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Hi folks here is a copy of my latest newsletter.
Our next meeting is being held at the Nelson Suburban Club, Tahunanui Drive on Tuesday 15 June. The meeting proper commences at 7.30 pm with the ever popular meal at 6pm when you will have the opportunity to chat to other investors. We have got Bob Askew a compliance officer from Nelson city Council coming to speak on things we would prefer to not know about. Recent articles in the newspaper about landlords being fined by the council and several letters I have received threatening me with prosecution for such crimes as leaking gutters shows we all need to find out what is going on.
Also we have our AGM. Accounts will be presented and officers elected to represent you for another year. As usual we will do our best to keep the AGM short. Bookings are not compulsory but it does help the
caterer with setting up the tables and collecting all of the meal money.
Well my goodness it is now winter. A number of you have wondered what I have been up to and how come the newsletters have not been filling up your in boxes. The combined affects of holidays, sickness, and lethargy before the budget have all taken their toll. Then add a distressing time with computer upgrades and it is enough to take up fishing or some other mind numbing activity.
I clearly was not the only one sitting on my hands waiting for the budget. Ask any Real Estate sales person who is still left in the industry. Things are hard in their camp and locally it is clear many faces have disappeared from the scene. The whisper is investors are not buying. A comment like that is not to be taken that I do not think it is a bad thing to do, buy more that is, but clearly many faint hearted people are sitting on their hands. Any investment or new (ad)venture be it climbing a mountain or buying another rental needs confidence and well being. A number of people I have talked waited to see what was in store for us in the budget. Well we have it to hand now and for some it is not good reading.
Sure not as bad as it could have been (perhaps the really bad stuff will be in next year’s budget) but it still hurt us. Some mystics have asked why us and not other industries. Governments do this sort of thing because that is what governments do. They pass laws, gather taxes, and try to tell their subjects how to go about their daily lives. Who ever suggested they know best or even understand what they are doing.
So what have they done? For the average residential investor who was collecting depreciation on an average house you will pay about $1000 more tax per property. You will pay $1250 more GST per $50000 you spend on goods and services. You will pay something like $8750 more GST on a brand new residential property costing the average $350,000.
Some investors buy on rate of return on properties. Most nice stand alone investment houses are selling on 5% Capitalisation rates. Sure you can do all sorts of fancy calculations and argue about this and that but basically if you earn $1000 less on a property that property should now be worth $20,000 less.
The stated aim of the government was for less money to be spent on housing and more on productive investments. Between the taxes and the rhetoric that is what will happen. What no one knows is will the correction overshoot the mark? What exactly the mark is the Minister is aiming for is beyond me.
Regardless of what has been done and the likely outcomes all I can be sort of certain about is what is happening at my back door. My vacancy list is climbing and I am having more trouble finding good tenants for them. There is a small increase in the number of groups of families applying for larger homes.
A small number of people are packing up and heading to Australia and putting their houses up for rent.
A number of holiday homes have slashed their rent to attract longer term tenants. Some properties which can not be sold are being let out increasing the supply of rentals. I think I am getting more calls from 16 to 18 year old girls with a pack of eager boys in the wings wanting to rent homes.
The number of people on home detention and electronic bail is definitely on the increase.
So what does this all mean for you landlords? Probably the best way to describe the current market is confusion. Many of you may find difficulty locating a good tenant. If you or your property can not accommodate a low grade tenant the chances are you will panic or be deceived into making a mistake.
If you do then remember help is always at hand. Do not ignore problems of missed rent or damage to property. Get those warning letters issued immediately. Make your tribunal application earlier rather than later. If the arrears are manageable like under $1000 then often WINZ may be able to assist if the tenants are beneficiaries. Leave it much longer and the only outcome may be eviction, loss of rent, and costly repairs.
In my opinion the market will quickly adjust and it will not be long before there will be a very firm demand for good rental properties again. Probably most landlords will use those better times to recover the lost income by increasing rents perhaps by around $20 per week. At the risk of being accused of being my normal cynical self my suggestion is to tell the tenants when you issue them with the rent increase letters that this is all the work of the Government. At present I have a large home sitting empty because the owner directed me to increase the rent by $20 per week. The tenants of only six months voted with their feet. It is not a smart idea to issue rent increases above what the market will bear in the middle of the winter when the demand is low. That owner will never recover the lost rent due to it sitting empty.
The following article comes from the USA. I am sure we can learn something from it.
The Cheapest Marketing You Can Do
You have a vacancy. Now you get to clean up the unit, do some painting and carpet cleaning, tidy up the front and put it on the market. Now write the ad. That might take a while since the last one didn't work too well--in fact, the only calls you got were from people who shouldn't rent a Barbie playhouse.
You're still not done. Now you have to place the ad and pay for it, unless the only place you run it is Craigslist. Then there's the sign. You have to put one of those up. And the flyers that go outside the unit, you need to create and print those.
Finally done with all the preparation, now you have to hope and pray the phone rings and at a time you can concentrate on the call about your vacant unit.
Wow! All that work and much of it could have been saved.
Of course, if you breathed a sigh of relief when that tenant moved out, that's different because all that preparation for that fantastic new tenant is worth it.
But this tenant was a pretty good one. What if you will miss her? What if the reason she's moving is not for a new job in a new city or to buy a house? What if she told you "it's just time for a move"? Maybe you could have avoided spending all the time, effort and money finding a new tenant.
What's the secret? There's no secret really. Small Business Marketing Strategies estimates, "Acquiring a new customer can cost 6 to 7 times more than retaining an existing customer."
An article in Entrepreneur Magazine pointed out, "It's a truism that long-time customers are vastly more profitable than newcomers, yet most companies keep better track of office supplies and magazine subscriptions than they do of their customer relationships."
That's for normal brick and mortar businesses where they send salespeople out to call on existing customers and find new ones. But landlords, assuming their units are relatively full, can concentrate on the customers they have. Keeping an existing tenant costs even less than the retail industry standard for keeping a customer.
You have to make repairs anyway, so there's no extra cost there. You have to do preventive maintenance anyway, so there's no extra cost there, either. You will have to repaint or recarpet sometime, so there's no extra cost there, either. The only extra cost might be for saying thank you occasionally and patting yourself on the back.
Do you have a tenant-retention plan? It doesn't have to be complicated.
How about a "thank you program"? You can reward tenants every so often with a $20 gift certificate to such places as Amazon.com, Starbucks, gas stations, local department stores, or anywhere else your tenants might like to shop. Gee, $20! Why that would buy a whole line in the Sunday classifieds for about an hour. At lease renewal, you could also provide a catalogue of gift items that your renewing tenants can choose from that cost maybe $75. That's a whole line in the Sunday classifieds for an entire day. One such website is www.chooseyourgift.com. You can even set up your own private-label gift site. That should truly impress your tenants.
How about telling your tenants what you did to make their home more pleasant and liveable? Believe it or not, tenants do not think about their landlords all the time, or even that often, unless their landlords aren't doing their jobs. Then they think about landlords a lot. Since you do your job, your tenants don't think about you that much except when they write the rent check. So tell them all the wonderful things you did to keep their homes great places to live. You can do it with a short note, an email or a full-blown newsletter, depending on how many properties you have. What's important, though, is that they know what you do for your properties and them.
But even if you aren't willing to spend money and time on your good tenants to keep them living in your property, at least send a thank you note. If you hand deliver it, the cost is only that of the paper you wrote it on and an envelope Mailing costs a little more, 44 cents. Is it worth 44 cents to keep a good tenant?
They don't know you care unless you tell them. There are numerous ways to tell your good customers you care and to keep them as your customers. In fact, if you do it right, they might never move. Just think, a long-term, regular-paying, good-neighbour tenant.
NELSON PROPERTY INVESTORS ASSOCIATION
JUNE 2010 NEWSLETTER
Also we have our AGM. Accounts will be presented and officers elected to represent you for another year. As usual we will do our best to keep the AGM short. Bookings are not compulsory but it does help the
caterer with setting up the tables and collecting all of the meal money.
THE MARKET
I clearly was not the only one sitting on my hands waiting for the budget. Ask any Real Estate sales person who is still left in the industry. Things are hard in their camp and locally it is clear many faces have disappeared from the scene. The whisper is investors are not buying. A comment like that is not to be taken that I do not think it is a bad thing to do, buy more that is, but clearly many faint hearted people are sitting on their hands. Any investment or new (ad)venture be it climbing a mountain or buying another rental needs confidence and well being. A number of people I have talked waited to see what was in store for us in the budget. Well we have it to hand now and for some it is not good reading.
Sure not as bad as it could have been (perhaps the really bad stuff will be in next year’s budget) but it still hurt us. Some mystics have asked why us and not other industries. Governments do this sort of thing because that is what governments do. They pass laws, gather taxes, and try to tell their subjects how to go about their daily lives. Who ever suggested they know best or even understand what they are doing.
So what have they done? For the average residential investor who was collecting depreciation on an average house you will pay about $1000 more tax per property. You will pay $1250 more GST per $50000 you spend on goods and services. You will pay something like $8750 more GST on a brand new residential property costing the average $350,000.
Some investors buy on rate of return on properties. Most nice stand alone investment houses are selling on 5% Capitalisation rates. Sure you can do all sorts of fancy calculations and argue about this and that but basically if you earn $1000 less on a property that property should now be worth $20,000 less.
The stated aim of the government was for less money to be spent on housing and more on productive investments. Between the taxes and the rhetoric that is what will happen. What no one knows is will the correction overshoot the mark? What exactly the mark is the Minister is aiming for is beyond me.
Regardless of what has been done and the likely outcomes all I can be sort of certain about is what is happening at my back door. My vacancy list is climbing and I am having more trouble finding good tenants for them. There is a small increase in the number of groups of families applying for larger homes.
A small number of people are packing up and heading to Australia and putting their houses up for rent.
A number of holiday homes have slashed their rent to attract longer term tenants. Some properties which can not be sold are being let out increasing the supply of rentals. I think I am getting more calls from 16 to 18 year old girls with a pack of eager boys in the wings wanting to rent homes.
The number of people on home detention and electronic bail is definitely on the increase.
So what does this all mean for you landlords? Probably the best way to describe the current market is confusion. Many of you may find difficulty locating a good tenant. If you or your property can not accommodate a low grade tenant the chances are you will panic or be deceived into making a mistake.
If you do then remember help is always at hand. Do not ignore problems of missed rent or damage to property. Get those warning letters issued immediately. Make your tribunal application earlier rather than later. If the arrears are manageable like under $1000 then often WINZ may be able to assist if the tenants are beneficiaries. Leave it much longer and the only outcome may be eviction, loss of rent, and costly repairs.
In my opinion the market will quickly adjust and it will not be long before there will be a very firm demand for good rental properties again. Probably most landlords will use those better times to recover the lost income by increasing rents perhaps by around $20 per week. At the risk of being accused of being my normal cynical self my suggestion is to tell the tenants when you issue them with the rent increase letters that this is all the work of the Government. At present I have a large home sitting empty because the owner directed me to increase the rent by $20 per week. The tenants of only six months voted with their feet. It is not a smart idea to issue rent increases above what the market will bear in the middle of the winter when the demand is low. That owner will never recover the lost rent due to it sitting empty.
The following article comes from the USA. I am sure we can learn something from it.
The Cheapest Marketing You Can Do
You have a vacancy. Now you get to clean up the unit, do some painting and carpet cleaning, tidy up the front and put it on the market. Now write the ad. That might take a while since the last one didn't work too well--in fact, the only calls you got were from people who shouldn't rent a Barbie playhouse.
You're still not done. Now you have to place the ad and pay for it, unless the only place you run it is Craigslist. Then there's the sign. You have to put one of those up. And the flyers that go outside the unit, you need to create and print those.
Finally done with all the preparation, now you have to hope and pray the phone rings and at a time you can concentrate on the call about your vacant unit.
Wow! All that work and much of it could have been saved.
Of course, if you breathed a sigh of relief when that tenant moved out, that's different because all that preparation for that fantastic new tenant is worth it.
But this tenant was a pretty good one. What if you will miss her? What if the reason she's moving is not for a new job in a new city or to buy a house? What if she told you "it's just time for a move"? Maybe you could have avoided spending all the time, effort and money finding a new tenant.
What's the secret? There's no secret really. Small Business Marketing Strategies estimates, "Acquiring a new customer can cost 6 to 7 times more than retaining an existing customer."
An article in Entrepreneur Magazine pointed out, "It's a truism that long-time customers are vastly more profitable than newcomers, yet most companies keep better track of office supplies and magazine subscriptions than they do of their customer relationships."
That's for normal brick and mortar businesses where they send salespeople out to call on existing customers and find new ones. But landlords, assuming their units are relatively full, can concentrate on the customers they have. Keeping an existing tenant costs even less than the retail industry standard for keeping a customer.
You have to make repairs anyway, so there's no extra cost there. You have to do preventive maintenance anyway, so there's no extra cost there, either. You will have to repaint or recarpet sometime, so there's no extra cost there, either. The only extra cost might be for saying thank you occasionally and patting yourself on the back.
Do you have a tenant-retention plan? It doesn't have to be complicated.
How about a "thank you program"? You can reward tenants every so often with a $20 gift certificate to such places as Amazon.com, Starbucks, gas stations, local department stores, or anywhere else your tenants might like to shop. Gee, $20! Why that would buy a whole line in the Sunday classifieds for about an hour. At lease renewal, you could also provide a catalogue of gift items that your renewing tenants can choose from that cost maybe $75. That's a whole line in the Sunday classifieds for an entire day. One such website is www.chooseyourgift.com. You can even set up your own private-label gift site. That should truly impress your tenants.
How about telling your tenants what you did to make their home more pleasant and liveable? Believe it or not, tenants do not think about their landlords all the time, or even that often, unless their landlords aren't doing their jobs. Then they think about landlords a lot. Since you do your job, your tenants don't think about you that much except when they write the rent check. So tell them all the wonderful things you did to keep their homes great places to live. You can do it with a short note, an email or a full-blown newsletter, depending on how many properties you have. What's important, though, is that they know what you do for your properties and them.
But even if you aren't willing to spend money and time on your good tenants to keep them living in your property, at least send a thank you note. If you hand deliver it, the cost is only that of the paper you wrote it on and an envelope Mailing costs a little more, 44 cents. Is it worth 44 cents to keep a good tenant?
They don't know you care unless you tell them. There are numerous ways to tell your good customers you care and to keep them as your customers. In fact, if you do it right, they might never move. Just think, a long-term, regular-paying, good-neighbour tenant.