Home and Income Properties

[drelly]

I was wondering whether anyone considered these to be a good investment? Are NZer's willing to live close by others in accommodation that wasn't intended to be split? Do you have to reduce the rent? Are tenants easy to get?

[RentMaster]

My brother had a property similar to this. He found it quite hard to find tenants, because people dont tend to like to share a place with someone else they dont know. Tenants he did find also did not tend to stay for long.
However, the total combined rent he received was quite good. Individually the rents were not too flash for the area, because he did have to reduce the rents in those situations.
It would be good if you could find one tenant who wanted to rent both the home and income.

[Gatekeeper]

I was in a home and income situation for many years. A large villa that had been professionally converted.
It worked really well. The flat had its own fenced yard, and lawn, they had there own parking area and privacy.
The rent covered the whole mortgage payment.
My average tenant stayed three years, and it was usually relet by word of mouth. If you could get a goody it works really well.

[cube]

Hi,

I think that is the key - make it seem, as far as possible, like they are independent by having obvious garden/parking/entrance for each residence. Sometimes this is less possible, but a bit of creative thinking may result in a presentable, rentable property with higher than average yield.

Happy thinking

cube

[drelly]

This all sounds like good advice. It seems that clear separation is the key to making it work well...

[Marcus]

I think that is the key - make it seem, as far as possible, like they are independent by having obvious garden/parking/entrance for each residence. Sometimes this is less possible, but a bit of creative thinking may result in a presentable, rentable property with higher than average yield.

I agree totally.

A couple of fences to section off a private area for each can create some outdoor living that may encourage the tenants to use an area previously thought of as shared (and not used by either).

I have seen this work well with flats.

Multiple income properties can return high yields but BEWARE.
In my (some what brief) experience, there are many illegal properties of this type out there. I have found more illegal than legit in fact.

Check council plans.

Regards,
Marcus

[Tempo]

I agree that the income looks GREAT. However, the higher the income the lower the quality of person you seem to attract, especially if they are living on top of each other.

I remember my dad had a friend who gave up his job in the 70s to become a full-time investor. I used to go and help him collect some of the rents and do the repairs on his properties. A lot of them started out as multiple occupancies or split into flats. And then he started renting out rooms. He bought some boarding houses too. I remember he was once really upset at how fast the toilet paper used to disappear. He asked me if I used one sheet or two. Mate, this guy watched the costs!!

Anyway, he had so many headaches - poor quality tenants, people doing a runner, repairs, complaints, trouble with the laws that he eventually went broke. I couldn't believe it - all those big returns and yet it didn't work for him. It taught me that quality is so important - both the properties and the people who go into them.

I saw him a few months ago when I came home. He has a big white beard now and looks like Santa Claus - he's a nicer guy though, told me that he learned the value of patience and the harm that comes from trying to get too much too quick.

Cheers

Tempo

[Marcus]

Hi Tempo,

I agree with your view on quality. I also think things like Location, presentation of property, screening and seletion of tenants, not over pricing rents and acting in a friendly professional manner with tenants play a major part in running a smooth bussiness.

Another thing is acting promptly on any issues that are of concern to both myself and/or tenant. I have had tenants comment on how fast I have problems dealt with. In my mind, I prefer to get it fixed and be done with it and not have to be concerned with repercussions letting things pile up.

Regards,
Marcus.

[orion]

...acting in a friendly professional manner with tenants play a major part in running a smooth bussiness.

Another thing is acting promptly on any issues that are of concern to both myself and/or tenant. I have had tenants comment on how fast I have problems dealt with. In my mind, I prefer to get it fixed and be done with it and not have to be concerned with repercussions letting things pile up.

Hi Marcus, 100% agree with you. Most landlord/tenant issues happen for one of two reasons - either the property is in a poor location that you can only attract bad tenants, or the landlord creates bad tenants by being slack with maintenance, communication, and how they relate to tenants. It is the same landlords I always hear are having to evict tenants, or going to the tribunal all the time.
There are of course still cases when you just get a dud tenant that doesn't want to pay the rent because of the mentality that - landlords must have more money than them, so they can afford to let people stay in their houses for free. I had one guy in particular that was like this a year or two back - there was just no reasoning with him at all - he had an extremely bad attitude towards money and people with money. He thought I should be more tolerant with him in paying the rent because I had lots of houses and $170 a week was nothing to me, so why should I be worried about such a little amount. He was a tenant that had had troubles with his previous landlord, which was a sign that I should have taking more notice of before putting him in the house.
Most of the tenants I get now come from referrals from existing tenants which helps a great deal.

Regards
Graeme Fowler

[Vern]

Home & Income Properties

Hi all

"Multiple income properties can return high yields but BEWARE.
In my (some what brief) experience, there are many illegal properties of this type out there. I have found more illegal than legit in fact.

Check council plans. "

I have been investigating turning a couple of houses I own into multiple tenancies to increase the yield since theyre not that flash - I don't have the money to do anything big.

The first is a 2 unit site which I can do up a large garage into a sleepout (I don't want to go to the expense of relocating another house or building on the back).

The second is one where there is a self contained basement area which could be blocked off. Alternatively there is a garage which could be converted into a sleepout/studio. Unfortunately its only a single unit site for which resource consent is needed. In addition I have been told that if I do have another studio/sleepout, that would be regarded by council as a 2 unit site and therefore illegal. The consequences of it being illegal is that it will not be able to be insured.

So I would recommend you talk to council and insurance company before doing the home and income property thing.

Cheers

[klimki]

Hi, Guys!

Thx for all the helpful info on this topic!

The first IP I'm looking to buy also has the potential for a separate self-contained flat in the downstairs area.

I'd like to enquire further about the possibility of converting the property into the house and flat arrangement, but I could definitely use some pointers as to the appropriate procedure to approach the council.

Thanks!
~ englishmum

[Marcus]

Be careful when converting a single dwelling to a duel dwelling. Council should be consulted to ensure that certain criteria are met.

I can only speak for my area as I have not approached any other councils regarding this matter but, from what I have been told, there are two different situations that are allowed.

1. Where the purpose of the second dwelling is for rental.
Consents must be sought from council that cover things like adequate parking (off-street), Shared services, and probably the biggy I would say is the fire rating of joining surfaces (walls, ceiling etc). Evidence of this should be kept in the building file held at Council including plans, permits and code of compliance.

2. Where the purpose of the second dwelling is for a dependant family member (or the like).
A letter must be submitted to council that you intend to provide housing for a dependant family member.
Separate letting of the dwellings is not allowed. Neither is fire protection between the dwellings. This I think is to detract from getting someone in that you are not in constant communication with. i.e. If you smell smoke you have instant access to the area.
A concern in letting them separately would be say if "tenant A" comes home drunk and falls asleep cooking a meal. "Tenant B" is upstairs asleep in bed. With no fire protection between the two dwellings everyone cooks and guess who is left to have the finger pointed at?... You can forget about insurance(and that may be the least of your problems).

These two situations are applicable to my area thus the rules in the area you are looking in may in fact be different, so be sure to check with your local authority.

Regards,
Marcus.