Private Landlords Beware
April 6, 2017 | News
Recently in the media there has been an alarming story about crime gangs renting houses for the purpose of cultivating marijuana. In these cases they are targeting private landlords who are often less stringent with tenant background checks and routine inspections.
In the past we have spoken to a number of private landlords who lease their properties themselves to save the cost of engaging a professional property manager. What they often fail to realise is that not only are the fees are fully tax deductible, but the cost of the fees is usually a lot less than the cost of rectifying tenant damage or loss of rent due to tenant default. Renting privately may work for a while, if you’re lucky enough to secure a genuine tenant. However one of the reasons that tenants choose to rent privately is because they have a bad record and are hoping the private landlord won’t pick that up. Here are some things you need to consider if you rent privately:
- Some tenant’s rent privately because private landlords don’t do the tenant database checks to see if they have defaulted in the past.
- Some tenants produce false references from past owners and if you don’t have the ability to cross check the property ownership you’d never know.
- It’s becoming more common for tenants to falsify documents. Always call the employer to verify employment.
- Some private landlords don’t provide detailed property condition reports, so when the tenants move out and things aren’t right, it’s very difficult to argue with them or hold back their bond. Tenant’s get away with hundreds of dollars in cleaning and damage because of this.
- Regular inspections are the key, the first one at 6 weeks and then every 3 months. But you have to issue notices 7-14 days in advance and allow tenants to move the date if it’s not convenient. Lot’s of private landlords simply don’t bother as long as the rent is being paid on time. Anything could be going on in their property in the meantime.
- Lots of landlords don’t bother to take a tenant to court for damage or rental default and never collect their lost income or claim back the cost of repairs. So these same tenants get away with it and go on to do the same thing again and again.
- The tenancy legislation is set up to protect the tenant (the consumer), not the property investor. So if you don’t follow the system exactly then the tenant can get away with a lot. You have to do regular inspections, have detailed reports and issue notices in a certain way in certain time frames. If you haven’t done that correctly you will find it hard to prove a case against a tenant.
- Landlord insurance is essential. For as little as $250/year you’re protected for damage and loss of rent. Again, you have to follow the legislation and keep detailed records, otherwise the insurance company can decline to pay out. Many private landlords think they’re protected but they’re actually not, because they haven’t fulfilled their responsibilities.
To provide an example, a private landlord may think they’re saving $3,000 per annum renting their property privately. Weigh this up against a tenant who defaults on the rent by 4 weeks ($1600), then moves out of the property without cleaning it ($650), leaving the gardens overgrown, carpets stained, blinds broken, walls dirty and chipped, and rubbish to be removed. To get the property back to neat and tidy in this case will cost at least $5,000. And then there’s the cost of lost rent while the property is vacant and undergoing repairs. Some owners don’t bother with the repairs and the property just deteriorates in condition and value with each subsequent tenancy.
This isn’t even an extreme example, it gets a lot worse. The cost of repairs to a property used to grow hydroponic marijuana in the recent news story was estimated at over $20,000. If it’s a meth lab it’s more like $50,000 due to the chemical contamination, some properties have even been condemned. And then the insurance company fails to pay up because the property was rented and the landlord was negligent in supervising their tenant? This is happening all the time. Is it worth the risk for $3,000 per year?
A professional property manager will screen the tenants carefully, issue a detailed property management report and conduct regular inspections. Everything is carefully documented so if there is a problem the tenant is promptly taken to court and ordered to make appropriate reparation. The property is always leased clean and tidy so the onus is on the tenant to return it in the same condition, extending the life cycle of the fit out. All maintenance is picked up and reported frequently to ensure things don’t deteriorate and the property ages gracefully. There are so many ways we protect the value of the property asset over the long term, we’re experts at this, it’s what we do.
Below is the link to the recent news article so you can see just how serious this is. Don’t be a victim, take steps to protect yourself now.