Life as a Landlord

[Perry]

There is a recent PT thread, here: Successful exemplary damages claims anybody?

[flyernzl]

Thats very handy, especially (b):
"No application may be made under subsection (1) later than—
(a) 12 months after the termination of the tenancy in the case of—
(i) an unlawful act to which section 19(2) refers; or
(ii) a failure to keep records in respect of bonds that is an unlawful act to which section 30(2) refers; or
(b) 12 months after the date of commission of the unlawful act in the case of any other unlawful act."

Her claim now is:
Vacated Tenancy
Compensation/Damages - s 77(2)(n)
Exemplary Damages - s 109 - Schedule 1A
Failure to maintain - s 45(1A)
Quiet enjoyment - s 38(1), 38(2)

[flyernzl]

There now seems to be general agreement that there is a substantial and growing shortage of rental accommodation in many parts of the country. This should hardly come as a surprise, given the adverse social environment that has faced landlords for the last few years.
It is often forgotten that no private individual can be forced to be a landlord, and that most residential investment property owners can choose between a number of options on how they utilise their property. As well as leasing it out on a traditional term or periodic tenancy, owners can now go into the short-term rental market with AirBnB or BookaBach or run the place as a room-by-room rental.

So, apart from passing some even more restrictive laws on rental property, what does the current government do? On possibly not so surprising move was to set up a study group to look at the causes and effects of the housing shortage, otherwise known as ‘the housing crisis’, that is affecting both rental and owner-occupied property. After all, that’s what governments tend to do, they love ink on paper. Possibly rather more surprising is their choice of the people to study this matter – an economist, an academic and a social worker.

While media-star/economist Shamubeel Eaqub, University of Otago’s Professor of Public Health Philippa Howden-Chapman and the Salvation Army's Alan Johnson may well be experts in their own fields of interest, one could have expected that the group to study a housing shortage might well have included (if not comprised) a developer, a builder, a mortgage broker and yes even a landlord and a tenant.

I do realise that such a gathering of practical people who have daily experience of working and living within the property market may possible return a report that does not agree with any preset Government agenda. This is always a risk – some years ago a large Canadian city hired a consultant to prepare a report on how to reduce fuel use and the subsequent pollution within the city. They were shocked and horrified when the report eventually arrived recommending that the best way to reduce pollution was for the city to provide more easily accessible parking for vehicles. After driving to their destination people could then immediately find a parking spot rather than be left driving around and around the place searching for somewhere to leave their car, unnecessarily burning fuel and causing road congestion in the process. This was, of course, diametrically opposed to the city bureaucrats pre-prepared plan to restrict and heavily tax vehicle access. Embarrassingly, they had totally forgotten to tell the consultant what his conclusions were to be.

In our own case, I am fairly sure most of us can be fairly certain what course of action Eaqub, Howden-Chapman and Johnson will recommend. It will largely come down to more Government intervention, greater displacement of private construction by public sector development, upping of tax-payer funded benefits, much strident trumpeting of the word ‘free’, and the ritual tarring and feathering of the usual suspects (foreign speculators, private landlords, capital-gain avoiders and developers) as the process eventually and inevitably grinds to a shuddering halt, stranded on the rugged rocks of the real world.

So what is the answer? Well I have not been offered a comfy and well-funded sinecure to sit in a nicely furnished state-owned office and study the problem, but I can see that there is not the one easy answer, the answer that everyone seeks. As a country, we have spent forty years working our way into this situation and getting out is probably going to take almost as long. Sorry millennials, whatever happens you are certain to miss out.

Socially, we all want to live in just a few areas of the country and we earn low wages. I have recently been zipping up and down Southland and Otago, and viewed from above such places seem remarkably uninhabited. Unfortunately, few people want to live there. That’s a problem. Most countries in the world face similar difficulties – look at Australia or Canada. On the wage front, most of our high earners are in non-productive industries - Law and Government - while those endeavours that do provide export earnings and real growth are generally low income – tourism and farm production. Any suggestions to open up areas of high return investment s such as oil and mining are immediately shouted down by those driving their nice shiny new cars to protest meetings and stopping at the Caltex station to fill up on the way back home. So we don’t want to be a Norway or a New Caledonia.

At a legislative level we have many laws and regulations bought in on the basis that this would be a nice idea. Little or no consideration is ever given to the cost aspect, and if this is even considered it is glossed over either on the basis that the cost will be minimal or that somehow it will be ‘free’. Every road cone, every tag-and-test has a cost, it all adds up, and that cost must eventually somehow be paid by the end user. Thus we end up with Cadillac houses when Corolla ones are what we need. The problem is summed up rather neatly in the advertising slogan ‘Don’t build a house, build a Landmark’.

Then there is of course the perennial question of land. Somehow, we have ended up in a position where you have to apply for permission to some cardigan-wearing office-bound pen-pusher for permission to build on the land you own. The Resource Management Act and other subsequent restrictions have complicating things so much that not only do you have to employ a regiment of professional consultants at considerable cost but also wait then months if not years for the great sausage machine to eventually cough up a decision on what you are and are not allowed to do. Again, every day and every piece of paper costs, costs hugely, and that cost inevitably appears in the end price.

So there we have possible long-term solutions – investment outside the hot-spots, real-world increases in our incomes, removal of planning constraints and delays, emphasis on modest homes and restraint in legislative demands. Not an impossible program, but as it is one that would take years to implement and adjust to new political and societal expectations I have little hope that will be implemented.

[artemis]

Another excellent post, flyernzl.

IT is a high income area, already large and growing. And another is trades, maybe more medium income but definitely not low. Hospo, including fast foods, is low but we no longer have the low income factory workers once such a large sector here.

High income earners will be owner occupiers when they choose to be and seems they will be spoilt for choice as landlords sell up. Lower income earners will move in with the rellies, apply for a state house and be counted as 'homeless' meantime.

I see the next phase of the housing 'crisis' as rental availability / affordability. Sure there may be 'affordable' Kiwibuild places coming but that is not a short term or even medium term fix. And Wellington - for example - is about to be swamped by hopeful renters over the next few weeks. Last Jan/Feb there were front page photos of queues of 30 or 40 people outside available Wellington rentals. This will happen again but it might be up to social media to publish them.

[Perry]

I do realise that such a gathering of practical people who have daily experience of working and living within the property market may possible return a report that does not agree with any pre-set Government agenda. That is always a risk. Some years ago a large Canadian city hired a consultant to prepare a report on how to reduce fuel use and the consequent pollution within the city. They were shocked and horrified when the report eventually arrived recommending that the best way to reduce pollution was for the city to provide more easily accessible parking for vehicles. After driving to their destination people could then immediately find a parking spot rather than be left driving around and around the place searching for somewhere to leave their car, unnecessarily burning fuel and causing road congestion in the process. This was, of course, diametrically opposed to the city bureaucrats pre-prepared plan to restrict and heavily tax vehicle access. Embarrassingly, they had totally forgotten to tell the consultant what his conclusions were to be.

That has to be one of your most informative if provocative quotes, Peter.

The council/government sets the terms of reference and appoints the 'right' people so that it gets the 'right' answer. Then it trumpets how it was consultative, as it sets out to do more or less exactly what it always planned to do, in the first place.

As observed in another thread, council wallahs - the cardigan brigade, as you call them - experience no adverse or exemplary consequences when they make a mess of things. Their job continues and the wages-funded-from-Rates money keeps rolling in. All the while, the Councillors are impotent as they read innumerable and voluminous reports and "sip tea." (As you once observed.)

[sidinz]

That has to be one of your most informative if provocative quotes, Peter.

The council/government sets the terms of reference and appoints the 'right' people so that it gets the 'right' answer. Then it trumpets how it was consultative, as it sets out to do more or less exactly what it always planned to do, in the first place.

Just as they have done with the tax working group. Just about everything is off the table except a CGT. Hmmmm.....

[flyernzl]

“So where are you actually going with this?”

That was a favourite saying of my fifth-form maths teacher as yet again he looked over my shoulder when I was fumbled through an answer to one of his set problems on geometric progressions. It’s a long time ago, but similar questions at appropriate times over the many years since have helped me to structure my life and achieve some of the goals that I have set myself.

The start of a new year always seems to be a good time to sit quietly in a corner and ponder where you are now, where you would like to get to, and how exactly you are going to get there.

Yes it all comes down to that nasty word ‘Planning’ and once you have planned then regularly taking the time to see if you are still ‘On Plan’. The goals that you set yourself are unique to you, and only you can know if you are heading in the right direction to get there. If not, then corrective effort might be needed. Sometimes I look at other people’s behaviour and actions and wonder why, but experience has taught me that they are working their own plan which is obviously quite different than mine and therefore calls for a different set of decisions and actions.

Last year my monetary payout finally came through. I knew that this was eventually going to happen, and an integral part of my own plan was to use this money to pay off all my investment property mortgages. However, when you have a seven-figure sum just sitting in the bank, other possibilities tend to open up. We are obviously heading into an economic and political climate where pressure will be applied to investment property, and where there is pressure no doubt there will be bargains to be had.


The Labour-led Government are proposing to implement a number of changes in taxation rules. Expectations are that the brightline test, which ensures that any profits made from the sale of a residential investment property held short-term is taxable, will be extended from the current two years to five years and that there will be a removal of property investors’ ability to claim tax relief on any residential rental losses.

Along with these two measures, which are promised to be implemented within 2018, the Government has set up a Tax Working Group led by former Labour Finance Minister Michael Cullen. Given the constraints laid out in the Brief to that group, a capital gains tax is likely to be among their eventual recommendations. We are told that the implementations of any recommendations from that group will, if adopted, not be imposed until after the next election. However, the probability of this happening will most likely scare the chooks rather sooner than later.

So by the end of 2018 the residential property business will probably be more adverse for investors starting out, those who make a running cash loss on their property investments, and those who aim to buy-and-sell without declaring their intention to do so. Seasoned well-resourced investors who actually make money from their rents and who hold for the longer term will probably not be affected by these current moves and will be well placed to take advantage of those who are less well placed.


So do I keep this pile of cash as a war chest, ready to pounce? Or do I maximise my current cash flow by waving goodbye to ANZ and Westpac? This is where The Plan comes into play.

Over the years I have been offered many tempting property investment deals. In each case I have been able to hold the deal up and ask myself “Is this going to help to get me to where I want to go?” Quite often, the answer is no. If your plan is to have a six-month tour of South America, then an offer of a bargain-price holiday in Perth, however tempting, is not going to get you there and actually represents a diversion from your real objective. To achieve your plan you should concentrate on your goal and avoid distractions.

So will keeping a few mil in a low interest saving account in the hope that some profitable property bargains will fall out of the sky this year fit in with my own plan? Probably not. Sure, I have already treated myself to the exciting 250km/h Mercedes-AMG C63 V8 and a few other of life’s non-frugal fripperies, but my goal of maximising my monthly cash flow remains unaltered and I can do that best right now by reducing debt rather than increasing both my portfolio and my workload.

I have never been into the competitive “I own more than you” game. I don’t care how much you own, that is not my measure of value. To me, investment property has always been a means rather than an end to itself. So ‘Where are you going with this?’ can best be answered with “Because it allows me to do what I want to do when I want to do it” and for no other reason. Life is too short to be just another hamster in the wheel, answerable five days a week to The Man.

So I shall discharge mortgages over a few more properties and expect to pay a bit more in income tax as a result. That might not be what you would do in the same situation, but my plan is my pan and your plan is yours. We each go to heaven or hell in our own way. The important thing is that you too have a plan, that you know “where are you actually going with this” and that you take the time, this early in the year, to actually think about how that plan is working for you.

May each and every one of you have an interesting, enjoyable and profitable 2018.

[Davo36]

Monetary payout? I'm guessing this must be a superannuation kind of thing?

Happy New Year to everyone!

[Learning]

Yes it all comes down to that nasty word ‘Planning’ and once you have planned then regularly taking the time to see if you are still ‘On Plan’. The goals that you set yourself are unique to you, and only you can know if you are heading in the right direction to get there. If not, then corrective effort might be needed. Sometimes I look at other people’s behaviour and actions and wonder why, but experience has taught me that they are working their own plan which is obviously quite different than mine and therefore calls for a different set of decisions and actions.

In preparing for battle I have always found that plans are useless, but planning is indispensable. - Dwight D. Eisenhower

[Perry]

If There Is One, A Plan Can Be Amended

In preparing for battle I have always found that plans are useless, but planning is indispensable. - Dwight D. Eisenhower

I don't think PIs, no matter how good they think they are at such things, always plan. They may plan to plan, of course, but . . .

However and in a sense - to me - that's generally what sets PIs apart.

For most of the rest of 'them,' planning is either an unaffordable luxury or a foreign concept.

Sometimes I look at other people’s behaviour and actions and wonder why, but experience has taught me that they are working their own plan which is obviously quite different than mine and therefore calls for a different set of decisions and actions.

In that sense, Peter, I suspect you give credit where none is due. In my case, I got into property investment by accident. (Perhaps not truly property investment, but passive income from rentals. Not necessarily the same thing.)

To follow on from Learning in quoting a well-known statesman, tis said that Winston Churchill once opined that:

Sometimes people stumble over the truth, but then pick themselves up and hurry off as if nothing had happened.

I was lucky.

I stumbled, then I noticed what had happened, then I learned from it.

But that's not my point.

As I see it, far too many people do not (or can not) plan. Plan for what is irrelevant, but the consequences are usually the same:

Some people makes things happen
Some people watch what happens
Many people wonder what happened.

It's not the he/she/they planned to fail
Rather, he/she/they failed to plan.

Do you live life?
Or does Life live you?

[flyernzl]

Having finally got rid of my Mad Tenant I was left facing that fairly common post-tenant-departure problem – rubbish. Lots of it. Rubbish with a very capital R.

Even after she had removed what were presumably the essentials of life to sustain her in her new and heavily taxpayer-subsidized home elsewhere there was stacks of stuff left. Every room was piled high. Just how someone could accumulate so vast a collection of possessions in just five years is quite amazing. She must have bought home a full car-load each and every day and then never actually thrown any of it away.

What is it with tenants that they never ever remove anything from the house? I counted seven television sets, presumably most or all not working. Furniture, clothing, nick-knacks, cushions, a spare fridge or two, and oh the mattresses – heaps of mattresses. They must have been breeding mattresses in the warmth and the dark. I quailed at the prospect of dealing with all this stuff, yet it had to go.

Quite often, when I see unwanted items starting to build up at one of my tenancies, I make the inhabitants an offer – I will bring my trailer to the site, padlock it to the carport, and they can stack their junk in. I’ll leave the trailer there for a week, and then at the end of the week I’ll take it all away. Free. No charge to them. Sure, it costs me the tip fee, but if they eventually depart leaving it all lying around then I’m going to have to pay that anyway, and should they take up this offer it saves me all the effort of bending over and collecting it up myself.

But this particular mountain of abandoned and decaying dross, debris, and detritus was far more than my poor little trailer could possibly cope with. Sterner measures were needed. I consulted the online rubbish disposal directory, selected a supplier and ordered a 12cu.m bin to be delivered, the largest that would fit down the driveway.

When the bin arrived (delivered, I may add, rather disturbingly by a man who actually had a ‘Pirates of the Caribbean’ steel hook instead of a right hand) I thought ‘Hey, possibly a bit of an overkill here. Maybe I should have gone rather smaller’. Accepting the offer of help by a useful friend, we started dragging stuff out of the house and chucking it in. A most unusual exercise. As we filled the bin up, the piles still inside the house didn’t actually seem to be getting any smaller. Perhaps we had some sort of Sisyphean self-generation process going on here.

Eventually, of course, we did manage to make a dent in the mountain. By concentrating on one room at a time we could feel that we were actually making progress. Getting that first room clear was a euphoric moment, then the second room and the third. By now the bin was definitely showing signs that it was going to be inadequate for the job, so several items of unwanted furniture were left stacked on the front deck allowing us to deposit most of the smaller and possibly more repulsive things straight into the bin. Yes, there was clear evidence of several uninvited and unwanted tenants in the form of small rodents having been cozily housed within the premises. Thanks goodness we had each equipped ourselves with that essential Landlording accessory – a stout pair of thick leather gloves.

By mid-afternoon we spluttered to a halt. Dusty and disheveled, we had the bin filled to the brim. But we were not finished yet. The piles of gimcrack furniture on the front deck still looked imposing. “I know a rubbish removal guy” my friend said, “We’ll ring him, and see when he can call around to take all this trashy rubbish”. “A damn good idea”, I agreed.

So the second bin arrived, on the back of a truck. Two hefty men lifted the saggy bed frames, shoddy cabinets, old tables and disintegrating audiovisual cabinets into the bin and crunched them down. As they drove away I could feel that we were, at last, getting somewhere near the end of what had seemed an impossible task.

Of course this was not quite the end. No way. Outside, concealed among the untidy and overgrown garden shrubbery, lurked broken and fragmented children’s toys, discarded footwear, damaged skateboards, the world’s largest collection of dead pot plants, a shattered barbecue, and an endless and eclectic selection of other assorted delights. Slowly, over the subsequent days, I unearthed this hidden wreckage and carted it away, trailer load after trailer load, to the local refuse centre. Nice people work there. They know me well now, and by the time I’d dropped off the eighth load they were inviting me to their after-work parties and their children’s christenings.

Of course all this comes at a cost. Whoever said “Where there is muck there is money” was looking at it from the rubbish disposal industries point of view. More than twelve hundred dollars spent I reckon. Unclaimable by me of course, as at the final Tenancy Tribunal hearing the adjudicator had sternly told me there was no way I was entitled to any cleaning or remedial costs. You rent out, you pay. Also, of course, it is an article of faith within the whole Tenancy Services industry that a Landlord’s time has no value.

So there we have it. Replace the carpets, paint the walls, subdue the garden and then we are off tenant hunting once more. Round and round we go.

[Don't believe the Hype]

but you're a greedy landlord... surely you will have just paid someone else to do all this whilst you sat on your yacht eating caviar.

seriously though, this is exactly why we -

i) include 240 Ltr bins with weekly collection and garden maintenance in all our rentals - it's not an option it is included in the rental price. We only started doing this last year when I got sick of cleaning up crap from tenants... fingers crossed it works... not sure it will help with mattresses though

ii) have started charging top dollar for our rentals - even when you 'look after' tenants with lower than market rentals, in the majority of cases, when they decide to move on, they seem to forget how much you've helped them along the way and do their best to ensure they don't have to pay their own way by skipping last few weeks rent and/or leaving their crap for you to dispose of

[Davo36]

Hmmm, could this not have been sorted with regular inspections?

Like if the place is being piled high with crap, surely you can get them out?

My father had a tenant like this recently, only the property had 2 large sheds. So those were full as well. Like the situation above, but about 10 times as much stuff, not exaggerating. Cost $12k to get rid of her and her rubbish.

But again, it was my dad's fault, he should never have let it get to that stage. He was being far too nice to her, for far too long.

[Wayne]

Hmmm, could this not have been sorted with regular inspections?

You have to wonder don't you.
Makes for a nice story but you'd think, with 3 monthly inspections, that it couldn't get that way in, say, 6 months.

[mrsaneperson]

You have to wonder don't you.
Makes for a nice story but you'd think, with 3 monthly inspections, that it couldn't get that way in, say, 6 months.

I guess its what you do as you adopt the comfortable ""outta sight outta mind"" notion. Before you know it it turns from a small problem to a bigger one.