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Property standards case study: Drawing the line in the sand

1st June 2015

I met a prospective client recently at their property in Mt Roskill, Auckland. This property had 4 flats, and we viewed the rear 2-bedroom unit where the existing tenant was moving out shortly.

The owner had forewarned me that the unit we were going to inspect was in a bad condition, and that the sitting tenant had done a lot of damage. The owner felt that a large renovation was required to get the property back to an acceptable condition.

This property’s condition was far from acceptable…

The tenant had been living in the unit for a few years. During this time, the interior paint work, floor coverings and fittings had supposedly (according to the owner) deteriorated from brand new to the present condition.

All walls were damaged with recently installed wallpaper hanging off and torn in parts; the new carpet (supposedly just a few years old) was stained in all rooms. The curtains were stained to the extent of needing replacing, and also many of the electrical fittings needed replacement.

The exterior of the property was just as bad

The exterior of the property was also in a very poor condition. The garden around the rear unit was a dumping ground, with car parts and household items strewn all over the lawn.

The property owner stated that his lawn-mowing contractor mows the lawns fortnightly. However, the lawns over the whole site were in a state of disrepair, with weeds growing around the base of all units and down the fence lines, and overgrown hedges.

(It was interesting – in a concerning way – how relaxed and friendly the property owner was being with the tenant, who was in our presence. The tone of communication didn’t match the amount of damage that had been done.)

How did the property owner feel about renovations?

It was obvious that this property needed some renovations, and the owner had already mentioned that they’d be necessary.

So as I went through the property, I discussed approximate budget figures with the owner for renovating the interior. These were ballpark figures: if I were to be appointed as Property Manager, I would submit quotes to the client for approval.

When we discussed a painting budget, the owner commented that he wasn’t going to be living in the unit and would have to get the go-ahead from his wife on the painting cost.

And although the property owner had originally prompted for a complete renovation, he was now querying whether we could shampoo the carpet, rather than install new carpet. I wondered if he had considered getting the carpet commercially cleaned in the early stages of damage, rather than years later when the situation is unrecoverable?

I pointed out to the owner that because of the widespread staining on the carpet, it was unlikely that simply cleaning it would give us a successful result.

This property owner talked the talk but didn’t walk the walk

I have difficulties with owners who let a property become very run down and then balk when renovation costs are put in front of them.

Such owners will recall how the property was in a brand new condition in the not-too-distant past, however there doesn’t seem to have been too much effort put into keeping the property in that brand new condition.

In this instance, there had not been any regular property inspections, nor were there any photographic records. There was a written inspection report at the start of the tenancy, however this did not identify that the interior paintwork, wallpaper and floor linings were new (as advised by the owner).

These property owners were employed as professionals with good academic qualifications, but they were happy letting their tenants live in conditions that would be unacceptable for their own home.

Bridgman Property Management has some specific rental property standards. Here’s where we draw the line in the sand…

Bridgman Property Management has some specific rental property standards. Here’s where we draw the line in the sand…

This is a line in the sand that separates me from this owner

I will only put tenants into properties that I would find acceptable myself, i.e. clean and tidy. A carpet may not be brand new, but I would find it acceptable if it was presentable and well maintained.

Moreover, under the Residential Tenancies Act, landlords are bound by law to provide a property that is clean and tidy. And during the tenancy, the tenant is legally obliged to keep the property reasonably clean and tidy.

Remember that property investment is a business

By running your property investments as a business, you’ll take a completely different view to your rentals compared with the owner in this case study.

If you run your investments as a business, it means you can secure A1 tenants who pay top rent and care for your property. It does mean that you are going to have to invest some money into maintaining the standard of the property, as well as time in making sure that the tenancy stays on track.

On the other hand, if you’re not prepared to maintain your property, you’ll find that your investment performance enters a downward spiral. The outcomes of this downward spiral being poorer quality tenants, lower rental income, increased tenancy tribunal hearings, more damage and wear and tear, higher maintenance costs, and less-than-desirable valuations from your registered valuer.

Is that what you want? You may actually start to question whether you really enjoy property investment. It’s important that you consider your property investment profile, so you can follow the road that suits your needs and personality.

 


 

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