Being a Private Landlord is a popular choice these days and with so many horror stories of bad Property Managers it is no wonder that so many decide that it is safer to handle matters themselves.
Unfortunately though, the reality is that too many Private Landlords find themselves in compromising situations due to lack of knowledge of the RTA and lack of experience when dealing with Tenants and the Tenancy Tribunal. Sadly the cost of this inexperience can often be more than if a good Property Manager had of been in control of the situation and let’s not even get into the stress levels!!!
We (Pedersens Property Management) took on a property recently where the Landlord was left with several weeks of rent arrears, but because he had failed to serve the correct termination notice, he risked losing much more than a few weeks rent if he had of pursued this debt through the Courts. Even sadder still, because the Tenants were more than 3 weeks in arrears prior to him issuing the 42 day notice, he would have been well within his rights to apply to the Tenancy Tribunal to have the Tenancy ended and would have received a full money order for the outstanding debt. His lack of knowledge of how the system worked essentially cost him in excess 3 weeks rent.
If I were to take my accumulative experience and offer Private Landlords my top 10 Quick tips based off what I’ve learnt over the year, they would be as follows:
1. Credit Checks
Never ever rent to a Tenant without first doing a credit check – this is THE golden rule
Always inspect your property every 3 to 4 months, not only does it give you the chance to address any concerns you may have about the Tenancy, it’s also a great way to stay on top of any maintenance that is required and also an opportunity to build rapport with your Tenant and let them know what’s expected of them.
3. Rent Increases
Review and increase the rent at least once every 12 months, even if it is just $5pw. We do the bulk of our rent reviews in late January / early February when the rental market demand is at its highest.
4. Entry Inspections
Photograph or video the property before the start of every new Tenancy. It may seem like a hassle that you just don’t have time for, but trust me when at the end of the Tenancy a dispute arises between you and the Tenant about damages, you’ll be thankful that you took the time to do this.
5. Marketing Photos
Great photos of the property can be the difference between your property renting quickly or your property not renting at all. If you don’t have good photos then people won’t bother coming to have a look. Turn on the lights in each room, turn the flash on of your camera and take your photo at a lower angle (e.g. bend down when taking the photos)– you’ll be amazed at the difference it makes! Also no one needs to see a photo of the toilet.
6. Fixed Terms
Use fixed terms to your advantage to ensure that your tenancies don’t end in December and January when properties are extremely hard to rent. All of our fixed terms come off in late January / early February when demand for rentals is at its highest.
It may sound simple, but you’d be amazed at actually how complicated good communication can be. The ability to communicate effectively can be the difference between having a long and exhausting battle with a Tenant which ultimately ends up at the Tenancy Tribunal or resolving the matter quickly and amicably and moving on with life. Communicating well means being firm and knowing your rights, but at the same time empathising with the other person’s situation.
8. Friends do Tenants Not Make
As much as you may like your Tenant, do not cross the line and make them a friend. When the rent hasn’t been paid you’ll need to issue a 14 day notice immediately and cannot afford to allow any lenience because you feel friendly towards this particular Tenant. Fast forward 4 weeks and your ‘friend’ has still not paid you a cent of rent, while you may sympathise with their current circumstances you are not unfortunately running a charity. It is much easier to manage a Tenancy when you keep things professional. Have a process for handling things like rent arrears and then stick to it no matter who the Tenant is.
It can be a minefield navigating your way through the Residential Tenancies Act and interpreting what it means in layman’s terms. Be warned though, you must understand yours and the Tenants rights, failure to do so may see you end up in the Tribunal Court and wearing a fine. The DBH website is a great resource for educating yourself about the do’s and don’ts of Tenancy.
10. It’s all about the bottom line
It’s as simple as this, you are running a business and you need to make sure that the return on investment is giving you what you originally set out for.
Pedersens Property Management manages properties across North, Central and East Auckland and has recently been nominated for the LPMNZ 2014 Property Manager of the Year Award and the Best Property Management Award. On we maintain an average arrears rate of less than 1% and less than 0.5% of our Tenancies end up in the Tenancy Tribunal Court. We are committed to helping Landlords get the best out of their rental properties.
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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