Life as a Landlord

[speights boy]

Right on cue we have this.

Where's the money in NZ?

Aucklanders are the least likely to be happy with their incomes, in spite of earning the most, while people in Wellington and Canterbury are happiest, according to a new report.

And in spite of earning the most, Aucklanders are forced to spend the largest proportion of their incomes on rent, at 23 per cent, compared with only 14 per cent in Southland.

But while Auckland had high employment growth, it also had high population growth and "it appears that significant groups within that population - including migrants and young Maori and Pasifika people - are not participating fully in the economy".

[Bob Kane]

So Bob.
How do you think this will effect future rent rises.

Is the "median tenant" (if you catch my drift) going to be able handle rent rises over the next few years ?
Will future cost increases be able to be fully passed on without a noticeable increase in tenant defaults and problems.

Or will net yields drop.
(for that last question, just assume steady purchase prices for a while)

If there's a shortage of rentals/ too many tenants then the extra costs will be passed on.
Otherwise not.
So we want a reduction in rentals and no more 'rental type' properties built.
Plus we want to allow poor immigrants into the country - even poor returning kiwis will do.
Let all the new houses be McMansions in leafy suburbs.
We also need to discourage landlords - talk of CGT, ringfencing losses, WOF etc all help to reduce the number of landlords/rentals leaving the gold for those that continue.

[speights boy]

So we want a reduction in rentals and no more 'rental type' properties built.

Nope, not happenning.

Plus we want to allow poor immigrants into the country - even poor returning kiwis will do.

I don't think that is the trend.

Let all the new houses be McMansions in leafy suburbs.

Nope, not happening.

We also need to discourage landlords - talk of CGT, ringfencing losses, WOF etc all help to reduce the number of landlords/rentals leaving the gold for those that continue.

With National at 52% there seems little concern on most of that at present.

So, it would seem you are not too optimistic about large rent increases in the near future ?

[Bob Kane]

So, it would seem you are not too optimistic about large rent increases in the near future ?

Not outside of Auckland, I'm not.
But it might happen in Auckland.

[Viking]

English and his socialist mate Smith don't like landlords. The tax dept. don't like landlords and many think they are entitled to Mc Mansions.

Reality is that most cannot afford them.

[speights boy]

English and his socialist mate Smith don't like landlords. The tax dept. don't like landlords .......

Sheesh
They must really really loath fixed interest investors then.

[eri]

Here are the most popular news stories today, upcoming events and the stories that will be talked about tomorrow.

1. Horror tenants frustrate landlord

A landlord whose property was left in squalor by a tenant owing more than $6000 rent and another who caused $28,000 damage, says owning rental properties is fraught with difficulties.
And she's not alone. Many landlords give up and sell their properties because of bad experiences, according to the New Zealand Property Investors' Federation.
Di Maxwell, a Far North District councillor, was dismayed to find dirty nappies, used condoms, rats eating rotting rubbish, and general "filth" in her three-bedroom Haruru Falls rental near Paihia.

2. Arrests 'imminent' in Madeleine McCann case

3. Mum awaits answer after close call at McDonald's

4. Karachi airport attack

5. Property report: Is this the beginning of a crash?

http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11270592

interesting

we see that

renting and property

are hot topics for herald

[Davo36]

Yep, I was quite surprised to see the first 4 stories on the site were all about property today.

Especially ones talking about an 'imminent crash', or 'is this a bubble' and so on.

[speights boy]

Yep, I was quite surprised to see the first 4 stories on the site were all about property today.

Yes, and another one today about tenants and property managers.
I had asked flyer:

flyernzl

Supposedly there is a shortage of housing in Akl.
You have a newly renovated property.

Why is it, do you think, that the top applicant was unemployed ?
Where were all the applicants with jobs, money and a good credit history ?

He is often very good writing about landlording experiences.

[flyernzl]

Why is it, do you think, that the top applicant was unemployed ?
Where were all the applicants with jobs, money and a good credit history ?

Greed and stupidity on my part.

The house had been unoccupied while the work was being carried out.

They were the applicants that could move in and (theoretically) start paying rent pretty well straight away, having just arrived in Auckland.

With one eye on my cash flow, I admit it - I was suckered.

[flyernzl]

By now it will have dawned on even the slowest among us that this year is a Parliamentary election year. The sight of normally remote and disinterested politicians hustling around the electorate kissing babies and promising heaven on earth is enough to make even the most cynical of voters smile.

Another personality who will be making her regular election-year appearance is our old friend Laura Norder. After spending the last three years muttering away in the background, you can depend on a front-of-stage appearance by good old Laura among every politician’s promises.

We are proudly told that reported crime rates right now are less than those of previous years. This may well be the case, or it may just be a change in the reporting. After all, if you are the Top Cop and are told by your paymasters to reduce the number of reported crimes, all you really have to do is lose your pencil down the back of the sofa every now and again to get the desired results.

There are as many apparent ways to reduce crime within our society as there are experts offering the solutions. These range from the draconian proposals of the Sensible Sentencing movement to Sue Bradford’s no smacking law. One of the strongest contenders has to be the ‘Broken Windows’ policy as implemented by Mayor Rudolph Giuliani in New York City. His policy concentrated on heavily policing such low-level crime as shop-lifting, vandalism and motor vehicle theft.

The logic behind such a policy is fairly easy to see. Career criminals usually start young by engaging in such low-level criminal activity. After getting away with this sort of behaviour they gain confidence, a sense of invulnerability and status within their group, and easily graduate to the sort criminal activity that society regards much more seriously. But by then the pattern is set and the young criminal comes to regard the rest of society like the wolf regards the sheep.

Luckily, like most Landlords, I have been spared crime of the most violent sort. None of my tenants have ever offered to rearrange my facial features or to fit me with a set of concrete gumboots. However I have suffered my fair share of what our justice system regards as civil crimes – theft of household fittings, malicious damage to rental property, breach of contract and failure to pay court-ordered monies. Although I have been reasonably assiduous in pursuing those concerned through the labyrinth of available legal systems, in most cases the perpetrators have escaped legal sanction and presumably have gone on to reoffend elsewhere.

The problem is that the legal system regards such lawbreaking as minor. An order from the Tenancy Tribunal or the Disputes Tribunal is just a piece of paper. All it means is that those named on it cannot deny that they owe the money. That’s all. It’s just a licence to hunt. Therefore having got such an order it is up to me to make the effort to track down these low-lifes. In between trying to scratch a living from my property activities, mowing the lawn and cooking dinner I am supposed to act like some latter-day Wyatt Earp and, smoking six-gun in hand, seek to bring these people to justice myself.

It is, of course, nearly impossible. I am not trained or experienced in detective work and the costs of hiring such expertise in the commercial market is usually far greater than the cash benefit to be obtained by me personally from successful pursuit. Yes, I have a recovery-of-costs clause in my tenancy agreements but you have to catch the buggers first. So the crims get away with it. Sure, they trail a long list of mediator’s orders and summary judgements as they go but a subtle change of name and partnering up with someone whose credit record is so much cleaner usually helps hide the past.

However, we then need to consider the cumulative effect that such penalty-free ‘minor law-breaking’ has on society as a whole. As well as the encouragement to reoffend it gives to those directly involved, it sets a bad example to those around them. I see from the news reports that the mother of the 12 year old boy accused of the aggravated robbery of murdered Henderson dairy owner Arun Kumar did, as the sole tenant responsible for a rental property, depart the house owing the Landlord more than $4200. The Tenancy Tribunal also made an order for the woman to pay immediately for the extensive damage to the property, but seemingly nothing has been recovered in the years since that order. The Landlords are still chasing their money, but I am sure will be getting absolutely no practical help in doing so from within the justice system.

What effect this example of blatant disregard for the law had on her children may be open to dispute, but I am sure that such a parent would hardly be likely to teach them to respect the lives and property of others.

Perhaps we need to quiz those who knock on our door seeking our support and votes in the forthcoming election about how exactly they propose to deal with the bad behaviour of such people. Just to throw up their hands and say ‘There are so many of them that there is nothing we can do’ is hardly a competent answer. Admittedly many of these offenders are, and deliberately set out to be, bullet proof. With no assets, no earned income, and a flock of dependent children they can stand there and literally stare down the justice system.

Surely human ingenuity is such that we can create a penalty and reward system that is economical, user-friendly, speedy and that actually works.

[Glenn]

Get your gun

Sorry I just remembered I have not posted my latest newsletter.
You better read it and if you need further advise contact me by other mediums. It is no longer necessary to find your debtors.
Yes I know unbelievable. Have a read of my newsletter.
Glenn

[flyernzl]

Earlier this month I had to replace part of a bedroom floor in one of my rentals. This house was originally built with a strip timber floor but at a later time an extra bedroom was added. Unfortunately for me, by the time this addition was built it was legal to use particleboard for flooring, so this is what they used. Over time, and given tenant propensity to trap moisture inside even a well-built house, this particleboard had crumbled and needed to be replaced.

Once the sawdust had subsided I then had to consider the replacement floor covering. All the rest of the house has polished floorboards, but in order to replicate this into that bedroom would also mean recoating the adjacent hallway in order to get a neat finish. Eventually, after considering options and comparing prices, I decided to carpet this one bedroom.

Carpet selection was made and the layer date confirmed. I met the fellow there, as you do, and pottered around the place while he did his work. Conversation ensued, and he remarked “I had a rental property once. What a disaster. The tenant left owing me thousands”.

“How did that happen?” I asked. “How come the arrears built up that high? You should have got on to them as soon as they missed the first payment”.
“We had no idea what we were doing” he said. “Not a clue. We just hoped it would come right, but it didn’t. So we got out of that game as soon as we could”.

I have to say that this is not the first disillusionedl ex-Landlord I have met that freely admits to suffering burnt fingers and a bruised wallet from their foray into landlording , and I am sure that there are more of them going through that chastening experience right now. So sad.

Being a Landlord is being in the accommodation business. You would not think of starting up in business as a plumber, an accountant or a building contractor and expect success without first acquiring the necessary skills of the trade and getting to know the rules of the game. Yet I meet so many people who have had one or more rental properties and then got into real trouble because they were ignorant of the requirements of the Tenancy Act and did not know how to handle the problems as they arose. You might hire a Property Manager to run the day-to-day affairs of your property empire, but although you can delegate the work you unfortunately cannot delegate the responsibility. As the property owner, ultimately the buck stops with you. To be successful in this business you must take the time and make the effort to understand how the Landlording business works.

When I started my landlording career I was very conscious of my own ignorance, as I am in so many things. That was back in pre-internet days of course, so I harnessed up my pterodactyl, rode down to the local Whit-cave and shuffled through the stone tablets until I found a small book on Landlording in New Zealand. I say small, as it was just 80 pages of A5, but had pretty much all the information that a novice like me needed. Now I could lie in bed at night engrossed in the sub-sections of the Residential Tenancies Act and ponder the obvious delights of a property inspection form, As well as a source of information, I found it also doubled as a sure cure for insomnia.

Armed with this small volume I was able to step into the bright new world of tenant selection, tenancy agreements and 10-day notices (as they were then) armed with at least some of the knowledge that I needed to survive. Sure, over time I have made some stupid and occasionally expensive mistakes, but I still have my scalp in one piece and my enthusiasm for this business intact.

Of course getting the knowledge is a lot easier now. The internet is a readily available resource for the novice Landlord, although certainly you do need to exercise care in judging what is good advice and relevant to local conditions and what is just fluff and bubble. Forums like this one give access to some of the best advice available, and also provide contact with many of the people who have been there, done that, and survived.

There are also much more detailed handbooks now available, although their size and complexity has greatly increased since my first 80-pager. The regulations have become more complex over time and the legal profession has worked industriously in their never-ending drive to add complication, confusion and cost. My current landlord’s bible now runs to 300 pages of A4 size and probably does not cover the very latest developments.

There are now Property Investor Associations covering most of the country, and while some landlords shy away from them they are a valuable repository of knowledge about the local market. Most provide meetings where landlords can learn the tricks of the trade and ask questions. The Auckland association now has an on-line video resource, Apia TV, where members can view more than 80 segments that cover most facets of the property business.

So really, there is now no longer an easy excuse for ignorance. The knowledge is out there and available. Unfortunately, many people are sucked into being a landlord by the hype of easy money and hassle-free hands-off investment promotions put out by various short-term promoters and agents. Either they end up aghast when faced with the very real problems that invariably arise and get out of the business as soon as they can, or they take the time and put in the effort to acquire the knowledge and the skills that are needed to survive in this challenging business. It certainly sorts out the doers from the dreamers.

[flyernzl]

Human nature being what it is, it is way too easy to become fat and complacent when thing are going well. My Malaysian family group has been renting one of my houses for over four years. Apart from a penchant for keeping the raw ingredients destined for KFC squawking and clucking in the back yard, they have been no trouble at all. The last property inspection revealed only the need to repaint the patio door step, which they did themselves within a few days.

Imagine my surprise to receive a phone call mid-Monday-morning a few weeks ago which went something like “I’m Joe, one of the family that was renting the house. We have moved out, as my parents had to go back home a few weeks ago. We are going today as well. The door key in the shoe outside the front door. Goodbye”.

He was right. The key was there. Inside the house, there was quite a mess. Some furniture left behind, little cleaning had been done, two badly damaged windows where the wind had caught them and blown them off the hinges, other windows jammed or glued shut and the workshop downstairs full of junk and clutter. Oven damaged. The occasional old TV set left in the bedrooms and the wardrobe doors off the runners. Oh dear. So much for 21 days written notice and a property inspection on departure.

First step – when in doubt make a list. When it ran off the bottom of an A4 sheet I began to quail. I had planned to repaint the outside of this place over the coming summer, and the bald patches on the weatherboards and the flaking trim around the front windows would not create a good impression for prospective tenants as they came down the drive. Maybe it was time to pray for some unseasonably fine weather over the next few weeks.

Unfortunately, this was not to be. Jupiter Pluvius did not oblige. After dragging four trailer-loads of tenant junk to the tip (sorry – refuse transfer station), booking the bath resurfacing expert and turning Jan-the –handywoman loose on some of the interior work, I broke out the paintbrushes and started creating dust. Have you ever tried to scrape paint and prime the bald spots while dodging showers? Having just finished repainting the garage door, I then had the pleasure of watching it all washing off and giving me some nice grey concrete. I’m beginning to see the point of that plastic wrap that they use around commercial buildings to shelter them from the wind and the rain while the workmen do their stuff.

Given that the exterior walls needed to dry out in the morning from the overnight rain before I can paint, I decided to use that time to trim back the undergrowth infesting the drive. Out with the electric hedge trimmer and away we go. Halfway down the drive, waving this lethal machine around, I felt it tug at my trousers. Looking down, I thought “Damn, it’s ripped the material on my corduroys. I like those trousers, now I’ll need to get that damage mended”. A minute or two later, I had another thought - maybe I should check for damage to the leg. Yep, you guessed it. The doctor was quite sympathetic as he injected the local anesthetic and put four stitches into my thigh.

So as you may have guessed by now, I don’t think kindly of tenants who depart in the middle of winter leaving me to sort out their discarded possessions and repair the damaged property. We have got there in the end. The place has been cleaned up, the exterior walls and windows visible from the driveway now look reasonable. I have signed up new tenants today at $40 a week more than the previous group, and my leg is almost healed thank you for asking. The rest of the outside painting can wait until the great burning ball in the sky decides to smile on us again.

The politicians, the lawmakers and the social do-gooders can make all the laws and regulations they like about tenant and landlord behaviour, but out there in the rough old real world people will pretty much do whatever suits them at the time. If the family wants to hive back off to their home country at the drop of a hat, then that’s what they will do. Sure, I got the entire bond back but there is Buckley’s chance of recovering anything of the tip fees, window repair costs, cleaning charges and god knows what else from the absconders. How much? I don’t really want to know. Direct outgoings would be over five grand, and my own time on top of that.

I guess it would be possible for a whizz-kid design a passport check for all people departing the country to ensure that their debts are paid, mortgages up to date, hire purchase paid off, no rent arrears and tenancy tribunal orders are left outstanding and their dogs are licensed before they go. Somehow I doubt that even Act would believe that this would be an election-winning strategy.

After each exhausting day clinging to my ladder in the wind and rain I would drive home in the car listening to the rantings of our soon-to-be-re-elected politicians as they competed with each other in dreaming of new ways to separate us from our earnings and blow the money on ‘free’ this that and the other. If I ruled the world, ‘Free’ would be banned from the political lexicon. If something is provided to someone at no charge to them, then someone else somewhere else is paying the price. Free does not come into it.

[Perry]

Of course, none of the said ranters will read this.
Maybe, instead of free, all political aspirants should
pay a bond on each and every one of their hustings
promises? Each would be refunded once the relevant
vote-snaring promises has been fulfilled. Failure to fulfill
said promises would result in the hustings bonds being
forfeit and being paid pro rata to all the rest of the
political parties which were in the election. Provided
they'd kept all theirs, of course.

Use manual hedge clippers next time, PLEASE.

PS
What DID you put down on the ACC claim form?