Real Estate

OMG is that us?

Driving to work one Summers’ day a few years ago, I was listening to the radio when I heard that there was a police incident in a street where I managed a property.

I listened intently as we had not been able to get hold of the tenants for a few days….. my spider senses were tingling….their rent was behind and we had been trying to get hold of them without any success.

When the radio announced that police were onsite investigate a “double death” my stomach lurched. I knew it that they were talking about our tenants and our property. Luckily I had a contact in the police and they were contacted, they confirmed that yes it was our property. Damn! OMG it was us!

The tenants were twenty somethings and we had never had any problems with them throughout the tenancy. Hence why it was so unusual that their rent was not in the account as usual. My heart immediately went to to the parents of the young boys, who were now experiencing the loss of their children. Those poor parents. I personally really hate it when a tenant dies, I have had to deal with 6 in my career so fortunately there was no emotional panic and I could be the professional property manager that the parents needed.

My job was to now support all parties involved (including my staff). I actually had an ex-staff member who once told me how he had found a tenant hanging in a property – my ex-colleague was approximately 23 years old and he was doing a periodic inspection. He called the office to tell them what had happened and unfortunately he was left there to deal with the situation all on his own. His boss did not arrive to assist! I was disgusted  by this. I would never do that. This is not something that a young professional should be dealing with, it will have lasting effects. If a tenant passes away at a property, the owner of the business should be out dealing with it, not the younger ones. (Rant over!)

Thoughts kept running through my head; how do I tell my client that this has happened? She will be devastated. Has anyone told the parents yet? Hopefully the police had already informed them. How did they pass away? What had happened? What did I need to clean up? I  know that the last question sounds very basic but at the end of the day someone has to take care of this and usually it is the property manager.

So I dashed over to the property, luckily the police were still there and they advised that the bodies had been removed (you could audibly hear my sigh of relief). I was told that it did not look suspicious and that they suspected that it was a drug overdose.

When I went to have a look I could see that the tenants had moved a mattress from the bedroom to the lounge room where they passed away. Unfortunately they had been undiscovered for a few days and it was now my job to arrange the forensic clean up.

So let me tell you what the practicalities of this entail:

Getting the preferred contact details of a forensic clean up team from the police, booking them in and getting them to sort out the problems left behind. I did this and was then informed that they had to remove some of the carpet because bodily fluids had saturated through the mattress and the carpet was unable to be salvaged.

So I had to arrange for a carpet supplier to quote to replace and/or patch the carpet. In the end we voted to replace the carpet entirely, (let’s face it you probably would not have wanted to just patch that carpet anyway).

In the meantime I had made contact with the tenants’ emergency contacts and I arranged to meet them onsite to allow them access to look over the property and the possessions of their loved ones. Be under no illusions, this is a very emotional time for these people (as well as whomever is hosting this inspection). It is not something for the fainthearted.

Once the initial inspection was carried out, we then had to field questions, when do they have to get all of their possessions from the property, what happens with the bond, were they paid up to date etc. It is my experience that the relatives of the deceased want to ensure that they do not inconvenience the landlords (and they are usually very apologetic for their loved ones passing away, and causing a problem). It is weird but in my opinion, it tends to follow the same pattern.

As you can imagine our client was very upset about the situation, her heart went out to the families that were affected. Her main aim was to ensure that she could do everything possible for the families.

We made arrangements for the tenants possessions to be removed and their family paid the rent that was outstanding. The bond was returned and they were then able to mourn their loved ones.

We had to now balance the sensitivities of the bereaved and getting the property back on the rental market to save our client from any further financial loss. This was a delicate process. The property itself was now what they call a “stigmatised property”, we had to let everyone who inspected it that 2 people had passed away in it. Which in turn meant that the pool of tenants was dramatically reduced. Not many tenants will secure a property where someone has recently passed away – let alone two people.

I remember going to carry out an inspection one evening and finding a “goodbye” letter at the back stairs (which I can only assume was from one of the tenant’s girlfriends). I have to admit that my heart was a broken after finding that.

So….. it took a while and we reduced the rent, a few weeks later we found a lady who felt that she could make it work and we arranged to move her in.

The silver lining of all of this is that my client was smart and she had insurance which covered the death of a tenant. Her policy covered her for 6 weeks’ worth of rent in this instance as well as the cost of the forensic clean up. If she did not have this insurance policy she would have been much more on edge and stressed about the situation. I expect that she would not have been able to afford to allow the bereaved time to make the appropriate arrangements. The insurance policy made things a lot easier for her, the parents and us to deal with.

What is the moral of the story? Please ensure that you have adequate landlord insurance.

-Tracie

 

 

 

 

Real Estate · Uncategorized

TOP TIPS FOR LANDLORDS AT TAX TIME

It’s that time of the year again.

Tax time is looming but many Australian property investors may be underprepared, according to leading landlord insurance specialist Terri Scheer Insurance.

“Landlords often come under scrutiny from the ATO when lodging tax returns, so it is important they complete their claims accurately,” said Carolyn Parrella, Executive Manager of Terri Scheer Insurance.

“Landlords should consult their accountants to confirm what can and cannot be claimed as a tax deductible expense. This ensures all claims are legitimate and the tax return amount is maximised.

“Seeking advice from a tax specialist can help make this time of the year much easier for landlords.”

Ms Parrella, also a property investor, has offered the following top tips for tax time:

– Negative gearing
“The net loss generated by negative gearing can be offset against other income, to reduce the tax payable,” Ms Parrella said.

“Landlords may be unaware that interest can only be claimed when the property is availablefor rent. For example, if a property is lived in for half a year and leased as a holiday rental for the other half, you cannot claim the interest for the full 12 months.”

-Insurance
“Property investors can usually claim their landlord insurance premium as a tax deduction butthis is often overlooked,” Ms Parrella said.

“Ahead of tax time, it’s also worthwhile checking your insurance policy to ensure you have theappropriate coverage. Some landlord insurance policies provide cover for professional feesincurred as a result of an ATO tax audit relating to investment properties. A standard homeand contents insurance policy won’t cover landlords for the specific risks associated withproperty investing.

-Expenses
“Landlords can potentially miss out on thousands of dollars of tax benefits by under claiming,”Ms Parrella said.

“Apartment or unit owners may be able to claim body corporate fees on strata or community title properties. Landlords who rent a fully-furnished property, such as a holiday home, may be eligible to claim some of their rental income as a tax deduction.
“Maintenance costs, such as changing light globes or fixing a hot water service if it breaks, may also be tax deductible. Running costs such as council rates, land taxes, water and sewerage charges might also be legitimate and claimable expenses.
“Landlords should check with their accountant to determine what they can and cannot claim.”

– Offsetting costs
“You may be able to claim travel to your investment property as a tax deduction, however you shouldn’t exploit this by incorporating it as part of a holiday or another trip,” Ms Parrella said.

“Similarly, if you’re a self-managed landlord, you may be able to claim some of the costs of your home office. You won’t be able to claim all the costs, such as purchasing the computer and the monthly internet bills, however a fair and reasonable part of this may be deductible.

“An experienced and qualified accountant can provide further advice.”

– Property manager
“Not only are property managers an invaluable asset to landlords, their cost can be a deductible expense for landlords,” Ms Parrella said.

“Appointing a property manager might create a potential tax benefit while assisting with organisation and saving time for landlords.

“A good property manager will take care of the administrative responsibilities involved in an investment property. They should also be able to help reduce the burden at tax time by compiling and completing the relevant paperwork for ATO reporting.”

For further information, visit http://www.terrischeer.com.au or call 1800 804 016.

Real Estate

What does a good tenant look like?

So you have purchased your investment property, it is being advertised and you have received applications…. now how do you choose which tenant you want to secure?

Here are my insiders tips to being able to find the best tenant:

Meet them – if you live nearby or if you are renting out the property yourself make sure you meet the prospective tenants, this is imperative. Use your intuition, what is it saying to you?  If you cannot meet them then ask the person who has done this on your behalf some probing questions, were they neatly attired, were they polite, did they show up on time, were they early? Did they have any pets with them? Are they desperate to find accommodation if so why? How many people want to live there? How long for? These are all indicators as to what type of tenant they are.

Ensure that they complete an application form –  I remember in the UK when I rented a property, the landlord literally met me and my flatmate and then decided there and then without any paperwork that he would allow us to rent out his property for 12 months. It was great for us but if something had gone wrong he would have been in all types of trouble with his insurer or the Freeholder of the property.

Application form presentation – Have a good look at the application form, is it a mess with scribble all over it? Is it neat and tidy? Was it sent electronically? Was it slipped under your door in an envelope? Was the application presented in a bound folder (don’t laugh I have had this in the past)? I have had others that looked like and smelled like they were filled out in a pub with stains on them etc. You can tell a lot about a person by the way they present their application forms.

Identification – check their ID carefully – I had a colleague who agreed a tenancy but the ID was fake. She did not realise this until the Police contacted her as they wanted to raid the property for drugs and stolen goods. My old boss raced down to the property to prevent the Police from kicking in the door and doing any damage to the property.  Constantly ask references to confirm the details on the applicants ID. Get those vital details checked i.e. their date of birth, their address, their mobile phone number etc. The more people who confirm those details the better.

How did they speak to you? I have had tenants who have been so rude to me prior to gaining a tenancy that I would never recommend them for a tenancy. I have to have a relationship with the applicants for a minimum of 12 months. Why would I do this to myself or to my client? I have to admit that I am always astonished at how people think that they can talk to a property manager prior to a tenancy. I will never agree a tenancy to a rude applicant.

Check out their references – this is a very important step. Make sure that you never call mobile numbers, always search for the landline equivalent when it comes to finding out more about the applicants and their jobs. You need to know the name of the company that they work for. Then you look up the registered landline number and you call and speak with the Receptionist – ask for that person by job title not by name. Ensure that you speak with their direct employer/manager. Ask the receptionist who their Manager would be. I could not tell you the amount of times a prospective tenant has put their work colleague down as their “Manager”. Go via the receptionist each time, they will always point you in the right direct.

Use the internet – Check them out on as much as you can on the internet, ensure that you check an industry recognised database to see that they are not black listed by other agents. Do a public records check, I remember doing my due diligence and discovering that a prospective tenant had found out his girlfriend was cheating on him. He learned who the man was and when he found him, he ran over him in his car. My client and myself did not want someone with a history like that as a tenant. I could not imagine the risk that a staff member would have just going into a property with him knowing that there had been past aggression.

Call their personal references – you will be surprised at what information you can glean from them. Most of the time it is 100% accurate and they favour the applicant however I have had a personal reference tell me to not rent the property to this prospective tenant because he was recently involved in a meth lab set up. Thank you for being so honest Mr Personal Reference! A meth lab is a very expensive mess to clean up. In order to clean a meth lab back to a non toxic state, all carpet, curtains, beds, toys, linen, couches and other highly absorbent material must be removed from the affected property and either clean (for high value items) or disposed of. All food preparation surfaces such as kitchen benches will need to be removed and disposes of in most cases.
 It is a nightmare. Prevention is better than cure.

Ask the applicant to do something for you – supply you with some more information, get someone to call you back – that kind of thing. Test how good they are at follow through. I use this technique when I am hiring staff too! Some people will do as you have requested, others won’t and I am constantly surprised by the amount of people that spend their time doing all of the initial ground work and then fail to do the required follow up.  If you have maintenance that needs to be carried out and you need a tenant’s assistance to get it done, you want to work with someone who can and will assist you instead of someone who will not be as responsible.

Phone calls – track how many times they have contacted you during the initial phase. There are those tenants who will call you 10 times a day. It has been my experience that this behaviour will not stop during the tenancy. You want tenants who are relaxed and who will not take up your day with small issues. Alternatively they call so much because they are anxious to secure a property. If they urgently need to move home, this should raise questions too. Why have they had to move so quickly? What has happened, have they had other applications declined? Have they been evicted?

All of the above are red flags and they will help you to assess if you want to proceed with an applicant or not. If you only find one issue that has been brought to your attention or that does not add up then you should ask the applicant to explain to you in further detail.

Sometimes there is a very good reason for an issue, other times it will just not add up. It is when I see a few of the flags that I recommend that an application is declined. If a landlord and I are torn between accepting an applicant or not, we will usually go with my gut.

With over 25 years experience as a Property Manager I have fine tuned my instincts and intuition when it comes to choosing tenants for my clients. So do as the professionals do and listen to your intuition too!

– Tracie

Real Estate

The things I tell my friends when they are looking for a good property manager…

So, you are looking for a good property manager…what do you look for? Let me tell you, it is not all of the usual standard stuff about fees etc that you should be comparing. You should be looking into the services and the way the business is set up.

Does the owner of the business work in the Property Management team or the Sales Team? I say this because most agencies are owned by sales people who start a property management company on the side as they do not want to refer business to someone else. You want a company where the owner of the business works in the property management department daily (80% of the day at least).

What structure does your PM department run? Why is this important? Well, there are several reasons and there are several structures. The 2 main structures are:

  • Task based – means that you have a separate person/department to deal with everything, just like a major phone company – you will have to speak with this person to find out about maintenance and that person to find out about payments and a completely different other person if you have a problem. This is great if the PM department is large (because you have experts in their fields working for you) but it will drive you nuts if you have to speak with 3 people if you have 1 problem.
  • Portfolio based – this means that 1 person looks after everything from finding a tenant, managing rent arrears, maintenance, periodic inspections, bills, vacating tenants etc. This is great if you PM is not overworked and does not have many clients to look after. I always say that for every property I look after I am usually managing 4 clients (2 landlords and 2 tenants), that is a lot of people to manage if I have too many properties.

How many properties does each PM look after? Again this is a very important question to ask because let’s look at it specifically. Industry standard for a portfolio Pm is 120 properties. A PM is scheduled works 38 hours a week (normally however we all know that they work a lot more than that). 38/120 = 32 minutes per week that the PM can fairly allocate to each property. If a Pm runs more than 120 properties as I know others do i.e. 140 properties that leaves you with = 27 minutes per week. I have actually know an owner of a PM business to allocate only 20 minutes per property per week.

How much real life experience do the PMs have? I know a lot of agencies who hire young staff i.e. 20 – 23 because they are cheap however most of the time they have not left the family home yet, don’t know how to obtain a mortgage, do not understand what “loan to value ratio” means, have never seen a depreciation schedule, have never had anything to do with a body corporate and who are yet to understand the worry that being a landlord brings with it.

How organised is your PM? I have known many PMs who could not organise a “chook” raffle let alone your trust account ledger. They can talk the talk but they have no idea what they are doing. Ask to speak with 3-5 client whose properties are currently being advertised for rent. They are current clients who are currently going through one of the most stressful times in a tenancy. They will tell you the truth!

Does the PM understand ledgers and trust accounting legislation? This is a large part of the job, it is vital that the PMs understand how to account correctly and what to do to repair an accounting error.

Who attends and prepares the QCAT (small claims tribunal) hearings? Is it someone with experience or just whoever is there at the time? Does the property manager personally attend? If it is a Task based PM department then this will be particularly important as one person will not have consistent dealings with the tenants and/or history of the case.

Does the PM department receive commissions from companies for referring business? You want to know if there is a payment of some kind and you are legally supposed to be advised of this. Some of the businesses that pay PMs are:

  • Landlord Insurance
  • Building Insurance
  • Sales department
  • Developers
  • Utility connection companies (gas, electricity, TV etc)
  • Mortgage companies
  • Financial advisers
  • Depreciation companies
  • Professionals (solicitors, accountants etc)
  • Photographers

Additional tips!

Make sure you find out everything you can about the owner of the business, google, Facebook, Insta – do your research.

Ask for a list of their their preferred tradespeople. Call these companies and ask questions such as:

  • ask what percentage of their work is done with the agent?
  • how do they let them know about jobs?
  • does the contractor do free quotes?
  • what percentage of the quotes they provided to the agency are approved?
  • do they make the contractors fill out a contractor insurance form?
  • have they ever lost keys?
  • is most of their work done immediately?
  • does the agent pay their bills on time? If so how frequently?
  • do they have issues with communication? Who is the best property manager to work with in the office?
  • how do they access properties to carry out work? (do they collect keys or do they arrange access with the tenants?)

All of these questions will give you a picture of how actual business runs.

I hope that these insights allow you to choose the best property manager for you and your family. These are huge investments that you have worked extremely hard to purchase and they must be administered professionally!

If you have ever had a bad property manager you will know the value of a good one!

-Tracie