Often the winter period is the quieter time of the year for the rental property market (as less people are moving at this time) so just prior to winter all landlords should be prepared in advance to take steps to ensure their property is ready to market to new tenants. Winter is when competition is the highest for tenants so there are specific issues to consider when for planning for this period. Property owners need to be on their game to ensure that their properties stand out from the crowd and will appeal to prospective tenants.

Generally your property manager sends you periodic inspection reports on the condition of the property and any issues to be addressed either now or at some stage down the line. The reason for this is that landlords hate surprises and your property manager’s communication gives you the time and resources to plan for any maintenance and improvements in advance. As a property owner you should begin planning for these issues prior to tenants giving notice and properties becoming vacant. This means taking steps to collect quotes, organize work where necessary and budget for the work in advance. Landlords who wait until properties become vacant are those likely to experience far greater vacancies between tenancies as the process grinds to a halt as they wait for quotes and tradesman.

All properties generally rent quicker in the summer months. This is due to many reasons including a higher demand for property in general. There is also the fact that almost all properties look better in the summer months when the sun is shining, the smell of the cut green grass is appealing and most properties show little sign of moisture or dampness. Winter months require addressing specific issues which I have noted below that may not matter so much in the summer. These important issues should be addressed when tenants give notice (not when they have vacated, but in the last weeks of their tenancy). Remember that all properties are generally marketed while tenants are still in occupation so often you can’t afford to wait until the property is vacant. It is also important to understand that tenants are only required to present a property to a “reasonable standard” so they will never address exterior issues 100% and owners need to be prepared to address the rest.

Trees, Gardens & Hedges: As all prospective tenants usually do a drive by from the outside of a property prior to viewing the inside so these issues require special attention. All trees/hedges should be trimmed back as much as possible which will improve sunlight on the property and though windows (less dampness) and stop leaves gathering around the yard. Gardens should be given a mini spring clean just prior to tenants vacating. Usually outgoing tenants will only maintain a garden to 75% so owners may need to complete this to maximize presentation. Lawns & edges should be attended to. By weed matting all gardens and clearing weeds not only do gardens look tidy but combined with the above issues, the entire property will appear to be LOW MAINTENANCE which is what all tenants look for.

Insulation: Winter brings this aspect of properties to the front of prospective tenant’s minds. Often some tenants will not rent in summer as they want to see a property in the winter first. These days insulation requirements are a lot stricter so many older properties may have poor or sub standard insulation. When prospective tenants are inspecting properties they will be looking at walls, ceilings, nets, curtains and windows for evidence of mould and moisture. The increase in recent media reports about poor insulation and education on heath risks, have driven tenants concerns. It goes without saying that generally the better insulated properties, will be the ones that rent the first in winter. Chattels such as heat pumps, HRV ventilation units and bathroom fans, will also assist in reducing moisture, and making properties more appealing. Subsidies are now available from the government for landlords insulating rental properties, and if you have a current tenant who is a beneficiary then extra subsidies apply. Better insulation and less moisture is also an investment in your chattels, such as curtains and nets which will last longer in a better insulated property. If surfaces show signs of moisture then they should be painted.

Lighting & Security: Often tenants who are viewing properties after hours in winter, will visit a property in the dark. This is when lighting and security becomes important. All properties should have security sensor lights/bulbs installed which pop on as soon as the tenants walk down the driveway or path. This gives tenants a sense of personal safety and security as soon as they step on to your property. Not only will they see what they have come to look at, but they know that if they lived there, they could feel secure. Alarms will also provide the tenants with additional piece of mind and help you compete with other properties.

Next time you receive an inspection report from your property manager identifying potential issues at your property, it may be worth getting the ball rolling ASAP. If you manage your own property then you should be inspecting quarterly or six monthly to assess the presentation and any issues yourselves. Start organizing quotes so you can budget for the work. Make a list of all issues in advance so if tenants give notice you can begin without delay. Any professional property manager will tell you that their role is a combination of systematic processes we follow each day or week to ensure that the property or portfolio performs well. We are not only managing as of today but planning for the future. In this day and age it is not possible to be re-active and only get involved when a tenant moves out or doesn’t pay the rent. The performance of the property is a direct result of how proactive the landlord is so you need to be prepared and plan for the future. A landlord with a plan is definitely the man/woman!

“It might not be the house that you want to live in long-term, but you could buy a $350,000 house in Te Atatu, Glenfield, Panmure or Pukekohe,” he said. “People should spend less money on coffee and brand new cars and overseas trips.

“It’s up to them to save more. This is a culture of ‘I want it now, I want everything and I deserve it’.”

Yesterday, the Government floated the idea of property developers being forced to build low-cost homes in new estates to ease Auckland’s housing shortage. Housing Minister Chris Carter after two new reports revealed that New Zealand’s most populous region faces a severe housing shortage and must accommodate growing numbers of people who may rent all their lives.

A study on rental housing by Wellington consultants DTZ predicts falling home ownership, a big increase in the number of people renting – particularly young families and the elderly – and a growing demand for rental accommodation.

Even households making $70,000 a year are being locked out of home ownership, the report says. The city will need almost 55,000 new houses and flats in the next 10 years. But high development costs are strangling new-house building – a topic the second report examines.

The housing supply report by consultants Motu proposes speeding up resource consent approvals by financially punishing councils for delays. It also suggests abolishing the artificial city limit boundary, freeing new tracts of land for development.

Mr Carter said he had two solutions – a new law that is yet to win support from other politicians, and funding for shared-equity schemes, which he expects to be in next year’s Budget. The minister wants to force developers to build a proportion of cheap houses in large new Auckland estates. He said the move had succeeded in Australia.

“We would consider a home affordability bill to direct developers to build a certain portion of affordable housing,” he said.
“I’m enthusiastic about this but I need to convince my colleagues.”

He also favoured shared-equity schemes, in which the Government takes a stake in a house to reduce the cost for first-home buyers. The scheme had been introduced in Britain. Money for a pilot scheme should be made available in next year’s Budget, Mr Carter said, but numbers were yet to be decided. He promised to issue a report within six weeks outlining options, and said a new law could be passed next year. The reports sparked strong reactions from developers and landlord and tenant groups.

Patrick Fontein, an Auckland developer building a $400 million 500-house and apartment project at Orewa, was concerned about Mr Carter’s cheap housing proposals. Forcing developers to build low-cost houses in new estates was no solution to the affordability crisis, Mr Fontein said.

The move could lower the tone of new estates and force buyers of higher-priced houses to subsidise the cheaper housing. Mr Fontein said Mr Carter should work out ways to help people into existing homes rather than new housing, which was often out of reach for many first-home buyers.

Angela Maynard, co-ordinator for the Tenants Protection Association in Auckland, called for more quality rental accommodation and better security of tenure. Landlords should have to get warrants of fitness for their houses or flats before finding tenants, she said, to ensure minimum standards were set.

Landlords should also have to give reasons for eviction, which could be achieved by amending the Residential Tenancies Act. “At the moment, you can give a tenant 90 days’ notice without a reason,” she said. “We want landlords to give just cause for eviction.”

She said she was not surprised to find that people making up to $70,000 a year were faced with a lifetime of renting, but said the city’s property market was based purely on greed.

“Everyone in the equation is greedy and trying to get more and more,” Ms Maynard said.

The Salvation Army’s director of social policy, Major Campbell Roberts, called for swift Government action, saying very little had been done to alleviate Auckland’s crisis. The region’s state housing supply was under considerable stress, forcing many people into the private rental market where rents had risen in the last year, Major Roberts said.

He urged a wide-sweeping range of solutions, including more state housing and more care and professionalism from private landlords. “Mom and pop investors are not in the rental market primarily to provide accommodation,” he said. “They are there for investment and superannuation purposes, so if another type of investment comes along, they shift their money. They don’t care about the tenant.”

Hugh Pavletich, a Christchurch developer and investor and co-author of the Demographic housing affordability report, welcomed the Motu report in particular, saying its recommendations had stunned him because they were so radical.

The recommendations went much further than he had expected, he said, advocating freeing of Auckland land for housing – necessary to start solving the city’s housing crisis – and punishing councils for lengthy resource consent delays.

Not so. Here are a couple of examples:

1. A commercial warehouse that is literally a shell would result in one finding it hard to get sufficient increased depreciation out of that property. In this instance the Valuer should talk to the investor about the options and other benefits of the chattel valuation.
2. Property was purchased for approx $500,000 as an Investment Property. A chattel valuation for this property would not be worthwhile as the land was worth $495,000 and the “outhouse” was worth the remaining $5,000.

What you need to consider is the proportion of the land from the Registered Valuation as a percentage of the Market/ Capital value. This has a large bearing on as to if a chattel valuation is worthwhile.

What you are doing by having a chattel valuation is claiming the correct depreciation rate for that particular asset (as advised by the IRD). Let’s take carpet as an example. By breaking the carpet out as a separate identifiable item, placing a specific value on the carpet, you are able to claim depreciation at 33% (diminishing value) giving an estimated life span of 5 years. (The longer the estimated life span the lower the depreciation rate). If the carpet had not been identified as a separate item depreciation could have still been claimed but possibly at 4% (estimated lifespan of 50 years) with the rest of the house.

In effect what is happening is the depreciation reflects the approximate lifespan of the asset so that you can replace it when it wears out. The asset will depreciate to the same nominal value. In the case of carpet it is whether this happens over 5 years of 50 years.
The depreciation then reflects the expected lifespan of that particular specific item.

A chattel is not necessarily just an oven but can include pretty much everything from the letter box at the front gate, the concrete path to the front door, curtains, carpets, stoves, kitchen cabinets, bathroom fixtures, floor coverings, internal non-load bearing walls, TV aerial on the roof, the garden shed, to the back fence etc. (As per the IRD Tax guide).

Other benefits for a Chattels Valuation include:

1. A full breakdown of chattels, their values and the IRD depreciation rates.
2. Reduced risk of penalties. This means if you are ever audited by the IRD you have substantiated values by a specialised independent third party (See our comment in the January 2005 edition of KPI in the Experts Forum)
3. Easy disposal of assets. If you ever replace an item you have an accurate book value that can be written off (as opposed to your accountant taking a (conservative) guess as to its value). The new chattel is depreciated at its receipted costs.
4. Minimise depreciation recovery. The report can be utilised to assist in minimising depreciation claw back when you sell the property.
5. Increased cash flow by maximising the depreciation you are able to claim.