Every landlord should have zero tolerance policy for the consumption of drugs at rental properties. Your tenancy agreement should include a clause that any unlawful activities are a breach of the tenancy agreement. Comprehensive systems and processes should also be followed to ensure tenants abide by these policies especially at the tenant selection process and during regular inspection cycles.
Many property owners are unaware of the risk of drugs in rental properties. The risk is not only to the tenant’s health and the safety of neighbours, but there is also the risk your property may be contaminated. We know that Methamphetamine (commonly called ‘Meth’ or ‘P’) use in New Zealand is widely acknowledged and it has been used and manufactured in New Zealand for over 15 years. Between 2000 and 2012, over 1900 Meth labs were busted by police and 75% of these were discovered in residential properties. What we don’t know is the affect that this manufacture and use has had on contaminating the actual property. Landlords need to police the use of drugs in order to protect future tenants and neighbours, as well as their asset. It is a general belief that most labs are found in owner managed properties and this is most likely a result of a less regular inspection programme and less rigorous tenant selection on the part of some landlords. Some tenants indeed “bully” private landlords and/or refuse to cooperate with regular inspections. If that happens to you it is a definite red flag that you may have a problem.
If you become aware that your tenant is using drugs in your property then you need to take steps to protect both yourself and your property. Safety is paramount so if you arrange an inspection make sure you take some support in the form of a friend or advocate. Always make sure that the tenant is aware of the inspection and the appropriate notice has been given as this will help ensure there are no surprises and help ensure your safety. If a tenant is clearly under the influence of drugs and this is reflected in their behaviour and causing aggressive communication, then it may be prudent to leave and come back another time. Try not to antagonise tenants and make situations worse as usually this achieves nothing and can make a situation worse.
You have various options once you have discovered drugs are being used in your rental property. If the tenant has consumed Marijuana then it may be a simple case of letting the tenant know that this is an illegal activity and they have breached the law and their tenancy agreement. An understanding can usually be agreed upon that the tenant will not consume the drug at the property again and if they continue to do so, you will terminate the tenancy and notify the police.
However, other more serious drugs often need a more serious approach. Class A drugs such as LSD, Cocaine and Methemphetamine are a lot more serious and landlords need to be aware of these. Again safety always comes first so take steps to ensure your safety and leave the property immediately. As professional property managers we are obligated to inform the police if we come across serious drugs like this and we recommend owners do the same. Firstly you should concentrate on terminating the tenancy and then when the property is vacant you may need to have the property tested to see if it has been contaminated. If it has been contaminated then you will be required to decontaminate prior to re-letting.
Landlords will often ask “how do I know if drugs are being consumed?” There are many signs and the benefit of having a professional property manager is that we are trained to look for these. Private landlords need to learn to look for signs and there are ways to stay informed. Firstly, know your neighbours and maintain a positive relationship. They are often the best way to keep track of your tenants and can tell you if there has been unusual activity at unusual times. Talk to the tradesmen who visit your property and ask for their feedback. During regular inspections check for unusual installations at the property such as security cameras, alarms, additional water pipes or ventilation and fans installed in strange places without your consent. Also look for unusual rubbish, packaging, bi-products and tools used for consumption. If you are not inspecting your property regularly you should be! You can also have devices installed in properties to monitor and warn you if Meth is being manufactured in your property and MethSolutions is a great example of this.
Terminating tenancies due to drugs takes time and applications should generally be made to the Tenancy Tribunal and can be a long, difficult process. If you are aware of a conviction for using drugs at your home you should request a copy of the police report under the Official Information Act as you can use this for evidence at court. Sometimes it may be prudent to negotiate with the tenant to avoid a hearing. For example, the tenant agrees to give notice and move out. Another alternative is to issue the tenant with 90 days’ notice to terminate the tenancy. If you choose this option don’t relate the notice to a specific issue (such as the drugs) as you can’t issue notice as retaliation. If they ask why you issued notice the answer is always because you required possession.
Allen Realty are award winning specialist Auckland property managers, and as part of our commitment to our clients, we have undertaken training with MethSolutions Ltd. We now have four Auckland property managers who are trained and certified Meth Samplers who are able to use a specialist Meth DNA Indicative Sampling Kit to test samples. If a test indicates a positive result then your property manager will assist by utilising professionals to undertake further testing and decontamination. Fortunately we have never had a Meth lab in a property we manage and we believe that our robust systems and processes have assisted to protect our clients from this.
Many landlords may have a casual approach and feel recreational drugs are consumed by many New Zealanders without incident. But remember that some drugs are gateway drugs and even if they are not causing you problems now they may lead to bigger problems later down the track. This may include moving to more serious drugs, tenants being unable to pay rents or associating with other sinister crowds. If you have concerns about drugs being used in your property don’t delay and act today!
How to Choose and Purchase a Suitable Property to Subdivide
With the demand for housing in Auckland at peak levels and even smaller-scale properties showing substantial profit margins when sold, subdividing a lot into two or more sections has huge earning potential. Those with the means and capabilities to purchase land for the purpose of subdividing are almost certain to see a large return-on-investment, that is of course, as long as it is done correctly.
Choosing a property to subdivide while exploring real estate options requires the assessment of a multitude of factors. Whether or not a property is capable of being subdivided will depend on its size, its location and the physical layout of the property. It’s not always as easy as choosing the biggest section out there and splitting it down the centre.
Considerations are not just restricted to feasibility either. Property investors taking this route should always keep profitability at front of mind. The effort put into the property needs to be reflected in resale value. At times, just because you can subdivide, doesn’t mean you should.
Factors to Consider When Looking to Purchase a Property with the Potential to be Subdivided
The Size of the Property
When it comes to subdividing, size definitely does matter. Generally, the larger the section the better the earning potential will be. On the other hand, it’s important to keep in mind that section size will also affect overheads. Larger sections typically incur higher costs while performing due diligence.
Level land is important, it will be easier to build on and will be more appealing when it’s back on the market. If a potential section is uneven or has landscape issues, it can make property development more difficult. Choosing a property that is already level will allow a smoother process.
Steps should also be taken to assess how easy it will be for multiple households to live on the lot. Consider issues like driveway creation, road and utility access, and street frontage. These factors will affect council consent and appeal once you’ve placed your subdivided property on the market.
The Zoning Rules of the Area
How the area the property is located in is zoned will restrict the type of housing you are able to create and can even cancel out any plans to subdivide. Before purchasing a property, it is crucial to research council zoning restrictions and consider how they will dictate your subdivision plans. Choosing to work with a subdivision consultant will help you navigate this process if you aren’t sure about taking it on yourself.
Subdividing is one of the most profitable actions a property owner can take. The ability to sell two lots from the purchase of one can exponentially boost your earnings from your investment. Council restrictions and market appeal will have an impact on how your subdivision journey will play out. However, with these considerations taken into account while you search, it is entirely possible to choose a property that will offer worthwhile returns.
Another date NZ property investors are dreading
How scary is the new ring-fencing legislation?
Well, just ask any property investor, most of whom are ma and pa investors with less than three rental properties and they’ll tell you it’s outright frightening.
They are the investors, most likely to be among the 116,000 already declaring a loss on their properties and times look set to get tougher for them where selling up may be the only way out.
Ma & Pa Investors Are Not Greedy Landlords
Ma and Pa investors are not your ‘greedy landlords’ with huge portfolios. They’re middle aged workers (GenX, Baby Boomers) and retirees, motivated by the need to provide their own financial security in retirement.
For years the message from those in the know has been: we’re living longer and the Government pension will not be enough to live on.
Taking matters into their own hands, ma and pa investors have heeded this advice and parked some savings in one or two rental properties. However times have been tough in recent years and the not so greedy landlords have seen any profits they had eroded.
Weekly rental increases have been modest for months. Some may balk at this but yes, the evidence is on the Trade Me Rental Price Index and on this blog too.
Property investors have been sideswiped with increases in running costs, which they have had no choice but to absorb initially, before passing them on in the form of incremental rent increases and now there’s another law to halt that with only one increase permitted every 12 months!
See this news item on Stuff, 116,000 rental property owners declared a loss for the year ending March 2017, and it was during the lead up to, and including, this financial year, that legislation changes really started to bite and property expenses started to far exceeded income.
On blogs, property accounting and finance professionals like GRA have provided their interpretation and opinion on legislation changes and forums like our PropertyTalk give a voice to investors and their sentiment.
The ring fencing law will stress out many property investors further, and some to the point of no return. Yes, landlords will sell, so more properties will come onto the market and many first home buyers will happily snap them up. For those amongst us that are politically motivative, they’ll only see the upside.
However there’s a downside too, that’s not been mentioned much.
Rentals typically house more people that first home buyer (FHB) homes. So for every rental property subsequently bought by a FHB, two people are left without somewhere to live.
Housing has been a hot political potato for so long it’s been one step forward and two steps back irrespective of which party or parties are in power and so there’s no end in sight to this housing crisis madness.
Not Just Local
Targeting the rental property owner has been popular not just locally, it’s been a justifiable fear for landlords in the UK, America, and Australia. Check out the links below.
So is there a country getting housing right? Let us know your opinion in the comments below or in a blog post on PropertyTalk or of course in our discussion forums.
Would You Be a Landlord in 2018?
Investing in residential property has well and truly lost it’s shine in 2018, especially in the state of Victoria and New Zealand.
In the UK, Landlords are more philosophical about changes to tenancy laws.
A recent survey suggested around half are actually positive about Land-lording even with the obvious challenges ahead namely Brexit and the political climate.
As aforementioned, can not be said down-under where landlords feel they’re wrongly in the line of sight of politicians for political gain and thus the law changes are not balanced and swing too far in tenants favour.
So the question is would you be a new Landlord in 2018?
Hindsight is a wonderful thing as the saying goes, and many property investors who have been in the property investment industry for some time still love it and already do well by the tenants which really is just commonsense.
However going in now with your eyes wide open and in the knowledge of the recent law changes, increases in everything from insurances to rates and the talk of tougher times ahead – is property investing a good move? For long term investment – why not?
Speculative property investing (though it’s hardly investing) has always been cyclical and when it’s grouped under ‘property investing’ it gives long term buy and hold Landlords a bad name.
Speculators will come and go as the property market moves through it’s cycle and their activity is considered a business and incurs Capital Gains Tax.
Long term buy and hold investors know it’s always been about the numbers and making sure they add up and there is some fat left in for the unexpected expenses.
However the constant politicising and changing of the rules to suit political agendas is disruptive and it’s hard not to think there’s a conspiracy against Landlords and it’s not just in Victoria our New Zealand, it’s more far reaching and this must be putting off would be investors which will be problematic since private landlords supply most of the rental stock.
The UK Landlords must be made of tougher stuff though as 64 percent say they’ll carry on regardless, keeping their rental properties, focusing on the potential of long term profit. The idiom “soldier on” holds firm on the land of the white cliffs of Dover.
Back down under the confidence is not so high among the local property investors. It’s one thing after another and there’s been a lot of change thrown at Landlords in recent months.
The bright line test, LVR rules, and more recently revision of the bright line test to five years and legislation around the quality of the properties.
Insulation, heating, moisture extraction, you name it New Zealand rental properties are getting a hammering from Government. But none more threatening than what might come from the Tax Working Group headed by Sir Michael Cullen.
There’s a lot on the table aimed at raising the tax grab, including Capital Gains Tax and more recently talk of a Property Value Income Tax. If you screwing up your eyes at this one, you’re not alone.
It’s creative for sure, and if implemented, it’s likely to be the tipping point for Landlords unsure if they’ll ‘soldier on’ or sell up and run for the hills.
What’s most perplexing Landlords, is why the sole focus on them and not a balanced effort to improve both the conditions of the suppliers of rental properties i.e. the landlords and it’s inhabitants, the tenants.
Surely the relationship is symbiotic and thus both are needed, now that ever before with homelessness increasing and home affordability out of reach for first home buyers everywhere you look.
Here are some great discussions on various topics affecting the viability of landlording today in New Zealand.
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