Tips for Rental Property Investors

Property investing can be a risky business.  Follow our tips to maintain a long-term reliable rental income from your investment property.

Purchase Quality Fixtures & Fittings

Under-budgeting, and purchasing low quality appliances is a mistake many property owners make.  Low quality fixtures, fittings and appliances often require regular maintenance more frequently, and need to be replaced after a much shorter period.  This causes the cost to be more expensive than if a quality item was purchased in the first place.

Tenant-Landlord Relationships

Maintaining a professional relationship with your tenants is a great way to encourage them to stay longer and take good care of your property, helping maintain a reliable rental income.  Good communication and goodwill goes a long way in maintaining good landlord-tenant relationships.  Tenants generally expect enquiries and requests to be answered in a timely manner, and appreciate you being friendly and co-operative – remember goodwill reflects goodwill.

Preventative Repairs

Does the roof need to be repaired?  Are the windows leaking?  Is the property secure?  Look out for any preventative repairs required during property inspections to reduce the occurrence of damage over time.

Investing Badly During Renovations

When landlords decide to invest in a rental property it’s often with the goal to increase its rent income and tenant demand.  Yet all too often people fail to invest in quality products that will earn profits in the long-term.  Though it’s tempting, try to avoid cheap, low quality paint, wallpaper, carpets and tiles.  These have a habit of wearing out quickly.  Discerning tenants look for better quality and you may be cutting some of the best tenants out of your market.

Quinovic Property Management Parnell Gives Tips for Rental Property Investors

Price-Rent Ratio

Don’t make the mistake of sealing the deal and purchasing investment properties without fully understanding the financial situation.  Take the time to first consider what the cash flow will be, how the property will help your financial position, and what initial maintenance may need to be done to attract good tenants.  Analyse the gross yield and net yield of the property, then calculate what you will earn after all the costs are taken into account.  You may even find the property isn’t as profitable as you first assumed.

Managing the Property

Managing properties is more than just being available to answer tenant calls all day every day.  Make sure you keep on top of the paperwork too.  Often we hear about landlords who let rent arrears get out of control with thousands owned.  A simple spreadsheet and swift contact with the tenant can help you keep on top of rent arrears, maintenance costs, endings of tenancies, help you measure the financial success of the property, and remind you when the rent value can next be looked at.  Thus creating a less stressful investment and a more confident investor.  Another common mistake made by self-managing landlords is the avoidance of properly checking and recording the condition of a property, at the beginning and end of each tenancy, and at regular property inspections, then letting damage go by without claiming the repair cost from the tenant.

Find Out More

To find out more about property management get in touch with Quinovic Parnell – experts in property care and return.  Click on the link below:

Get in touch with Quinovic Property Management Parnell

Hidden costs of self managing your property.

You may believe you can save money by managing your property yourself! This is a phenomenon unique to New Zealand residential property owners where perhaps due the “do it yourself” attitude 80% of rental properties are self managed. In contrast even in Australia the reverse is true where only around 20% of property owners manage their own rental properties.

Unfortunately, the belief can often be counter productive when self managers discover the hidden costs and the risks they are taking by not using an experienced specialist residential property manager.

Here at Quinovic Parnell we see self managers losing money and can often turn around the losses.

Here are some of the risks of self managing:

 1.      Rent too low

Self managed properties are more likely to be rented below market value.  This is due to a combination of factors including:

You are unlikely to have good comparative data on market rentals which a good local property manager will have from continually letting properties in the area.

You may be less likely to review the rent regularly due to simply forgetting, fear of losing a good tenant, or having too personal relationship with the tenant and not wanting to upset them.

 For a long term rental this can have a huge impact on long term cashflow. Rents should be reviewed at least yearly, and adjusted when appropriate even for good tenants.

 2.      High Vacancy rates

A self managed property is at greater risk of higher vacancies. There are several reasons for this and is mostly due to a lack of professional relationship with the tenant and failure to treat the property as a business.

 So examples of this we have often seen include:

 Self managing landlords being reluctant to start viewings at the property before the tenant moves out, because the tenant is not wanting to co-operate with this.  This is a sure loss of around 3 weeks rent – almost a year of management fees.

   If a tenant is vacating in the peak season (which includes the January holiday season) you may not be back from holiday to deal with handling enquiries and viewings in a fast efficient way.

  Not controlling the tenancy. For maximum return on most properties, fixed term tenancies with renewals in the peak period are recommended. However, if you succumb to pressure from the tenant to change to a periodic tenancy, or allow a non-peak termination date, or forget to renew the fixed term so that it becomes periodic, this highly increases the risk of a longer vacancy at the end of that tenancy.

 You may find it difficult to insist on the terms of the lease even in difficult circumstances such as where the tenant has been made redundant, a family breakup or a forced relocation.  Unfortunately, letting a tenant off a lease when this is not required can be very expensive.

 3. Cost of damage and cleaning

 Self managing landlords are often not able to be firm enough with tenants on an ongoing basis to establish standards for, during and at the end of a tenancy.  One part of this is failing to complete a thorough property condition report for each tenancy which involves hundreds of photos and a detailed written report that takes several hours to complete.  Following this process and providing the tenant with this report sets a bench mark and is a strong indicator to the tenant of the detail that will be checked. If this is not done, and not followed up with regular inspections (we recommend 3 monthly), then there is  increased risk of the property being allowed to deteriorate, and arguments at the end of the tenancy on cleaning standards and ‘wear and tear’.  It is essential to establish a history with the tenant of being firm and insisting on a high standard of cleanliness so that this becomes the expectation. 

 At the end of a tenancy a tenant will sometimes put pressure on you to release the bond even before the end of the tenancy or very soon after, for example if they are leaving the country.  However, succumbing to this request can result in difficult to recover costs for rectifying damage and cleaning issues which are found later on.  It can sometimes take until a new tenant moves in to check that everything is working as it should. For example if the power has been disconnected it is difficult to check that appliances are all working.

 Your insurance may become invalid if inspections are not carried out at least once every 6 months.  A high standard of cleanliness (above the level legally required) cannot be insisted on legally, but there is a high chance of achieving this with regular inspections and setting a high expectation of the tenant.  If a history of high expectation has not been established then the tenant may consider minor damage and cleaning to be ‘wear and tear’.

 4. Rent Arrears

 Rent needs to be checked on the due day and action taken immediately if rent falls into arrears.  This can happen even with a previously reliable tenant due to sudden loss of income due to redundancy or illness.  Arrears are most likely to happen in the holiday period when most people are not even thinking about their rental property at all and are on holiday. Timely and professional action is essential to ensure that appropriate legal action is started and the issue is resolved before the debt mounts. 

 This is not a pleasant process but essential to prevent the risk of losses in the thousands which can accumulate in a matter of weeks.

 Another common issue arising with self managing is that arrears are not treated seriously enough.  We have seen many examples where tenants have accumulated thousands of dollars of arrears and the landlord has failed to take decisive action due to repeated promises and some irregular payments from the tenants.   A firm policy to follow the legal process of 14 day notices and application to the Tenancy Tribunal in case of arrears, is essential to prevent large potential losses that are very difficult to recover.

 5. Breaking fixed term tenancies

 Approximately 20% of fixed term tenancies will be broken at the request of the tenant.  We have seen so many examples of self managers letting tenants off their tenancies and making concessions that are not required resulting in significant vacancies.  If managed professionally a new tenancy should be started with no loss of rent (not even a day), and expenses such as advertising, credit checks and a new property condition report covered by the outgoing tenant.  

 A formal documented process is essential to ensure that the outgoing tenant accepts responsibility for the tenancy and expenses.  This is time consuming, but essential to prevent arguments later over who pays for what. Tenants may advise they want to move, then change their mind and you are left with costs if they have not formally agreed to them.

 6. Selection of a tenant

 Tenants with adverse rental or credit history generally will not even approach Quinovic properties because they know they will get checked out and will not be successful.   Self managers are at much higher risk of attracting unsuitable tenants.  High quality tenants also often prefer to rent through a professional property manager as they know they can demand a professional level of service.  Quinovic has many tenants like this who will not go self managed properties due to past bad experiences with unprofessional service.

 Thorough reference checks and credit checks must be completed in all instances.   You are more likely to be more tempted to take a tenant at face value as you are not letting properties all the time with constant comparisons.  

 It is also important that the process of offering the tenancy is formal and clear.  We see many examples where inadequacies in this area result in misunderstandings and tenants pulling out at the last minute resulting in a loss and unexpected vacancy.

 7. Inadequate Documentation

 The standard Building and Housing tenancy agreement is non-specific and missing a number of important issues that should be in any tenancy agreement. 

 If proper documentation is not used throughout the tenancy this massively increases the risk of misunderstanding and not being able to hold the tenant to account, and with subsequent loss to you.  Proper documentation should be used for all records including the initial tenancy agreement, record of inspections, record of variations and extensions to the tenancy, and proper notice being given at the end of a tenancy. 

 If for example you forget to renew a fixed term tenancy before it expires, the lease enters a 3 month ‘no-mans land’ where the tenant does not have to give notice at all.  This is currently under review and is expected to change to a situation where if no agreement is made then the tenancy will automatically default to a periodic tenancy.  Allowing this to happen is likely to result in later loss as the tenant then only needs to give 3 weeks notice, and can do so at any time of the year.

 Is it really worth the risk and stress???? Join other self managing owners who have referred their business to us for peace of mind.

 For rental appraisals, rental market advice, or property management, please contact us – Mary Vinsen or David Vinsen at Quinovic Property Management Parnell.

 

10 Reasons for choosing Quinovic to manage your Rental Property

 

 1. Size does count! Because of our reputation, we have become the largest independently-owned specialist property management group in New Zealand. This means we have more accurate rental appraisals, we deal with more property tenants on a daily basis, and we have invested in superior systems to make your property investment profitable, easy and safe.

 2. Property management specialists. Our business is purely property management. We do not sell properties; our sole function is to professionally manage residential properties.

 3. Experience. We have been in business serving property owners for 21 years, and our performance and experience has built our reputation as NZ’s leading residential property management specialists.

 4. Inspections. We undertake regular thorough inspections, with full reporting to owners, keeping you informed and in control of your investment.

 5. Reputation. Over 75% of our business comes from referrals from satisfied clients.

6. No letting fees for tenants. We do not collect letting fees from tenants; we work solely for the property owner, with no conflict of interest.

 7. Prompt payment. Don’t wait until the end of the month to receive your rents; all payments are made automatically to your account 5 days after we’ve received them.

 8. Online access. Full accountability, transparency and reporting for owners with internet access to their individual property and financial reports. Check the status of your property’s records, inspections, photos and accounts at any time, wherever you may be.

 9. Financial reporting. Clear and comprehensive monthly and annual financial reporting, enabling ease of accounting and taxation returns for owners.

 10. Deal direct with the business owner. The Quinovic group shares world-class systems and reporting, but each franchise is locally owned and operated by a friendly, local professional.