Life as a Landlord

[Davo36]

Yeah and it doesn't get any easier for the big jobs too while they're in demand. Builders, tradies hold all the power and they know it so either you work with them on their terms or you don't.

I've decided to go 'old school' and work hard on developing a good relationship with a builder. I've done the research and references and I know he's nowhere near the cheapest probably slightly above average but his work is good and I've nothing to gain by attempting a tendering process for the business. My line of thought is if you've got a good plumber, builder etc why would you hunt around and risk shoddy workmanship that ends up costing more later on.

cheers,

Donna

Good one Donna. I've fallen into the trap of taking the cheapest quote for work in the past. And it's ended badly. I'll try not to do it again.

[mrsaneperson]

Yeah and it doesn't get any easier for the big jobs too while they're in demand. Builders, tradies hold all the power and they know it so either you work with them on their terms or you don't.

I've decided to go 'old school' and work hard on developing a good relationship with a builder. I've done the research and references and I know he's nowhere near the cheapest probably slightly above average but his work is good and I've nothing to gain by attempting a tendering process for the business. My line of thought is if you've got a good plumber, builder etc why would you hunt around and risk shoddy workmanship that ends up costing more later on.

cheers,

Donna

I have found it pays to have more than one builder or plumber to contact as often some become to busy then at least you have the other option. A lot of plumbing jobs unfortunately are often relatively urgent matters particularly leaks. Or you take the hard route and tackle it yourself, which occasionally i have done through exasperation of not being able to find someone.

I fixed a ranchslider that wasn't locking the other day, finally after 2 1/2 hrs.Almost was about to give up on it and call a locksmith.

[flyernzl]

As plumbing always goes wrong in weekends or at night, best move I ever made was to buy some brass blanking caps.
These allow you to turn off the water main, remove the damaged tap/faucet, cap the pipe, and then turn the water back on again.
The tenant can then use all the other fittings in the house while they wait for your plumber to arrive during normal working hours.

[Don't believe the Hype]

As plumbing always goes wrong in weekends or at night, best move I ever made was to buy some brass blanking caps.
These allow you to turn off the water main, remove the damaged tap/faucet, cap the pipe, and then turn the water back on again.
The tenant can then use all the other fittings in the house while they wait for your plumber to arrive during normal working hours.

this is the best advice for the week. stabilize the situation and allow people to continue on with their life until the problem can be fixed in a non urgent manner.

well done

[mrsaneperson]

this is the best advice for the week. stabilize the situation and allow people to continue on with their life until the problem can be fixed in a non urgent manner.

well done

That is good advice but most of the problems i have struck often involve leaky pipes occurring before the faucet. Another one is blocked drains .

I had one scenario where a child of the tenant had put some toys down the drain by lifting up the iron grate . The water would backup when a large amount of water was disposed of like from a washing machine and rise above the breeze block foundation and empty into the holes of the bricks then seep through into basement accommodation that lay behind the blocks. The problem would only occur intermittently since it only happened on wash days so was tricky to find . The toys he'd put down the drain could not be seen from above but when i put my arm down i felt them . Tenant denied all responsibility of course even when it was shown the toys down the drain were of the same light blue set he had in the lounge!!

[Perry]

Tenant denied all responsibility of course even when it was shown the toys down the drain were of the same light blue set he had in the lounge!

Really odd, that.

Previous tenant's child had the exact same set, you see.

[Wayne]

Previous tenant's child had the exact same set, you see.

And popped them in the drain just before they left.

[flyernzl]

Maintenance is one of those property costs that always seems to be minimized when you talk to anyone who is trying to sell you investment real estate. They will mention mortgage interest, yes, rates and insurance if you must, but maintenance – “Ah well, of course what I am offering you is a low maintenance property. You don’t need to worry about that!”.

Rubbish. There is no such thing. I have seen a group of primary school children reduce a solid brick table with a bolted-down steel top down to a pile of rubble in less than twelve months. I have just checked, and in the last year I personally have spent a tad over $67,000 on repairs and maintenance plus another $13,700 on capital improvements. A substantial sum that, of course, does not include the value of my own time doing any of the smaller stuff. The academics and their acolytes who claim that landlords contribute nothing to the economy have not seen my repair bills - each and every one with GST attached. GST that, by statute, I cannot claim back.

Anyone who happens to own the house they actually live in can tell you that yes, there a constant stream of small repairs that should be done. Even worse, if these small items are not dealt with right now, they can rapidly become large – as in costly. Somehow, they never seem to be self-healing and invariably occur at expensive times of the year.

Tenants in particular, can be, and almost always are, tough on a property. Because tenants don't care about the future value of the house they rent from me they're harder on my houses than they would be on one they actually owned themselves, and that leads to excessive deterioration. Realistically, if the whole place collapsed in a heap of sawdust the day after they left they wouldn’t care.

We are regularly confronted with the news of some run-down and ill-maintained hovel inhabited by long-suffering tenants who either cannot contact their landlord or who are too scared to do so. There are also frequent reports on situations where rental property owners have been asked for repairs or improvements to be carried out but nothing has ever been done. On looking a little closer at these situations, I can see quite a mix of reasons why these situations arise.

Yes there are property owners who simply do not care. They regard their property as simply a cash-cow, where it is all take and no give. Either through sheer ignorance of tenancy law or the belief that such laws do not apply to them, they extract the maximum profit from their properties and be dammed to the conditions their tenants face. While the place rots and moulders, the roof leaks and the plumbing collapses, they shrug their shoulders and do nothing. Also, surprisingly, my own experience is that when sale time rolls around they still expect top dollar for that property.

They there are those landlords who actually cannot afford the maintenance. They bought the place expecting a ‘tax efficent low-maintenance investment’ and sit like possums in the headlights when the reality turns out to be quite different from what the smooth-talking salesperson promised. The rent is consistantly less than the costs and they are having to put money in each month to cover the loss. That golden goal of massive capital gain suddenly seems a long way away while the actual monthly cash loss must be fed right here and now. Thus any but the most minor repairs are actually a financial tragedy, the choice between food on their own table or paying the the repairman. These people are out of their depth, cannon-fodder, and should never have got into the business of rentals in the first place.

One of the unfortuate side-effects of long-term rent control in jurisdictions where it has been imposed has been the degradation of the properties involved. As the owners of such properties have seen their returns drop in real value over the years they naturally reduce their spend on that property. Maintenance is minimised, no improvements are instigated, and eventually, given enough time, the property may even become derelict. The tenant involved, knowing that the pegged rent is now way below free-market levels, has no desire to leave even though the place may now be a dump and their living conditions unhealthy. An inevitable lose-lose situation that still does not silence those who yell loudly for such controls.

Then of course there is you and me. As competent property owners and landlords we are well aware that any asset we possess does require ongoing maintenance. From a lawnmower to a Lamborghini, the maintenance demands and the consequential outwards cash flow is inevitable and we structure our affairs to cope with both the expected and the unaticipated. It makes good business sense to spend to proterct the value of our investment and also to maintain reasonable value-for-money in the eyes of our customers, the tenant. Everybody wins.

Having said that, it’s a bitter experience when a freshly renovated property is reduced to splinters within months by feral tenants who barely know how to open a window yet alone properly care for an asset worth hundreds of thousands of dollars. More than once over the years I have stood in the middle of one of my properties where doors have fallen off the hinges, holes have been punched in the walls, light fittings smashed and floorcoverings destroyed. It takes considerable fortitude to sigh deeply and start the upgrade all over again knowing, deep down and before you start, that the system will permit low-lifes who caused all this chaos to walk away without paying a cent. Even if I get a Tribunal Order, that’s just a piece of paper. So often, I see an item in the media that a tenant ‘must pay’. There is no ‘must’ and in my experience in over 90% of cases no payment is ever made.

So when you next see a report that claims that rental housing is in worse condition than owner-occupied then maybe these are some of the reasons. Yes there are feral landlords, and we do need to out them, but there are also many competent landlords who do their best but are consistantly challenged by both the strain on their own resources of time and money and also by the ongoing uphill battle to repair and upgrade faster than tenants can destroy and the Government can legislate.

[Sportsvee]

Nicely put and worth the read.

[artemis]

... " the strain on their own resources of time and money..."

Ring-fencing of rental losses will see a serious jump in that resource strain. Do property investors realise? Especially those with more recent acquisitions and hefty mortgages.

[Perry]

Do the W'gton woodenheads and their sycophants realise it?

[flyernzl]

Read any one of the many surveys that attempt to answer the question: “Which is the best country in the world at . . .” and the inevitable answer is Nordic. Why should a small group of chilly, sparsely populated and largely irrelevant countries sandwiched uncomfortably between Russia, Germany and the North Sea apparently be the home of the happiest, best educated, most socially aware and progressive people on the earth?

The answer, according to the academics, lies within the Gini Coefficient. To save you looking that up, the Gini Coefficient measures the level of wealth inequality within a country. Running this mathematical ruler over many countries, it appears that the more equal a society becomes the better the people feel. Living in an economically unequal country is stressful, both for the wealthy and the poor, whereas it’s unlikely that you will get all bitter and resentful over the lack of a ballpoint pen if no-one else you know has one.

Sweden, Norway, Denmark and Finland are all cohesive societies which historically have had low levels of immigration. Couple that with a strong Lutheran religious tradition that shuns ostentation, dislikes public displays of emotion, values thrift and approves of keeping one’s self to oneself and you have a people that thinks and acts as a group. Thus the Finns are said to have the best education system in the world, the Danes top the happiness score, Sweden is the best place to live if you are female and the Norwegians (as a nation) are the wealthiest people on the planet.

Another feature of these four countries are their high levels of taxation, usually topping 50% on personal income. Norway is one of the most heavily taxed countries in the world with a total tax burden of around 45% of GDP. GST is a whopping 25% and personal income tax rates border 55%. Company profits tax ranges from 28% to as high as 78% .In Sweden personal income tax can be as little as 29% but most employed people will pay between 49% and 60% through a combination of local government and state income tax.

So why do the people put up with this?

As cohesive and inward-looking societies, the people of these nations feature higher levels of trust in their fellow citizens than anywhere else in the world. This evidence is consistent with the reality that social cohesion is larger in Scandinavian countries than elsewhere. Thus citizens show a willingness to pay large taxes in belief that the money will be wisely spent on valuable social infrastructure programs – education, health programs, public transport – that benefit all citizens and will not be conspicuously wasted.

So while there are some extremely wealthy families and citizens in these countries – Maersk, ABBA, and Ikea’s Kamprad come to mind – the majority of Scandinavian people live homogenous lives of security, equality and contentment untroubled by any base desires to out-earn their neighbours or indulge in conspicuous displays of wealth and excess.

So how does all this affect their housing market? During my recent time in Sweden I spoke to a few people to find out.

During the 1960s and early 1970s the Swedish Government promoted an extensive housing construction project called ‘The Million Homes Programme’, but since then construction has consistently lagged behind demand.

One in five households rents a publicly owned home, and a similar ratio rents in the private market. Rents had been regulated since 1942, but were gradually deregulated between 1957 and 1968, when rent setting according to a utility value system, the “tenant’s value”, was introduced. This system, determines the rent according to the dwelling’s condition, reflecting its size, quality, year of construction and standard. New rents are set in accordance with comparable rents in the neighbourhood. Private landlording as we know it is almost unheard of. It is considered speculation, profiting from people in a way that is not socially appropriate.

There exists the Rent Negotiation Act, which authorized tenant associations to negotiate with landlords, public or private, to determine fair and proportionate rents. These negotiations generally take place each year, and 90% of rental agreements are determined in this way. The rationale is that such negotiations are fair to both sides because individual tenants are weak and lack the ability to influence landlords, and because it is easier for large-scale landlords to sign a group agreement than to deal with each tenant separately.

Another Swedish feature is that the rents in the large municipal housing stock served as a norm for all rents, including the private rental sector. A regulated market where rents are decided in negotiations or by courts rather than supply and demand means there is little incentive for construction. The wait in Stockholm’s public queue for a rental in the inner city now averages 13 years!

In theory, Sweden’s rental market is designed to ensure that anyone who doesn’t own their own property has access to an affordable home with rent that’s capped, provided by either a local council or a state-approved private company. Once you get one of these so-called “first-hand” contracts, is usually yours for life.

Far from providing “housing for all” Swedish municipal landlords actively avoid housing the poorest and most vulnerable households, preferring those tenants who can supply good references and have no history of rent arrears and bad debts.

A tenant of an apartment has the right to sublet. Would-be renters who cannot find a place have the option of either subletting from someone with a long lease or renting from a private landlord. However, such arrangements are often for a year or less, since individuals who choose to let out their homes are usually limited to a fixed period agreed by the building’s housing association and only for a valid reason such as travelling abroad or moving in with a partner. By contrast, subletting contracts can change hands for double that price on the black economy, despite regulations designed to ensure such tenants don’t pay much more than the market rate.

Over time, politicians have tried to make it easier to build new homes, particularly rental accommodation. In 2006, for instance, the utility value system was supplemented with presumptive rents for new-builds in order to increase the incentive for building new rented accommodation. In practice, this has meant that a property owner has the possibility to charge market rents for newly-produced rental apartments during an initial period. This period was first set at 10 years, but was extended to 15 years in 2011. In the meanwhile, low rents in the municipal sector mean many of the properties built during the time of the Million Homes Program are now in a deteriorated state and require extensive and costly renovation and repair.

As many of us so often predict, the long term effects of rent control and the active discouragement of private landlords have led to a shortage of housing, lengthy wait-lists for any tenancies that do become available, a decline in rental quality and a flourishing black market.

[Bluekiwi]

Read any one of the many surveys that attempt to answer the question: “Which is the best country in the world at . . .” and the inevitable answer is Nordic. Why should a small group of chilly, sparsely populated and largely irrelevant countries sandwiched uncomfortably between Russia, Germany and the North Sea apparently be the home of the happiest, best educated, most socially aware and progressive people on the earth?

The answer, according to the academics, lies within the Gini Coefficient. To save you looking that up, the Gini Coefficient measures the level of wealth inequality within a country. Running this mathematical ruler over many countries, it appears that the more equal a society becomes the better the people feel. Living in an economically unequal country is stressful, both for the wealthy and the poor, whereas it’s unlikely that you will get all bitter and resentful over the lack of a ballpoint pen if no-one else you know has one.

Sweden, Norway, Denmark and Finland are all cohesive societies which historically have had low levels of immigration. Couple that with a strong Lutheran religious tradition that shuns ostentation, dislikes public displays of emotion, values thrift and approves of keeping one’s self to oneself and you have a people that thinks and acts as a group. Thus the Finns are said to have the best education system in the world, the Danes top the happiness score, Sweden is the best place to live if you are female and the Norwegians (as a nation) are the wealthiest people on the planet.

Another feature of these four countries are their high levels of taxation, usually topping 50% on personal income. Norway is one of the most heavily taxed countries in the world with a total tax burden of around 45% of GDP. GST is a whopping 25% and personal income tax rates border 55%. Company profits tax ranges from 28% to as high as 78% .In Sweden personal income tax can be as little as 29% but most employed people will pay between 49% and 60% through a combination of local government and state income tax.

So why do the people put up with this?

As cohesive and inward-looking societies, the people of these nations feature higher levels of trust in their fellow citizens than anywhere else in the world. This evidence is consistent with the reality that social cohesion is larger in Scandinavian countries than elsewhere. Thus citizens show a willingness to pay large taxes in belief that the money will be wisely spent on valuable social infrastructure programs – education, health programs, public transport – that benefit all citizens and will not be conspicuously wasted.

So while there are some extremely wealthy families and citizens in these countries – Maersk, ABBA, and Ikea’s Kamprad come to mind – the majority of Scandinavian people live homogenous lives of security, equality and contentment untroubled by any base desires to out-earn their neighbours or indulge in conspicuous displays of wealth and excess.

So how does all this affect their housing market? During my recent time in Sweden I spoke to a few people to find out.

During the 1960s and early 1970s the Swedish Government promoted an extensive housing construction project called ‘The Million Homes Programme’, but since then construction has consistently lagged behind demand.

One in five households rents a publicly owned home, and a similar ratio rents in the private market. Rents had been regulated since 1942, but were gradually deregulated between 1957 and 1968, when rent setting according to a utility value system, the “tenant’s value”, was introduced. This system, determines the rent according to the dwelling’s condition, reflecting its size, quality, year of construction and standard. New rents are set in accordance with comparable rents in the neighbourhood. Private landlording as we know it is almost unheard of. It is considered speculation, profiting from people in a way that is not socially appropriate.

There exists the Rent Negotiation Act, which authorized tenant associations to negotiate with landlords, public or private, to determine fair and proportionate rents. These negotiations generally take place each year, and 90% of rental agreements are determined in this way. The rationale is that such negotiations are fair to both sides because individual tenants are weak and lack the ability to influence landlords, and because it is easier for large-scale landlords to sign a group agreement than to deal with each tenant separately.

Another Swedish feature is that the rents in the large municipal housing stock served as a norm for all rents, including the private rental sector. A regulated market where rents are decided in negotiations or by courts rather than supply and demand means there is little incentive for construction. The wait in Stockholm’s public queue for a rental in the inner city now averages 13 years!

In theory, Sweden’s rental market is designed to ensure that anyone who doesn’t own their own property has access to an affordable home with rent that’s capped, provided by either a local council or a state-approved private company. Once you get one of these so-called “first-hand” contracts, is usually yours for life.

Far from providing “housing for all” Swedish municipal landlords actively avoid housing the poorest and most vulnerable households, preferring those tenants who can supply good references and have no history of rent arrears and bad debts.

A tenant of an apartment has the right to sublet. Would-be renters who cannot find a place have the option of either subletting from someone with a long lease or renting from a private landlord. However, such arrangements are often for a year or less, since individuals who choose to let out their homes are usually limited to a fixed period agreed by the building’s housing association and only for a valid reason such as travelling abroad or moving in with a partner. By contrast, subletting contracts can change hands for double that price on the black economy, despite regulations designed to ensure such tenants don’t pay much more than the market rate.

Over time, politicians have tried to make it easier to build new homes, particularly rental
accommodation. In 2006, for instance, the utility value system was supplemented with
presumptive rents for new-builds in order to increase the incentive for building new rented
accommodation. In practice, this has meant that a property owner has the possibility to charge
market rents for newly-produced rental apartments during an initial period. This period
was first set at 10 years, but was extended to 15 years in 2011. In the meanwhile, low rents in the municipal sector mean many of the properties built during the time of the Million Homes Program are now in a deteriorated state and require extensive and costly renovation and repair.

As many of us so often predict, the long term effects of rent control and the active discouragement of private landlords have led to a shortage of housing, lengthy wait-lists for any tenancies that do become available, a decline in rental quality and a flourishing black market.

Centuries of these Vikings raping and pillaging through Britain and Northern Europe (and each other) seems to have made them a more happy and equal society.
Is that what you are suggesting ?
All I have on the East Coast Bays here is a 12 foot dingy.
But I do have quite a wide selection of Axes, Hand Axes and Wood Splitters

[Perry]

Sweden is the best place to live if you are female

Peter - no mention of the islamic invasion? Although controversial and disputed, there is a lot of undercurrent [fake?] news about the incidence of rape of Swedish nationals by immigrants.

[artemis]

Good post again Peter.

So the net of it is - NZ could be the much vaunted Sweden via a huge rise in rates and many new businesses selling or leasing cigarette boats, axes. And tents for those who nobody will rent to.