TIPS FOR MANAGING YOUR RENTAL PROPERTY
Recently David Pearse wrote an article about how to manage rental properties. It was picked up by both the North Shore Times and The North Harbour News. Here it is (updated for our News section) for your reading pleasure.
With property continuing to be one of New Zealanders’ favourite investment options, the importance of managing a rental property is vital. For novice investors, choosing the right tenants and putting in place a water tight agreement from the outset is the cornerstone of success. Founder of Pukeko Rental Managers David Pearse has been involved in property management for over 25 years and said often investors can get it wrong and lose large sums of money in the process. He offers some top tips to investors on how to safeguard their investment.
How to Select Tenants
- While there are some benefits of having a ‘gut-feel’ about someone, it should never be an excuse for not contacting and speaking directly to referees. They should not be family members - previous landlords are key people to call.
- Provide an application form to prospective tenants which includes approval to obtain a credit check, and request for a photocopy of photo identification - preferably in the form of a driver’s license.
- Questions for referees should cover the following: are there any rent arrears, payments outstanding for water charges, do they smoke or have pets, and how well did they maintain the grounds and property in general. Ask if the full bond was refunded and if they provided proper notice before vacating the premises.
- Be sure to do a credit check so that you are confident that they can continue to pay the rent.
- Offer the property ‘subject to’ a tenancy agreement signed on or before a nominated date.
About the Tenancy Agreement
- Don’t use the Department of Building and Housing’s standard tenancy agreement, as it does not ensure adequate protection of the owner. Instead, significantly add to it using information from the points outlined below.
- Always use fixed term tenancies, as a preference. For the many reasons as to why you should do this, download ‘Never Have Another Vacancy Again’ by John May.
- Add a page of ‘special conditions’ to the tenancy agreement that covers a range of issues such as: maintenance of grounds, rules on hanging objects to walls, smoking outside, ventilation and minimising of mould in wet areas, not placing pot plants directly on carpet, etc., to name just a few.
- Don’t use the standard property inspection report attached to the Department of Building and Housing’s tenancy agreement. Instead, type up a detailed condition report on every room listing every defect for agreement by the tenant. Always remember that it is your responsibility alone to prove to an adjudicator the condition of the property at the start of the tenancy. Simply noting whether or not the walls or carpets are in an acceptable condition does not ‘cut it’. At the very least, detailed photographs of every room is required, along with external areas of the property. It’s generally a certainty that if you don’t take photographs of a property issues will inevitably arise.
- Always have written confirmation that the tenant agrees with the condition of the property. Alternatively ensure that they have a date by which they need to notify you of any defect they wish to have added to the agreement.
Check rents weekly
- Always diary a reminder to check that the rent has been paid. If a payment is missed, contact the tenant immediately, and if there is no response within 24 hours send them a 14-day payment letter.
- As it can take some time to get a mediation or hearing scheduled, do not wait for the 14-day letter to expire before applying to Tenancy Services. It is easier to withdraw an application than lose more weeks of rent.
- It is your responsibility to keep a rent statement showing rental periods, dates of payments and any arrears. There’s nothing worse than having to spend time searching through months of bank statements.
Do regular inspections
- Inspections should be done every three months at the very least or more often, if required as part of any landlords’ insurance. What gets inspected gets respected.
- Avoid becoming friends with tenants as it can become difficult to do detailed inspections or, at worst, lead you to not doing them at all. Investment property should always be treated as a business first and foremost.
Maintenance is essential
- Diary to carry out regular maintenance, so as not to void any insurance policy. This is imperative if you are required to do regular gutter cleaning and chimney sweeping. If you do these jobs yourself, keep a record of when it was done.
Residential Tenancies Act
- Know the Act and your responsibilities as a landlord under the Residential Tenancies Act. Landlords complain that the Tenancy Tribunal is all for the tenants, but as a landlord you need to know the rules of the game otherwise you will be penalised. Make sure to pay special attention to the Unlawful Acts in the Residential Tenancies Amendment 2010, which includes things such as unlawful discrimination and departing the country for more than 21 days without appointing an agent, and avoid them completely.
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