What are the Top 3 Worries for Landlords?

What are the main things that landlords worry about and how we can help mitigate the things that keep you up at night?

1. Non-payment of rent
If you are a regular reader of the monthly Taupo Rental Trends, you will have seen that our rent arrears are extremely low. Nationally rent arrears tend to sit around the 5% mark. That means at any one time, 5% of residential tenants are in arrears. Our office sits all of the time at under 1%.

How does our office keep rent arrears so low?

• Strict focus and adherence to proven processes when assisting landlords in selecting a tenant,
• Monitoring arrears daily and taking the necessary swift and firm actions while at the same time demonstrating understanding and respect,
• Encouraging open and honest conversations with tenants,
• Local knowledge
• Quality of the portfolio and stability of the team, meaning we are not continuously putting out fires or retraining people. All of our time is spent on our client’s needs, their tenants, and their properties.

2. Property damage/Loss of control of the asset
When you rent out a property, the tenant has the right to privacy and quiet enjoyment of the property in exchange for the rent paid. Sometimes we get asked if inspections can be done monthly. The standard practice in New Zealand and Australia (and very likely most other countries) is to inspect a rental property every three to four months.

If someone felt they had to inspect a property every month, I would be very concerned on several fronts, firstly that the property owner is perhaps too emotionally connected to the property and/or secondly that the tenant is awful!

The only time a tenancy would require an inspection more frequently is when an inspection has been completed and we were not happy with something. We then give the tenant a few days to get things back in order, before completing a revisit to the property. This is usually all that is required to get things back on track and reestablish the standard expected.

The absolute worst thing you can do is presume that because the rent is being paid, the tenant is also looking after the property and so you get lax with completing routine inspections. This is very common and we see it all the time from private landlords.

Four things must be consistently done:

1. be extremely diligent when selecting tenants
2. complete a photographic property condition report prior to a tenant moving in
3. conduct regular routine inspections and never miss one
4. if something is amiss, formally address it immediately.

We would also recommend being clear about what events your insurance policy covers.

3. Financial Worries
This blends in with both of the above, if the tenant doesn’t pay the rent = financial worry, if there are damages = potential financial worry. We have given our thoughts on how these risks can be minimised.

Other financial worries that none of us can control such as taxation, interest, insurance and rates costs might also keep you up at night. Our thoughts here is to:

• make sure you are comfortable with where the rent is sitting and review it annually
• consult with other professionals – brokers and accountants to get the best rates available and the best structures
• we all have to work in the legislative environment that is presented to us, and we don’t want to be political, but we will say that there are hopefully brighter days ahead for those who are providing the service of residential accommodation
• always remember that for most people, property investment is a long-term investment sector