Life as a Landlord

[Glenn]

Thats a timely post Anita. I was also wondering what happens in the event of a tenant dying ?Out of graciousness does the landlord mostly opt out of pursuit of any arrears or lodge a claim with the guardian of the deceased or trust handling the financial affairs?

My goodness someone called my name and here I am.
The debt remains as being owed by the estate. We have often been paid out of an estate. However mostly one finds that the estate has no assets so you get nothing. Obviously it is not possible to enforce a debt from a dead person unless there are some assets up for grabs. This surely is the reason to be hard nosed with a tenant as mentioned by Anita. Thus said I have been punished by the family after having that sort of thing happen. Like they seriously damaged the property after mother died and I would not assign the tenancy to them, and of course I could not claim anything off anyone apart from the bond.
Oh yes the correct person to make the claim to is the executor of the estate. Sometimes the likes of Public Trust and sometimes the family lawyer.

[Wayne]

Like they seriously damaged the property after mother died and I would not assign the tenancy to them, and of course I could not claim anything off anyone apart from the bond.

Criminal damage?
Hard to prove I suppose.

[flyernzl]

As humans, every now and then we are reminded of our own mortality. On a recent Saturday morning I had this experience. The scene reminded me of one of those old black-and-white war movies where the grizzled, cigar-chomping Sergeant gets the platoon together and says “OK guys, I need a volunteer. Someone who is prepared to risk everything for the sake of our great cause, the nation, and the battalion. It’s a tough assignment, so tough I can’t order you to do it. But I know that one of you men will have the grit, the determination and the courage to volunteer for this assignment. I want that man to step forward, now”.

Everyone in the platoon takes a step back. Everyone except for some dozy rookie in the front row, half asleep, not really listening, who jerks awake when the Sergeant claps him on the shoulder and says “Well done lad. I’m proud of you. If it doesn’t work out we’ll give you a really good funeral”. Shocked, the rookie realises that, somehow, it’s too late to back out.

So that’s how last Saturday morning I came to be sitting at the end of the airfield runway in one of our aircraft, fresh from a wings-off major overhaul, and I was about to carry out the first post-rebuild test flight. What if someone had left their lunchbox in the works? What if they had forgotten to replace this bolt or that nut? What if . . .

Ah, well. I can only die once. Carry out the 1 – 2 – 3 check. One engine, two wings, three wheels. Are we all set? At least the mechanic in charge of the rebuild is in there alongside me. Away we go. Peter the Test Pilot, hardly in the same league as Chuck Yeager. Actually it didn’t go too badly. A few minor items that needed attention, nothing major. They could do those while I waited, then I could fly it back home.

While Mr Goodwrench dug into his toolbox and finished the adjustments, I got to thinking about some of the tools that have come in handy in my own work as a hands-on landlord. Every trade has over time developed the right tools for the job, tools that avoid barked knuckles and at least some of the swearwords. Tools that you probably don’t even realize you need until that awkward and frustrating job comes along.

Ever since leaving high school I have tried to avoid cold showers. Cleaning out the guttering, hosing down walls, spraying Wet-and-Forget on the roof always seem to involve connecting the garden hose to some distant outside tap cleverly concealed in the most inaccessible place and then lugging the spurting hose around the section and up and down ladders while trying to avoid soaking yourself. Finally I have found the answer, a plastic tap that clicks on to your end of the hose and lets you block the flow until you are in the right place and ready to work. So simple, and if you are using one of those mix-with-the hose-and spray-on chemicals then you minimise wastage as well.

Back in the day, a screw was a screw. A slot in the top meant you needed just two screwdrivers, a large and a small, and you were fully equipped. Then along came Mr Phillips. Following his example every inventor in the world took the hint and designed some sort of different way to make screws go around. Square recesses were followed by hexagonal, star, pozidriv, security hex, double-square, the oddly named pentalobular and heavens knows what else. You can now be absolutely sure that when you are 90% of the way through dismantling some plumbing fitting in your tenants house you will find that the last two screws that must be removed will inevitably require some obscurely patterned driver to remove them. However, help is at hand. You can now buy, remarkably cheaply, whole sets of screwdriver heads of every possible size and pattern that will fit into a ratchet driver and turn those little rascals. I have a set of 100, and have yet to be defeated.

One of the most difficult tasks I have come across is in the bathroom. No, not constipation but tightening the bathroom taps. Typically these are tucked away at the rear of sink units and in the corners of bathtubs. Somehow, tenants often seem to be able to loosen these taps so that when they turn the thing on the whole tap body moves loosely around on the vanity top. The retaining ring that holds the tap unit securely on to the vanity needs to be tightened to cure this fault. As this retaining ring is hidden in the dark under the unit, at the rear of the basin, unable to be seen and accessible only by feel, this job is up there with trying to split the atom with a hammer and chisel. However, I have found the answer, a special tool. This item is a steel rod with a ratchet claw on one end and a turning mechanism on the other. You stick it up behind the basin, lock it around the retaining ring by feel, and away you go. Problem solved. It’s not cheap and reminds me of a fearsome gynaecological instrument from the Victorian era, but by god it does the job.

My final tool for low-stress hands-on Landlording is a good book. Living in Auckland I am suitably punished by spending large amounts of time dawdling on the motorways, the on-ramps, and at traffic lights where few other drivers seem to realize that a green light means that they can actually move. For many of my fellow commuters, this means stress. However, not for me. As well as driving an automatic vehicle which can therefore easily maintain speeds as low as four or five kilometres per hour, I always carry a paperback. Sitting on the motorway, stationary in traffic, rather than fume I can knock off a few pages of the latest who-dunnit. Usually I get through the average 200 page book in about a fortnight. Auckland Transport, thanks for the reading time.

[mrsaneperson]

I know exactly where you're coming from. I had to buy one of those tubular hexagonal socket sets a few months ago to tackle a loose kitchen faucet fitting. You would think the manufacturers of the tapware would have come up with an easier solution to tighten & loosen the damn things.

[PTWhatAGreatForum]

Haha. You think the 100 piece set is the bee's knees until you find you need a precision sized non-standard driver. Never mind, I think I'm covered now!

[flyernzl]

According to the Otago University ivory tower academics, property people lead a charmed life. All we do is hand over fistfuls of borrowed cash to buy a house and then rent it out to some disadvantaged and oppressed family at a swinging above-market rate. We then immediately spend all the proceeds on jeroboams of champagne and the deposit for our next P&O cruise. Apart from issuing the occasional vindictive eviction notice just because we feel mean and nasty, we never set foot in the place again.

Of course, as battle-weary Landlords you and I know that this is purely the stuff of myth and fiction. Experience tells us that successfully running any rental property as a business requires constant input from somebody, if not from the owner then from a competent property manager. When this job is not done and done properly, disaster will result. Recently my aluminium window-and-door repair man has told me that he had been called to a rental property in Browns Bay. The tenant complained that the doors were sticking. The reason was apparently not hard to find, the house was falling down. The tenant had been there for 11 years, and the landlord had not carried out even one property inspection during all that time. Unattended minor problems had now developed into major ones that were going to cost the owner several hundred thousand dollars to rectify. Truly, there is no such thing as a passive property investment.

Early last Friday morning I received a text message from one of the tenants in my block of flats. A gang of undesirables had visited the complex during the wee small hours of the night and had broken windows both at her flat and at one of the others. While groping desperately for my morning coffee I rang the AMI emergency assist number. A recorded voice from the other end told me that there would be a wait for my call to be answered, and suggested that I could retain my place in the queue by leaving my own phone number and they would call me back as soon as possible. Thankfully, I did so. It would have been a dammed long wait. 72 hours later, AMI I’m still waiting for your return call.

Aware that the glazing people can get quite busy on Fridays, I tried again at business opening time and rang the insurance claims line. The lady who took my call seemed to become a bit miffed at my lack of detailed knowledge of the damage. “All I have is a text from the tenant”, I told her. “I don’t live there. I will go out to the property this morning, find out exactly what needs to be done, and then you call back. Right now I just want you to ask the glaziers to book a time for the repair this afternoon so that we don’t have to go right through the weekend with the windows still broken”. This, apparently, was impossible. She needed to know how many windows had been broken, their location and the size before she could actually do anything. And these are the people who constantly say they are customer-focussed.

Once I had battled through the choked Auckland traffic to the property I was able to assess the damage. Two windows broken in one flat, one in another. Some palings of the picket fence pulled off, these had apparently been used as weapons to create the damage. As ill luck would have it, one of the broken windows was directly above the main water supply pipe. Some of the glass shards had speared directly on to this pipe, piercing the plastic and creating a leak similar to the Mission Bay fountain but lacking the associated lighting effects. Finally able to give AMI the information I needed, I was then able to fill in the waiting time by fastening a temporary patch on to the pipe, reducing the flow back to a slow drip. The plumber can affect a more permanent repair next time he comes around.

There appears to be no real reason for the attack, just mindless vandalism. When in contact, at last, with the glass company they assured me that the repairs would be done that afternoon. However, eternally pessimistic, I was not going to leave the place until their van arrived. This gave me time to do a few small jobs around the place while I waited.

There has been some discussion about the role and costs of residential Property Managers. While I do manage my own properties, I would hate to take on the job as a full-time professional activity. To be the piggy-in-the-middle between demanding tenants and grumpy owners would not be my idea of fun.

I understand the going rate for PMs is around seven to eight percent of the rent. For your average $400 per week property that’s about $30 a week. How much of someone’s time can you buy these days for $30? Realistically, all you can reasonably expect from a PM for that sort of money is that they check the rent has been paid and that they answer the phone when the tenant rings up to complain that the power has gone off or the toilet has exploded. Certainly, they wouldn’t hang around my flats for the best part of a day to make sure that the window repairs were completed before knock-off time on Friday. To make a living from the business they would be far too busy keeping up with the other 99 clients on their books. You are just one cog in their rather large wheel.

Looking at the time I spend on my own property management I would say $100 a week per property would not be overcharging. Of course, in the current market, anyone who tried that sort of fee would find it rather difficult to get clients. Thus when we hear the frequent complaints about Property Managers who are slow, unresponsive, or incompetent just remember that there are good ones out there, they are generally overworked and underpaid, and that you would not want to do the job for twice the money.

[PTWhatAGreatForum]

Welcome to the world of small business. One of the first lessons learned is thyself is the most reliable employee.

[flyernzl]

I have the mild misfortune to be white, male, middle-class and of mature years. This means that I am a member of the only group in our society that can safely be ridiculed, derided, and mocked without any risk of running into retaliation from the Human Rights Commission. Insult women, indigenous people, those who prefer bed partners of the same sex, the physically or mentally disadvantaged, or any of the many racial or ethnic minorities now within our society and you will be swiftly smacked over the knuckles. Portray white men as either power-hungry manipulative abusers or beer-swilling sport-obsessed slobs and you will raise no more than a knowing nod and a mild chuckle. Like most kiwi blokes who do not fit either mould, I have grown so used to this low-level antagonistic environment that I just get on with life.

However, over the last year, I have noticed another growing group within our society that is becoming the Target for Tonight. Yes folks, that’s you and me, property people in general and residential landlords in particular. Judging from the outpourings from politicians, academics, child protection advocates and general do-gooders, we are now responsible for most of the ills of our society. From child ill-health in damp cold homes to surging Auckland property prices and the threat of Ebola, you and I Carry the Can. It’s all the fault of speculators and landlords.

Throughout history, it has been a common ploy for humans to identify problems within their nation or tribe and then sheet the cause of those problems home to just one easily-recognisable group. Hitler picked on the Jews, Senator McCarthy hassled the communists, Idi Amin ejected the Ugandan Asians, and many African regimes blamed the whites. “If only we get rid of these people” goes the rhetoric, “then all our problems will be solved”. Yes, it has also happened in New Zealand. “If only women ran things” we used to be frequently told, “Then our society would automatically be a fairer and friendlier place”. So we had Cath Tizard, Helen Clark, Jenny Shipley, Theresa Gattung and Sian Elias. All that proved was that the female of the species has, given the incentive, the potential to be just as venal and grasping as the male.

The solution is, of course, never that simple. Most problems have a plurality of causes, and are seldom easily solved by one simple action. However this has never stopped any politician from advocating such measures. “Getting rid . . .” can vary from simple dislike or expulsion to the nasty and drastic methods of ethnic cleansing employed by some of the more ruthless dictators.

So what are the problems and solutions in the local property market? For much of the country outside Auckland and a few other select spots, the problem is one of lack of employment resulting in a declining and aging population, static or dropping rents and property prices, and steadily rising council rates as the fixed cost base is spread over ever-reducing numbers of ratepayers. Many towns have lost their ‘reason to be there’ and have become society’s holding pens for the incompetent and the unfortunate. No rational commercial business is going to move to such a place simply on the basis of a Government financial incentive which can later be withdrawn on a bureaucratic whim. As I have said before, I see some form of mining or other resource extraction as the only saviour for a few of these regions.

In the hot markets such as Auckland, there are a different set of problems. These may be summarized as high costs in creating new housing leading to the price of existing housing being dragged up to so called ‘unaffordable’ levels. Although these increases have not yet caused residential rents to rise at a similar rate, they will over time. This will cause even more weeping, wailing and public flogging of those landlords involved.

The sorry part of this scenario is the posturing of most of the parties involved. The developers point the finger at the Council, the Council blames Government regulation, the Government twists the arm of the Reserve Bank Governor, the Reserve bank tries to reign in the trading banks, the trading banks plead their case to various politicians and the politicians abuse property people. Amongst the uproar little gets done and that which is done creates unforeseen and unwanted flow-on effects.

Grim reality is that the problem has multiple causes, many of which relate to policies and attitudes that have been bedded in generations. If you steadily overeat for 30 years it is quite unrealistic to expect to be able to go on a diet and return to your original sylph-like figure in just a few months. The attitudes of all parties involved will need to change, and this change will take years. Council planners need to realize that they cannot control your every thought, word and deed. The Government has to recognize that if something unfortunate happens to you then just possibly it is your fault and the legal system should not always allow you to sue someone else for your misfortune. Buyers should not expect their first home to be just like the one Mum and Dad spent 40 years achieving, and that just maybe it will be a house that looks like every other house in that street and not an architect-designed high-status fashion statement with all the latest bells-and–whistles. If you rent a property you are not just getting a place to live in, you are also getting the rates and insurance paid, the property maintained, the damage repaired and someone to whinge at over the high price of living. All these benefits come as part of the package and tenants need to know that such a package has its price.

So that’s this year’s rant. It has been a busy time for me in the property market, but I can now see the fulfilment of my long-term property plan. Sure, there have been knock-backs but hey it is possible, with planning, work, and yes a bit of luck here and there to get where you want to go. May your dreams also work out for you.

[PTWhatAGreatForum]

However, over the last year, I have noticed another growing group within our society that is becoming the Target for Tonight. Yes folks, that’s you and me, property people in general and residential landlords in particular. Judging from the outpourings from politicians, academics, child protection advocates and general do-gooders, we are now responsible for most of the ills of our society. From child ill-health in damp cold homes to surging Auckland property prices and the threat of Ebola, you and I Carry the Can. It’s all the fault of speculators and landlords.

That's because it is justified. As a "white, middle class [person]" (and I say this because both genders are equal in this), this demographic is largely out of touch and has no real understanding/experience of child health problems, damp houses or many other ills in the lower rungs in society.

One of the bigger ironies is many of the people in this demographic who are what is commonly described as "do gooders" are bigger hypocrites than run of the mill petty capitalists.

A lot of this has to do with personal distance and self interest. Especially in instances of people born into the middle class, they have no idea what the real reality is on the other side - how people end up in that position and get trapped there. They just see things in a simplistic view from the outside and then start arrogantly trotting out prescriptions and blame. On some issues they may be right to a certain extent, but it still doesn't mean their claims are justified.

Never underestimate the bias of personal interest. I have seen many people come on here and boast about how much money they are making in residential properties and how they keep racheting up the rent to higher and higher levels, yet remain totally in denial (or simply don't give a toss) this could possibly have any effect on people with low incomes.

Thinking of my own industry, this is much like Telecom (now Spark) who for years had a position in the market which enabled them to continue to rachet up the prices, while avoiding development in the network. During this time they also managed to continually pull the wool over the eyes of the government and commerce commission, until one day the government had enough, called their bluff (and there was a substantial amount of this) and took decisive action. Did this result in the end of the Internet and telephone? Far from it, we now have far better, cheaper, faster connections today, available from a wide variety of suppliers. Telecom's share price took a dive and has stayed down, so their shareholders lost on this, but the collective society including the capitalist economy is far better off.

In the same way that Telecom tried to stave off local loop unbundling and structual separation and thought they could continue to play their same old games well into the 11th hour, so it appears that some of the residential landlords present here also believe it won't happen to them either. They believe they can continue to maintain the same profits they gloat about on here all the while receiving huge taxpayer subsidies - direct and indirect.

It is my bet this will prove to be a delusion. The government can act and will act because of the massive and far reaching social and economic consequences. It's just a matter of time, if not this government, then the next one. Or the bubble may burst of it's own accord before then - either scenario putting a big dampener on many landlords, including kicking the greedier ones to the kerb. Even a National government will take some action if a problem gets too big. They too are affected by the universal constant among all politicians in a democratic society - they want to get voted back in.

While I am certainly not suggesting a conspiracy, there is a notable collective controversy in the mainstream discourse about residential property, Auckland prices, rentals etc etc. Anyone who is naive enough to think this will have little or no consequence on their business plan is a fool. Anyone who fails to take heed of the signs is a fool.

My own reflections on the past year:

I have moved twice - from a mid-sized city to a smaller city, then to a country town. In the 2 later places, there is plenty of cheap property. I have also lived provincially and rurally before. There is life beyond the Bombay hills and a large proportion of NZ lives this way. There is also work available, though a greater degree of flexibility is desirable. While I am unlikely to find employment or contract work in my area of expertise around here, I can drive a tractor and use a milking machine (Something I did at 16). I'm living in a small town next to a major highway. Property is cheap (1/2 acre next door for $25k and should go cheaper then that) and I have quite reasonable broadband available via ADSL2+ or VDSL2.

While I certainly appreciate the benefits of living in a larger city like Auckland (where I have lived most of my life), the numbers just don't stack up anymore. It is better financially to live here and take a lower paying job than to live in Auckland and work in my industry (Internet). While I don't expect a mass exodus from the large cities I do expect this will have some bearing on Auckland values. I do not see an underlying reason to justify the gulf between Auckland and most of the rest of the country. Actually, when it comes to my industry, Auckland is behind. Where I lived previously I had a 100/50 UFB connection and could move almost anywhere in town and continue to get it. This is not the case in Auckland. Auckland is way behind in UFB rollout, and even in the suburbs being deployed, Chorus are doing this on a street by street basis. Some streets get it and some get bypassed. In effect, I had better infastructure for my trade in provincial NZ than in Auckland along with no traffic jams. Core shopping - groceries, petrol etc there was on a par with Auckland price wise.

[eri]

well said.,.....

[Perry]

Two interesting pieces and perspectives from Flyer and Michael.

I also wonder if CBD real estate is not playing the ostrich? Too
many empty shops may indicate an over-supply of buildings,
or an under-supply of customers. Or customers who can afford
the lease costs. Costs partly driven by rates, insurance & things
which the LL has no control over.

But the 'stacked deck' of the NZ labour force and NZ businesses
being required to compete with cheap, sweat-shop economy
work forces in the East is an impossible and unwinnable game.
We have a structural imbalance on a grand scale in our economy
that seems as invisible to the W'gton woodenheads as are the
problems Flyer and Michael mention and/or allude to.

[speights boy]

But the 'stacked deck' of the NZ labour force and NZ businesses
being required to compete with cheap, sweat-shop economy
work forces in the East is an impossible and unwinnable game.

I was dragged along to the home show this year.
Many NZ businesses do compete very well based on quality.

Many people have now realised that cheap is often extremely false economy.

[Perry]

How many is "many" and
how many can afford it?

[PTWhatAGreatForum]

I was dragged along to the home show this year.
Many NZ businesses do compete very well based on quality.

Many people have now realised that cheap is often extremely false economy.

While many people may go to the Home Show, how much of a percentage of population is this? I'd suggest a far greater number shop at The Warehouse.

[PTWhatAGreatForum]

Buyers should not expect their first home to be just like the one Mum and Dad spent 40 years achieving, and that just maybe it will be a house that looks like every other house in that street and not an architect-designed high-status fashion statement with all the latest bells-and–whistles. If you rent a property you are not just getting a place to live in, you are also getting the rates and insurance paid, the property maintained, the damage repaired and someone to whinge at over the high price of living. All these benefits come as part of the package and tenants need to know that such a package has its price.

You are presenting a false dichotomy. It is a rediculous statement to suggest first home buyers are after something flash when this is often not the case. Have you not seen the price rises at the lower end as well? Or do you really not care - you are just after a cliche to try and bolster your claims?

As for residential property being maintained, agreed this is a cost the owner incurs sometimes. But equally sometimes not. Have you not seen the number of crappy rentals? Are you not aware this is the business plan of many landlords - ie: to spend as little as possible?