Many landlords see property investment as a wealth creation strategy. Many choose to use a property management service, however a number of landlords believe they can successfully manage their rental property themselves but more and more private landlords are running into problems they didn’t expect. In the next few weeks we will explore the problems associated with being a private landlord.
Danger 1- Bad Tenants tend to Avoid Property Managers!
It is often true that a private landlord can place a ‘for rent’ advert online and be inundated with response, not realising they could be speaking with tenants who specifically avoid dealing with agents. This tenant type likes to target private landlords knowing full well they will most likely be accepted on face value, with no reference checks or stringent identification checks completed that can expose their unsavoury rental history.
Danger 2- Bad Tenants Don’t Like Regular Inspections!
Some bad tenants target private landlords because they know that MOST do not conduct regular inspections. This allows them to conduct illegal activities like drug production which can result in substantial damage to the property. It is only after the tenant has left or has been evicted that the damage and devastation is evident, leaving the landlord to fix the damage and deal with a massive financial loss.
Danger 3- Private landlords often delay rent arrears process
If a tenant falls behind in the rent, private landlords can give the tenant lengthy periods of ‘grace’ unknowingly allowing them to get into a financial ‘point of no return’ where they are unable to catch up. When the landlord finally starts to serve legal notices it is too late and results in a much greater loss than if correct action was taken in a timelier manner. This can also prejudice landlord insurance claims if the legal process is compromised.
Danger 4- Private Landlords can become Emotionally Involved
Taking action against a tenant is so much harder when you have become emotionally connected with the tenant. Having a business only relationship is good, but having a ‘no relationship’ status is better by employing an agent, who avoids becoming emotionally involved and treats any situation in a business manner. Becoming emotionally involved can make your landlord experience a bitter one if a bad tenant takes advantage of your ‘good will’ and leaves you with a financial loss.
Here is a recent example…
James was managing one of his properties for over 7 years and have the same “great” tenants in the property for the last 5 years. While the tenants look after the property well but they are only paying $490/ week rent for a stand alone well maintained 3 bedroom house in Mt Eden! The market rent should be $650-$690. But every time James tried to talk about rent increase the tenants say they cant afford it and they are great tenants. James find it difficult to bring up the subject or deal with this situation.
When Uno Property Management Specialists took over the management of the property, we negotiated the new rent to be $625 taking into account of the history of the tenancy and offered the below market rent in good faith. Everyone was happy in the end.
Danger 5 Not Completing a property condition report
This document describes the standard of repair for the premises and any items included within the premises, such as furniture. It is designed to protect the interests of both parties.
Danger 6 Not having a fixed term tenancy
This is a legally enforceable contract which usually spells out the length of the rental agreement, the amount of rent that will be paid, and the condition the property must be returned in. By having a fixed term tenancy it is protecting the landlords from tenants changing their mind and ending tenancy in the middle of a slow market season.