must have been a pain in the neck for my friend, but I liked that she mostly came to see me.

As it turned out, my friend broke a window at the property, a big plate glass one.  Very expensive, very hard to replace due to the access.  She was very embarrassed.  Her flat were having a BBQ on the deck beside the window, and the heat from the BBQ cracked the glass (I told my active imagination to believe this, and not try to think of alternative scenarios.  It partially worked).  I never asked how many people were at the BBQ, but I knew why I wasn’t.  Bummer about the glass.  What to do?

Fortunately, we had another rule to cover such things.  We agreed that if ever anything went wrong with the tenancy, my team at Rental Results would deal with it according to the rules we had for everyone else, I was not to be involved.  So, the window got fixed, and she paid for it.  Even with this rule clearly stated for everyone’s benefit, my team kept asking me if it was OK to do XYZ in regards to her tenancy.  Because they knew we were friends, they thought surely I didn’t mean it for every situation. I had to keep telling my team to do what they would do for anyone else, and bite my tongue as to my opinion (very hard for me to do, so I doubt I always did this, which no doubt reinforced them asking me what they should do).  Were the rent increases as much as they otherwise would have been?  I wouldn't know, as I stayed out of it as much as I could, but I suspect there may have been a bit of a bias – everyone tends to go easy on people they like, it’s a culturally ingrained thing, and over a three year tenancy, they all came to like my friend.  Apart from the BBQ broken window thing, she was a great tenant.

In the last few weeks of my friends tenancy she was having trouble with flatmates letting her down as they began new lives in new flats.  She rang me for advice.  Because we’d always been clear on the boundaries between us, she prefaced the call with ‘can I ask you as an expert in these things what I should do?’.  This wasn’t a social chat.  We had a long call discussing the options, and sometimes I would say things along the lines of ‘as a property manager, I’d recommend…’ (note, not as her property manager), or ‘the law says…’ or ‘in my experience this is likely to happen’.  I left it to my friend to decide her course of action once she had all the points of view I could supply.  Only after her tenancy ended and she was no longer my tenant did I find out what she’d chosen to do about the situation.  I didn’t want to know before her final inspection as I didn’t want to be biased about her flighty flatmates and if they had done their share or not.  I loved my friends integrity all the more after I found out.  We then organised a date to have a brunch and gossip, and to go to her housewarming at the new place!

While this tenancy went well and ended well, and we are still friends (great friends in fact), it was only achieved with clear rules in place right from the beginning, stated very clearly.  I don't recommend it: not everyone can have as up-front and frank discussions about such things and mean it by both parties, and then, most importantly, stick to the agreed rules.  My friend is an absolute exception to the norm on this, so much so that an organisation I headed also employed her because she is kick-ass amazing (I was pushing for the other candidate, on principle).  And yes, that job also tested our ability to set boundaries, and when it came to an end for her, I graciously let her go (after a bit of begging to the contrary).  Truth be told, we were both glad when both job and tenancy were over.

Would my friend and I want to do this again?  No, because after her tenancy and job ended, we realised what we were missing in our friendship during her 3 year tenancy, and wouldn't give that up again.  I think we became closer due to the enforced separation.  I have an intimate understanding of how she lives in a place, and how she works (like a machine!), and would highly recommend her, but I’d never want a professional relationship with her again because I’d miss her (although if the opportunity came up, I'd really say 'yes', because why wouldn't I want to with such an amazing person?).  She’s overseas right now having a fantastic OE, and I miss her terribly, but not as much as I did when she was so close, but also at arms’ length. 

My good news story does not mean it will happen to you.  Few people are amazing like my friend, and few people are as analytical as me (I confess I talked my board down on the amount of a pay-rise for her job, as that was best for the organisation, but clearly, not best for her).  I know that even though I’m sending my friend a link to this blog as part of my ongoing love-letter to our friendship (I figure we’ll be in a nursing home together), she’ll forgive my stinginess and value my honesty, because she also did what was best for the organisation she worked for.  

If you can identify with our characteristics, and are not shocked by our actions and choices, then maybe, just maybe, this could work for you too.

For everyone else, don’t rent to friends or family!

What Charity are you Supporting?

Many landlords are happy to take less than market rent from their tenants because they are doing them a kindness, they like the tenants, and they don't want to be greedy, and they don't want their tenant to move out.

These are wonderful and admirable qualities.  It does tend to result in very long term tenancies, as lets face it, who wants to give up a very sweet deal?  Tenants are well aware of where their property sits compared to similar properties, and know when the rent is very good compared to others.

I know a tenant who has a four bedroom home in the Capital city who pays a mere $200 per week, when market rent is over $650 per week.  How long has she been there?  15 years and counting.  Does the tenant know how much she'd need to pay if she moved out?  Yes, she's well aware she'd need to pay $350 for a one bedroom place, let alone what four bedroom is worth.  This happens a lot more than anyone wants to admit.  It's a lot of support landlords give their tenants.

I wonder though if the support landlords give their tenants could be better used elsewhere.  Supporting more causes, doing greater good.  Making the world a better place.

Lets look at this in a bit more detail.  If you rent your property to someone for $50pw cheaper than the neighbours rent an equivalent property, you are effectively handing your tenant a gift, tax free, of $2,600 per annum.  Over 10 years that's $26,000, or with compounding interest at 7.2%, closer to $50,000.  That's a lot of money!

What could you as a landlord do with that money?  What does your tenant do with it?

How many 'One Dollar a Day' charities could that support?  Answer: 137 families fed and lifted from poverty.

How many families are supported when a landlord discounts their rent?  Answer: 1.  What do they do with it?  Who knows!  It could be supporting a charity, or it could be spent at the pub.  It's not in your power to choose.

$50 per week would make a huge difference to an animal shelter, protecting wildlife, feeding kids good food, clothing those who need it, programs for disadvantaged youth, researching cures for disease.  There are lots of great uses for your funds surplus to your requirements.  Why would you not want to be in control of where it goes?

Now imagine how much that would be if every landlord of the estimated 300,000 rental properties in New Zealand did the same.  

How much good do you think three quarters of a billion dollars do?

Off-peak letting vs in-peak letting.

I'm a big fan of fixed term tenancies, as long as they end at the right time of year.  If they don't, landlords are doomed to suffer financially.

Why?

Firstly, it takes longer to rent a property when fewer people are looking, and Wellington certainly has a season of many people looking vs not many people looking the rest of the year.

Secondly, in off-peak, the proportion of high-risk tenants to low-risk tenants is higher.  So, while 8 out of 10 may be excellent in peak season, in off-peak season that may be only 2 out of 10 people.  You have a choice of taking a high-risk tenant knowing you'll be paying for it with rent arrears and damages, or wait for the great tenant when they finally come along, resulting in longer vacancies.

Thirdly, landlords know it can be hard to attract tenants in the off-season, so lower their rents.  This means you could get less money for your property than it would be worth in peak season, when the laws of supply and demand mean higher rents are easier to get.

We know someone with a property that has fixed term tenancies to peak season, but their tenants for the last few years have broken the lease late in the year, in off peak, meaning the usual process of advertising the property is disrupted.

Outgoing tenants usually accept the landlord going 'oh, you are leaving?  I'll put the rent up for the next person then', unless that tenant is responsible for finding the new tenant as they are breaking their fixed term.  In this circumstance, they see it as a hindrance for replacing themselves, and argue against it.  Ordinarily this may be no big deal, but bear in mind it must be 6 months after the tenancy begins before a landlord can increase the rent again, so this slows down the usual pattern of increase.  You may have been just about to do a rent review in the current tenancy when they leave, and instead of realizing its planned review, see it as a barrier to replacing themselves.  You need to decide if it is worth the hassle of arguing the point, or just take the hit.  Many just take the hit and keep rent the same.

If this happen for several years in a row it compounds the effect.  Take two properties next door to each other.  One has the leases end at peak season, and has long term tenants who have regular rent increases.  The other keeps ending at the wrong time of year, and has all the above inhibiting factors on the rent discussed above.  Which property performs better financially?  The one with regular increases of course.  It may be $50 per week or more better than its neighbour after a few years of market forces and stroppy outgoing tenants effecting the rent.

It's only quietly on the market

With the recent boom in house prices it is natural for investors to consider if this is the time to sell their property.

One of our long term clients rang us recently to let us know that they were going to get a real estate agent to go through to appraise their multi-unit property as the agent had recently sold a similar property nearby for a surprisingly large amount of money.  
"Is it going on the market?" I asked our client.  

"No, I'm not selling it.  Of course, I will if they can bring me an offer to match the other property.  They won't be marketing it or anything, they'll just be talking to the buyers who missed out to see if it will suit them, and if so, then hey, we'll sell."  The owner commented casually.  

I confirmed my understanding that "the agent is just doing an appraisal, nothing for us to do but arrange access for this?" The owner agreed, so we did.

A week later, I'm filling our client in on a prospective new tenant and I asked him if he was going to list it.  "No," he says, "They haven't brought me an offer yet, so no, I'm not selling it, let's carry on as if I am going to own this property for the rest of my life, which was the original plan".  

"OK, tell me if anything changes as we'll need to notify tenants if it goes on the market" I sign off.

So, we carried on as usual, organizing some maintenance work we agreed on, and proceeded arranging a sign-up with the new tenant for the available unit.

On the day we are due to sign up the new tenant, we get a call from the real estate agent.  "I want to bring a buyer through, can you please arrange it with the tenants?".  Hold the phone, we thought it wasn't being sold, so I called our client to ask what was happening.
"Oh yes, that's fine, they can go through" he said.  

"But is it on the market or not?" I asked, "we legally need to notify tenants if so*".

"I'm not getting the agent to advertise it, it's only quietly on the market, so no it's not on the market as such" declares our client.

"We can't deal in ambiguity, or more importantly, the law can't.  Have you, or have you not, signed a listing agreement with the real estate agent?" I asked as patiently as we could.
"Oh yes, I signed one several weeks ago for a ninety day period, but as I said, they are not doing any marketing" says my client, blissfully unconcerned.

"Then it's on the market" I say, holding my head in my hands for the breach of the Residential Tenancies Act that has been unknowingly committed. "The advertising isn't the defining factor; you've authorized someone to sell your property for you.  Therefore it's on the market.  I'm notifying your tenants straight away."

My client kindly assures me "Tell my tenants not to worry, I won't sell it unless I get the price I want".  I mutter darkly that this is hardly reassurance, few people sell without getting the price they wanted, but assure him we have a polite and calming letter for the very purpose, and as soon as I am off the phone I am sending it to his tenants, including one to present to the new tenant I am due to sign up in 20 minutes time.  Boy was he surprised, but took it rather well, and proceeded to sign the tenancy agreement.  I was less inclined to be unconcerned about it, given we do all we can to keep clients out of trouble, and this one just landed themselves in a particularly messy spot.

Two days later, the day I am due to do the initial property inspection with the new tenant, I receive another call from the property owner.

"Guess what?  I've just signed a sale and purchase agreement.  Settlement is in three weeks time, the purchasers will be doing their due diligence next week, help them out won't you?  I've told them they need to use you guys for managing it, you are the best!".

I can only hope they are better at keeping us informed of important things like this.


* See Residential Tenancies Act 1986 Section 47 for more details of the law that applies here.

Lesson:  Knowledgeable property managers to help save you from mistakes that may land you in hot water, but you need to tell them exactly what is going on for them to be able to do so.

Unforeseen Trouble in your neighbourhood?

If your tenant is a victim of crime, is this an unforeseen change in their circumstances which may result in them breaking their fixed term lease early?

I'm currently waiting on the outcome of a Tribunal hearing to find out.

Some people would consider having their car broken into as a reason to move away from an area as soon as possible.  Others would shrug and say 'that the roulette wheel of life, could have happened anywhere'.

If you have a tenant in the former category, and you are firmly in the latter, your tenant will probably find you unsympathetic to their cause.  But will they win over the sympathy of the Tribunal should they wish to break their fixed term tenancy early?  

The Tribunal does not need to feel that the hardship caused by an unforeseen event is severe for a reasonable person, but that it was severe for the person affected.  So if that person is a drama queen, their drama is real for them, even if the rest of the world is rolling their eyes at their thespian antics.

I personally can't understand it when people make a big deal out of a small issue.  I'm not cut from that cloth and I'm told I have a higher tolerance to stress than most.  I'm pretty hard to panic, it really needs to be life and death for me to get that feeling of 'OMG what am I going to do?', which is why I am so good at first aid.  I don't like feeling that way, so I prepare and practice.  (I'm definitely one to have on your team when the Zombie Apocalypse happens; the only question is, are you one I want on mine?).

If you have always lived in a plain, foothills will seem as high as the Himalayas to a mountain goat.  What do the Himalayas look like to an astronaut in space?  A wrinkle on a tablecloth?  Problems are all a matter of perspective.  

It was suggested to me today that landlords buying property in a particular area should expect problems with crime, and their tenants wanting to leave as a result, and it is a risk they should bear.  I wish I'd retorted that tenants wanting to live in a particular area should expect problems with crime, and their landlords wanting them to stay in spite of it, and it is a risk they should bear.  If an area has a reputation, is an event in keeping with that reputation unforeseen?

I will find out when the order comes.

Osaki sucks for Landlords

This Osaki case is no end of trouble.  If you've not heard of it, if you are a landlord you probably soon will.  The Osaki's burnt down the rental property they lived in when they left an unattended pot of oil on the stove.  They didn't have insurance cover themselves.  They then refused to be held responsible for their careless negligence, stating they should have advantage of the landlords insurance cover.  The landlords insurance company took them to court, and, unbelievably and against all understanding of all that is fair and right in the world, lost.

I think however there have been a few assumptions made in the decision which need to be addressed, and also there is a huge gap that the Tribunal has not recognised.

First the assumptions.  Reading the Court of Appeal decision, paragraph 36 states that the tenants effectively pay the insurance premium for residential landlords through rent.  I guess the judge in this case had never heard of negative gearing?  Or thinks all landlords live off the proceeds of rent and don’t have other jobs which keep everything afloat.  For investors like me who realise some years will be losses and some will be profits, I am often forking out in the loss years to cover expenses.  All sorts of things can change, such as Government policy changing deductibles (e.g. loss of depreciation), increases in expenses like rates, insurance or interest rates; or doing a lot of maintenance like painting.  It’s pretty hard to say with conviction that the insurance premium is always covered by the rent, even if nothing else is.

In Paragraph 53 they say that the cost of insurance is factored into market rent.  Umm, I’m pretty sure I’ve never heard a residential tenant offer rent for a property based on the landlords outgoings.  Rather, it’s determined by what the landlord next door is charging – and they may choose not to have insurance, and may have owned the property for 50 years, so are not worried about their mortgage repayments or insurance premiums, unlike their neighbour.   The decision then goes on to say that if the premises doesn’t attract a sufficient return then it will not be on the residential tenancy market.  Yep, property is such a liquid asset.  Oh wait, no it isn’t.  But the landlord who can’t get enough rent to cover their outgoings can always sell it at a profit to cover their debts on the property, can’t they.  Oh wait, that also is not always the case.  If it were, developers would never go broke.  So what are they thinking of here?

Landlords certainly suffer because of a lot of assumptions.

The huge gap in the decision now:

The Osaki case talks about insured peril, like fire and flood.  As far as I’m aware all insurance policies cover fire, it’s the mainstay of policies, which is why the Osaki’s had the benefit of the landlords insurance cover, as they had cover for that peril of fire.  I am yet to see a peril identified in an insurance policy as ‘4 year old spilling drink on the carpet and nobody bothering to clean it up’.  I am yet to get clarification on the definition of ‘insured peril’, and I think it is particularly relevant for most landlords who suffer losses from careless and negligent tenants.  While I’m not keen to see long lists of what is and isn’t included in a policy, I’d like a peril to be a bit more defined than ‘accidental damage’.

As for the excess, I note commercial leases, which are based on the Property Law Act, of which the Osaki decision draws, require tenants to pay the insurance excess, as this is the amount that the landlord is not insured.  As Housing New Zealand is not insured, they can pursue their tenants for the entire cost of damage, all landlords should be able to claim the excess on their insurance policy as an amount they don’t have insurance for.  I don’t see what the difference is between having no cover whatsoever, and having cover for amounts over the excess eg $550 of damage.  The first $550 in either case should be the tenants cost to bear.

The Osaki decision also makes reference to Acts of Parliament correcting judge made law.  When will we see an amendment to the Residential Tenancies Act to correct this particular judge made law?

It is costing the insurance industry and landlords millions of dollars and there is no personal responsibility by tenants for careless or unintentional damage anymore, no matter how sever.

I welcome your comments on this post, and urge you to discuss it with your MP.  

People forced to live in garages?

I’ve read and heard so many articles about just how bad the housing crisis is that people are forced to live in garages and emergency accommodation at great expense.  What I haven’t heard is ‘why’.  Oh, I hear that it’s because there is a housing shortage, too many migrants, too many greedy investors, too many houses being sold and so on.  But that doesn’t really answer why some people are in emergency housing and desperate situations, yet others are not.  Am I missing something?  I’m not hearing why people are not still in the houses they were in before things hit the fan.  Contrary to popular myth, most landlords don’t like tenants leaving and needing to find new ones, it’s a sometimes stressful and expensive exercise full of risks for both landlords and tenants. And yet, the myth persists that landlords kick out tenants at a whim and without much notice.  There is more to this story that is not being spoken about.  And why isn’t it?  

I believe there is an unspoken bias in the media which says ‘tenants = good, landlords = bad”.  While I am sure there are plenty of people who are blameless for what life throws at them (most accidents and sickness for instance), I find it hard to believe they make up the majority of people in emergency accommodation.  The questions I want asked in these reports is if they paid their rent on time and in full, if the landlord took them to Tribunal or issued a 14 Day Notice to Remedy some matter.  I bet what we will first hear is a whole lot of complaints about greedy landlords in substandard housing, but if the journalist persists with the question, I believe a lot of those in ‘housing crisis’ ended up there because they didn’t meet their half of the bargain, i.e. they didn’t pay their rent, disturbed the neighbours or other tenants, caused damage or some other big no-no.

How do I know about it?  Because people come to me with their down on their luck stories, and I ask them. I eventually hear that they did something they shouldn’t, or didn’t do something they should.  It always comes back to something within their sphere of control.  Victors or victims seem to differ in that one takes responsibility for their own selves, the other blames the world or their luck.  I believe psychologists refer to the internal or external ‘loci of control’ – what we believe to be guiding our lives.  Is it within us, or without?  If you have ‘bad luck’, why let someone or something else guide your less than optimal fortune?  Surely it’s time to do the steering yourself?

People forced to live in garages?

I’ve read and heard so many articles about just how bad the housing crisis is that people are forced to live in garages and emergency accommodation at great expense.  What I haven’t heard is ‘why’.  Oh, I hear that it’s because there is a housing shortage, too many migrants, too many greedy investors, too many houses being sold and so on.  But that doesn’t really answer why some people are in emergency housing and desperate situations, yet others are not.  Am I missing something?  I’m not hearing why people are not still in the houses they were in before things hit the fan.  Contrary to popular myth, most landlords don’t like tenants leaving and needing to find new ones, it’s a sometimes stressful and expensive exercise full of risks for both landlords and tenants. And yet, the myth persists that landlords kick out tenants at a whim and without much notice.  There is more to this story that is not being spoken about.  And why isn’t it?  

I believe there is an unspoken bias in the media which says ‘tenants = good, landlords = bad”.  While I am sure there are plenty of people who are blameless for what life throws at them (most accidents and sickness for instance), I find it hard to believe they make up the majority of people in emergency accommodation.  The questions I want asked in these reports is if they paid their rent on time and in full, if the landlord took them to Tribunal or issued a 14 Day Notice to Remedy some matter.  I bet what we will first hear is a whole lot of complaints about greedy landlords in substandard housing, but if the journalist persists with the question, I believe a lot of those in ‘housing crisis’ ended up there because they didn’t meet their half of the bargain, i.e. they didn’t pay their rent, disturbed the neighbours or other tenants, caused damage or some other big no-no.

How do I know about it?  Because people come to me with their down on their luck stories, and I ask them. I eventually hear that they did something they shouldn’t, or didn’t do something they should.  It always comes back to something within their sphere of control.  Victors or victims seem to differ in that one takes responsibility for their own selves, the other blames the world or their luck.  I believe psychologists refer to the internal or external ‘loci of control’ – what we believe to be guiding our lives.  Is it within us, or without?  If you have ‘bad luck’, why let someone or something else guide your less than optimal fortune?  Surely it’s time to do the steering yourself?

On the Market: Should tenants get a rent reduction if you are trying to sell a rental property?

From time to time clients will sell their rental properties.  When we notify the tenants, I often am asked “Is there any sort of compensation/rent reduction while it’s for sale?  We have been through this before, and the rent was reduced while on the market.”

The best way to handle tenants expectations while the property is on the market is to: 
a) have a good rapport with your tenants from the beginning 
b) keep them informed during the process – uncertainty is the biggest issue for most people
c) have a great real estate agent who understands how to work with tenants regarding both parties rights and responsibilities 
d) do what you can to have a short marketing campaign 
e) say thank you sincerely.  A card and small gift (wine or chocolate, but not a whole shop full) is often sufficient.  Don’t give cleaning products – it’s not saying anything good.

As for decreasing the rent, my automatic answer is ‘No’.  Why?  There are many reasons.
1. Investment properties value is connected to the rent received.  If the rent being collected is not the same as stated, it could jeopardize the sale, or the price.
2. It is an inherent risk for tenants that properties they live in are sold.  If they want to control that process they should consider carefully if they want to be tenants.
3. If tenants are on fixed term tenancies, there is little risk their tenancy should end when the sale goes through.  As a buyer I’d look less favorably on tenants who want a rent reduction at every opportunity, and would be less likely to renew their lease.  
4. Periodic tenancies have the ultimate power when the property goes on the market.  If they don’t like the open homes, they can move with only 21 days notice to the landlord.  That’s good motivation for landlords to keep tenants sweet, but there is nothing to prevent them moving even if the rent is slashed to nothing – tenants can’t contract out of their rights to 21 days notice, no matter what landlords offer in return.
5. The tenants are not doing you a favor by having the property clean and tidy for the open homes.  That’s a basic requirement of tenants in the Residential Tenancies Act.
6. Tenants are not doing you a favor by allowing open homes or viewings by appointment. Again, they are required to give reasonable access by the RTA.
7. Tenants don’t need to be there, or need to go out, while the property is being shown to prospective purchasers.  They can carry out their normal activities while purchasers are looking around, so no disruption is necessary.  This has led to some awkward and funny situations, but there is only their own modesty to stop them.
8. Some tenants express concern about their stuff being stolen when prospective purchasers view the property.  I don’t know of any property or real estate agent that has actually had this happen.  Reducing the rent won’t cover this anyway.
9. If landlords are realistic about the price they would like to see, and choose a good real estate agent to get that, the property won’t be on the market long if the tenants are meeting their obligations.  The less time on the market, the less disruption to the tenants.
10. If your tenant is adamant they won’t cooperate unless they are compensated, why would you give in?  Never negotiate with terrorists, it just breeds more.  There are ways to deal with this, ask us if you need to know more.

Just because others are doing something doesn’t mean you should.  Any tenant (or Adjudicator) telling you ‘most landlords reduce the rent’ is trying to get you to bend to peer pressure, when is that a good thing?  Instead gently ask what the issues were they experienced last time, and let them know what you intend to do to prevent or minimize those issues.  If more landlords automatically drop the rent whenever they want to do something, the harder it is for all others in our industry to enforce rights enshrined in law.  So, think of your peers and don’t agree to drop the rent.

Some property managers react to properties going on the market as a slight, and a threat to their income.  They hinder the process by not providing the information required in a timely manner, or just refuse to help.  If this has been your experience, deal with people who realize you will adjust your portfolio from time to time and want you to be financially successful.  Those are the property managers who know you and all your friends will be coming back, because they help you make more money and make it with pleasure.

Slimy pile or rich resource?

How do tenants dispose of lawn clippings?  Does your property have the classic pile of grass and weeds, and probably rubbish mixed in, in the corner of the section, up against the fence?  If the answer is yes, guess what?  Your fence is going to rot, and you will get more rubbish, more slimy grass, and more pests at your property as they burrow and breed in the slimy heap.

What can landlords do about it?  Well, we can ask tenants, tell tenants, show tenants, but we can’t force them to do the right thing.  I find it is often better to make it so easy to do the right thing, the wrong thing is too hard to bother with.  

Grass clippings and garden waste are a valuable resource and a good source of fertility for your soil.  If like me you’d rather not spend money on fertilizer and removing waste, but rather efficiently combine the two, try this.  

At your property build a compost bin (open at the bottom so earthworms can munch on the goodies within) or a raised garden bed of at least 1 cubic meter of capacity.  If there is a lot of lawn to mow, and so a lot of clippings, make the boxes bigger.  Locate them near trees you want to feed and make healthy (e.g. fruit trees), and encourage tenants to put clippings and veggie scraps there.  Your trees will thrive and you’ll no longer suffer the slimy pile by the fence.

For advanced compost management, tenants can add coffee grounds, small twigs, leaves, poop from their pet rabbit or guinea pig, cardboard and paper, and ash and lime.  I find most people have no idea about gardening though, so if they don't have a natural inclination and curiosity in this area, don't encourage creative composting. It will just become a rubbish pile, exactly what you were hoping to avoid in the first place.  Stick to the lawn clippings, and they shouldn't go too far wrong.

WINTER is coming

It’s a good time to update insulation, heating, and thermal drapes to keep your properties snug and tenants healthy.  While some landlords may not see the benefit of insulation in properties they don’t live in, they do see the benefit of rent being paid.  Insulation is an investment by the landlord to receive regular rent payments.  Cold tenants become sick tenants.  Sick tenants need time off work.  They run out of sick leave, then holiday pay, and start taking unpaid leave, which soon means missed rent.  Their irregular attendance means employers overlook them for promotions, which compromises the landlords ability to put rent up and get it paid.

You don’t need to be entirely self-serving as a landlord to insulate your properties, you can also do it out of respect for your fellow human beings, caring for the environment, and lowering demand on our power generation infrastructure.  
From 1 July, new tenancies need to specify the amount of insulation in the property, which is yet another reason to insulate.  Over time, this will influence the vacancies your property experiences, as tenants choose properties on their thermal performance, which has a direct result on your investment return.

Whatever your motivation, it’s time to insulate.  If you want assistance with this or any other matters relating to managing your properties, come see us at Rental Results.   Phone for an appointment 04 4711880.

PS. Forgive the Game of Thrones reference, it's Monday night, and I'm off home shortly to watch the latest installment and think how fortunate we are it is all make-believe. Tempting though it is to deliver 'the Kings Justice' on deserving people from time to time, imagine the cleaning bill for the carpets.

Ten tips on how to pick great tenants

Oh if we investors could choose tenants perfectly every time, how easy it would be to be an investor!

First you need to attract the right tenants to your property.  See our post on advertising for a few key pointers on this.  If you find everyone who inquires is on your 'no way, no how, not ever' list, then you either need to change the property ad, change the price (upwards is my recommendation), or change your property.  For the purpose of this post, I'm going to assume there are at least a few decent seeming sorts who are keen to take it.

There are the things that are desirable and should be sought, and things that are undesirable and should be avoided.  This list covers typical areas where people make tenant selection mistakes, in no particular order of priority.

1. Steady means to pay the rent.  I don't care if this is a trust fund or a job or running a business or a benefit.  What I do care is that it is approximately three times the amount of the weekly rent.  Any lower ratio that this and tenants are likely to get into rent arrears when unexpected expenses pop up, like needing work done on their car.  Much higher than this and you've got to wonder why they want somewhere so cheap for them.  Ask.

2. Stable household structure.  This means couples that have been together a while (rather than first time playing house), friends who have known each other for years (as opposed to 'flatmate wanted ad' friends), established families, or a single person who intends to stay that way.  Nothing means another vacancy sooner than a household relationship that implodes.

3. Longevity at their previous properties.  If they stay a long time at each place they've lived at before yours it suggests stability in all aspects of their lives.  Be cautious if that stable address was with Housing New Zealand however, as market rent and household budgeting might not have been a feature of their tenancy.  Avoid people who flit around from property to property.  This is only OK for people who are new migrants and had temporary accommodation provided by their employer before moving into a permanent place.

4. References from former landlords.  If they don't have these, really consider if you want to take them.  The exception is for first time renters who have parents willing to guarantee them, homeowners who are now renting, or new migrants.  Everyone decent will have someone who is willing to vouch for them.  Always.   If they don't, and don't have a verifiable good reason, don't take them or you'll be another name they avoid giving to other landlords.

5. The right number of people, pets, and vehicles for the property.  If your property only has one car park, and five vehicle-mad men apply to live there together, it's probably not going to work for the neighbours or your lawn.  Don't allow tenants to pack in extra people to save them money, it's not their budget that should concern you.  If they want more people than you do, don't take them, or negotiate the rent upwards accordingly as you will have a lot more wear and tear.  If you don't want pets, you don't have to take them.  If your property isn't suitably fenced for dogs, don't accept they will have them tied up, it's not good for the dog or your garden.

6. Non smokers.  Yep, sorry smokers, yet another way you are discriminated against.  Lets face it, your peers who think smoking outside is leaning out a window have let you down.  I've also had applicants who were moving because their house burnt down.  What started the fire?  A cigarette butt flicked into the garden.  Nope, we didn't choose them to be our tenants, alarm bells were ringing, and I don't just mean the fire alarm.  The exception to the non-smokers only rule is if the smoker has young children and a non-smoking spouse.  They really will smoke outside for the sake of their family, almost guaranteed.

7 People who have the whole household show up to view the property.  Parents who bring their kids, couples who both attend, and all flatmates who come to view are all much better bets than those who elect a representative to make the choice.  With parents you get to see how effective their parenting is and therefore how much damage you might be facing from rampant children (I sawa kid break three things before his oblivious mother finally got the increasingly strong hints to leave!).  For couples you don't need to worry if the partner is a gang member, or highly strung.  For flatmates, you don't need to worry about disagreements about who gets what room leading to disagreements on who cleans the loo and puts rubbish out, or worse.  Check the vibe in the household.  If they seem to hang well together, you are probably onto a good thing.

8. People who remove their shoes and don't park in the driveway when they come to see the property, and look you in the eye when they say hello.  Respect for you and your property here speaks volumes about how they will treat it going forward.  You don't actually need to hear them say 'be gentle, it's a rental' if you see them acting that way.

9. People you get a good vibe from.  Trust your gut.  Weirdo's should be apparent.  Don't accept tenants who make you think 'what the??' when you meet them.  Be careful not to discriminate unfairly though.  I once met a gentleman with a full face moko at a busy property showing.  On speaking to him I discovered he was a man of high mana in a respected position in the community, and doing great work.  I could have easily dismissed him as a gang member.  My gut said 'yes' so he got the property and was an exceptional tenant.

10. No sob stories.  You are not a charity.  Don't make someone else's problem your own.  Yep, people sometimes have bad luck, but mostly people create their own luck with how they react to what life throws at them.  Are they a survivor or a victim?  People can change their luck, but you won't be able to change it for them no matter how hard you try.  Don't give your property to someone you feel sorry for.  Talking with someone in the Tenancy Tribunal scheduling team I discovered just how often they see situations go to Tribunal where a landlord gave the property to someone they wanted to help, and it went badly.  I have to wonder how many more the Tribunal didn't see because the landlord kept their charitable blinkers firmly in place and lost out to a bad tenant who, unsurprisingly, suffered more 'bad luck'.

And a bonus tip because I'm feeling generous:  People who have a good credit score and clean tenancy history tend to stay that way.  Be careful before you take someone who doesn't.  See point 10 above as to why.

These basics work very well for me and my team.  Perhaps you think we are being too harsh?  Maybe, but we have a duty of care to look after our clients properties well.  You also have a duty of care to your family, your bank, and yourself to choose great tenants.  If you want to be a long term landlord, be careful who you trust your very expensive asset to.  If you had a Ferrari, who would you give the keys to?  I'm guessing that list would be pretty short.  Your investment property is worth about the same, so why would you risk it?  Don't worry about those you reject.  I hope in time they will get the hint they need to change how they behave to get what they want, and that will be better for landlords and tenants everywhere.

Perhaps you are wondering how to get all that information?  Yep, you could seem like a creepy landlord if you try to interrogate the information out of tenants.  Become a master of non-judgmental 'tell me more' statements.  Being a Chatty Cathy works wonders to get people opening up and telling you their life story.  Listen closely and you might just find yourself the best tenant you've ever had.  Lets hope they feel the same about you!

How to advertise properties for rent

You've all seen them, the ad reads:

 "3Br, close to shops and kindy, open fire. Avail now, suit QUIET professionals. No pets or smokers. Bond 4 weeks, plus 2 weeks rent to be paid in advance."

What exactly is in this for the tenant?  It's a good property from which they can set up a sniper position to pick off preschoolers? (Read it again, hear the command).  Tenants who shout 'Quiet!' frequently would be great?  I once saw an ad that mentioned it was close to the bottle shop.  Were they seeking alcoholics in particular?  I can only wonder why.

Obviously there is a bit of an art to writing good ad copy.  There's also an art to taking great photos, but that a topic for another post.

Put yourself in your ideal tenants shoes.  Don't know what your ideal tenant looks like, or what their footwear preference is?  If that's the case, and you are genuinely stumped, we can help with that.  We love the challenge of making your property appeal to great tenants.

Who are great tenants?  Ones who pay the rent when it is due, don't damage the property in any way, keep it clean and tidy, especially when they leave, and don't annoy the neighbours or yourself.  Sounds fairly achievable really, anyone should be able to do that.  Sadly, they don't.  There are also nuances of great, and good copy gets the really outstanding ones excited to see your property.

How do we get to them?  We sell the property to them with love.  We seduce them with the aspects of the property that will give them the life they always dreamed of.  We appeal to their imagination and their intellect.  We flatter them.  We nurture their desire to be special.  We tap into their desire.

Exactly how do we do that?  Your property is more than the bricks and mortar that makes it.  It is the location, the aspect, the way it relates to its section and the neighbours.  It is the people around it.  It is how they get to work and play.  It is what makes your property fit in, and stand out.  It is the value as opposed to cost.  We tap into that and talk about more than the number of bedrooms the house has, because all properties have something to offer the occupant.

What we don't do is turn people off.  It doesn't mean lie or obscure bad aspects, but instead find the upside.  It has a lot of stairs?   "Save gym fees, get a great workout each time you walk to your front door".  Its got a tiny outdoor space? "Easy care courtyard makes weekends all pleasure, not work mowing"... you get the idea.  It's standard 'real estate speak', and it works.

Don't punish new tenants for the crimes of old ones.  Leave out the bits that clearly show you had a bad experience ("clean and tidy tenants wanted"), instead be the landlord you want to be, the one who has a great professional relationship with your tenants.  Make it clear your ideal tenant is the one that the property best suits.  This makes tenants put their best foot forward, and they'll be oohing and ahhing at your showings to show you they love it, and you'll love them.

I notice some landlords don't seem to love their properties.  While you should never buy an investment based on emotion, you should be excited about some aspect of it, even if that is the return it brings you.  If you truly can't find something about the property that could excite you or anyone else, have someone else have a crack at it.  We have a rule in our office.  If you don't love the property, you don't write the advert for it.  How you feel about a property will show in your writing, so we make sure we manage properties we have a reason to love.  And not surprisingly, we get lots of great tenants wanting to see the properties we advertise.

Things you shouldn't say in the advert include matters of bond and rent as they can be worked out when tenants see the property.  If you are adamant on no pets, then sure, have that in there.  Likewise you can discriminate about smokers.  Any other choices you make to thin out prospective tenants needs to pass the 'Human Rights Act'.  So, you can't say 'no children', or 'married couples preferred', or 'Christians ideal' or 'no Australians'.  Trust me, I've had thousands of tenants.  Good tenants, and bad, exist in every way age shape and form, so forget your biases.  You can't even say 'professionals' because that implies blue collar workers are not going to get a look in.  What you mean is 'someone who won't go into rent arrears', and again, that doesn't need to be said as it is an expectation of every landlord.  If you really don't want children in your property (and I honestly can't understand why not, there are good ones) then only buy one bedroom places and limit the number of occupants to one person only.  You can't reasonably limit the number of occupants in a three bedroom place to just one or two, so don't try.

We love using video to promote our properties, and we use it whenever we can to really get someone 'in the moment' of being there.  Again, there is an art to doing this well, which there isn't room to go into in this post.  Video really solves the problem viewers have of 'how does this photo relate to the others?' and you'll get committed prospects turning up to see it.

Make sure you have clear contact details so people can see the property and apply.  I've seen plenty of ads where the only way to contact the landlord was via email, which could be too slow for tenants looking at many properties at once.  What's wrong with taking some calls? A very successful landlord friend of mine has it down to an art and in under a minute can give prospective tenants all the key points they need to know.  We use a cool booking system to get tenants to property showings, it works really well to reduce no-shows and saves us buckets of time.

If you want to see examples of our great ads in action, please view our Trademe listings here.  If this doesn't bring up any properties, it's because they've already been snapped up by eager and awesome tenants.  Contact us to have the same happen for you.