First Run at IP (a real bad luck story)

[sbblackangel]

Well, how's this for a first run with bad run with property managers and tenant.

1. In early December tenant does not pay advance rent for the December. Get PM1 to chase up for rent. PM1 advises she will chase up but cannot do anything until 14 days have elasped (for rental arrears).

2. Tenant advises on a Friday that the rent has been paid. Even provides a fakes receipt number. PM1 is on the road and not able to confirm reciept number until the Monday. Rent still outstanding.

3. PM1 goes on Holiday. PM2 takes over. PM2 in chasing up on the rent, is advised by phone that she intends to vacate and that she plans to do so during the Christmas break. PM2 does not obtain in writing that the tenant intends to vacate.

4. PM2 lodges an application form 9Notice to Vacate) and applies for a Tribunal Hearing date.

5. Tenant pays portion of December rent (on December 30). Still no date of vacating provided.

6. Property is advertised and there is interest from potential tenants.

7. PM3 comes on the scene. PM2 on maternity leave. PM1 moved to PM2 role. Tenants boyfriend advises that she is unable to find a property and that she may stay on. I advise the PM that I want a lease signed or she is out.

8. Today I find out from my PM, that the tenant has purchased a property and unsure of a settlement date. In the meantime January's rent has not been paid and a portion of December's rent is still outstanding.

9. Advised by PM that we will still got to the Tribunal in a week's and half. Was advised that we cannot get the tenant to vacate because there was nothing in writing.

The story is to continue.......


So here I am a first time property investor, with a young family and two mortgages to pay. Being screwed around (sorry for the french) very frustated and angry. Advised by the PM that this is the red tape in Victoria and just bad luck.


Property only settled on 25th Nov 2004.

I am angry, frustated and p***s@@ off. BUT I believe this is the risk of IP's and am in there for the long haul. Good suburb and good investment for the kids.

Still looking for IP 2.


Have you got any bad stories.

PS: I need a hug))))))

 

[duncan_m]

What a bummer

This sort of thing is one of the reasons I now choose to self-manage, there was a high turnover of PM's in my area for some reason AND rent-rolls were getting sold/traded so PM's were also changing for that reason.

I got fed up with having to continually re-educate the PM's about how I wanted things done and having to re-explain the history of Tenants etc each time problems occurred.

Now I find there's no wiggle room for Tenants, the buck stops with me, I know exactly whats going on with Rental Payments etc and they have no fallback of "But I agreed with the previous PM that xxxxxx " etc..

I'm not suggesting you self-manage, only you can make that decision based on your comfort zone, availability of time, confidence in dealing with people, etc..

 

[Andrew_A]

How much?

Hi Duncan,

You have probably mentioned this before, but how many do you self manage and how much time per week does it take?

Cheers,
Andrew.

 

[toony]

This has almost been par for the course on one of my properties in Sth Frankston.

The property needs a bit of work. I seem to have constant PM turnover at the agents. I seem to get the professional renter who knows when to pay so you cannot take them to the tribunal.

But you need to have a bit of cash flow behind you. And I am constantly chasing the PM. But the bigger picture is more important than the short term frustrations.

Stick at it.

 

[duncan_m]

Hi Duncan,

You have probably mentioned this before, but how many do you self manage and how much time per week does it take?

Cheers,
Andrew.

I self manage 10 of my properties, these ones are all in easy driving distance (most under 10 mins, southern suburbs of Adelaide).

If there's no active vacancies or 'issues' it takes me around 45mins a week maybe? Shuffling rent around, updating records etc.

If there's active vacancies it a little more.. 1-2 hrs if I need to do an 'open for inspection' or fix things... Because I choose to do most of the maintenance myself that also adds a little on depending on whats going on..

I can be almost anywhere, I have a web service running at my web-hoster that has all of my records, so at work, at home, on holiday, working interstate etc I have access to everything I need and of course my trusty little Nokia has all my important numbers, tenants, plumber, electrician etc..

Its not for everyone.. but with a rental income well over $100K I wasnt going to pay a PM around $15K a year to do it..

 

[Alan H]

I also still self-manage. I may not always do this but modern communications certainly makes it easy from that point of view.

For example, on Boxng Day I was going for a walk at Geroa on the south coast. The mobile rang and it was a tenant with a blocked toilet. I told them I'd take care of it and would call them back in 30 minutes. I rang the Emergency After-Hours Plumber whose number is in the mobile and confirmed with him to arrange a mutually convenient time with the tenant to fix the problem and ring me when on site. I then rang the tenant back and told them they could expect a call from the plumber shortly. The tenant was most appreciative and still a little shocked that everything was being taken care of so quickly.

When the plumber attended he rang, gave me a report on the problem and said he'd ring me when complete to arrange payment over the phone.

Not too difficult.

Mind you, I'm getting a bit paranoid. I had almost exactly the same thing happen when going for a walk on the beach a couple of years ago.....

 

[Andrew_A]

Hourly rate

Its not for everyone.. but with a rental income well over $100K I wasnt going to pay a PM around $15K a year to do it..

Thanks Duncan. With that hourly rate I would be doing it myself as well You mean 7.5k/year though? (I pay 7.5% to my PM).

 

[duncan_m]

Thanks Duncan. With that hourly rate I would be doing it myself as well You mean 7.5k/year though? (I pay 7.5% to my PM).

In the last year of my properties being managed I added back the total rental percentage taken, the letting fees, the "statement" fees etc and it came to well over 13%. It was a bad year, there was a lot of changes of Tenants and 2 evictions so a reasonable number of letting fees.

I also found that the repairs always turned out more expensive than what I was able to organise myself.. I feel sure there was kickbacks going on.. I also got lots of phone calls still.. "blah blah said that her front door lock is sticking is it OK to send a locksmith?" despite clear instructions to PM's about what to call me about and what not to call me about, every time the PM changed or their assistants etc changed I had to go through the same education process.. amongst lot of other mismanagement issues. So adding all that up I came to a rough figure of $15K made up of fees (most of it), costlier repairs and advertising in 'corporate ads' that seemed more expensive than simple (but more effective) Line Ad's in the classifieds.

A couple of other unexpected benefits.. 1. Tenants seem less demanding of petty repairs, the buffer of an Agent between them and me seems to make them more demanding (unquantifiable, just an observation). 2. I seem to have less turn-over of Tenants, I dont know why maybe I pick better Tenants.

 

[geoffw]

I had almost exactly the same thing happen when going for a walk on the beach a couple of years ago

What, your sewerage blocked?

 

[Merovingian]

What, your sewerage blocked?

Well, only if Alan_H used his tenant's toilet recently...

 

[Alan H]

What, your sewerage blocked?

Yes....same property......same toilet........different tenant.......and I was enjoying a nice stroll on the beach when the phone rang that time too...... All solved before I came off the beach in the previous instance too.....

But enough of this story Geoff, I just know you won't be able to help yourself from coming out with a one-liner and God knows you don't need to be fed lines.....

 

[Donna L]

Question 1

Wasn't the tenant under a lease when they first moved in?

Question 2

Landlord's insurance?????

 

[Beach Bum]

If rent was due in advance for DEC and they only paid a portion on the 30th then their 14 days are up, also today is the 15th so their time is up again and move to terminate the lease and get them out of there asap.
And take them to court asap for monies due. If you know a laywer call them and ask them to help you.

They obviously could'nt care less about you, so don't have sympathy for them.
After you get them out, fire your PMs, they are useless.

Something similar happend to me a few yrs ago, after the event I found out that my tenant was a girlfriend of the girl that worked at the front desk who let here get away with always paying late unknown to me, and fudged her application.
I approached the principle of the agency (who was actually one of the nicest and most hones RE I know) the situation and pointed out to him how upset I was.
She was soon looking for a job, and he kept my rentals.


cheers

 

[Kristine..]

Hi sbblackangel


Firstly, OK Forumites, all gather round, group hug for sb - aaaah, there, that’s better!

This is my second attempt at responding to your post, the first was swallowed by the post mechanism!

You have asked for ‘bad’ stories of property investment, and as this is your first investment here goes:

In the last twelve months I have:

Cleaned, painted and redecorated six properties,

had a fire in one,

had one vacant for eight weeks and another vacant for ten weeks,

had a new tenant move about twenty tones of junk in over the first weekend then park all sorts of vehicles all across the front lawns,

had one set of feral tenants vacate to be replaced by a Donna Reed look-alike who bakes scones, polishes furniture but has an aversion to paying rent, ending up with significant wailing and gnashing of teeth when after due process the Police arrived with an eviction warrant (she fuddenly managed to find the rent and is still there),

had another tenant move in on a peppercorn rent but who nonetheless suffers from acute rental amnesia,

had a pipe leak inside a wall resulting in mildew to about a metre high,

had other tenants refuse to ventilate the building resulting in mildew in the bathroom, a bedroom and inside the wardrobe,

when these tenants left the house was infested with fleas and the entire building needed washing down,

had these tenants’ visitor’s dog chew a hole in the carpet,

had the sewer backwash up into a shower stall due to the nature strip tree blocking the sewer outfall,

had a tenant want to install a cat door in the sliding glass patio door,

had another tenant wanting to roof the pergola,

a change in commercial tenant,

had another commercial tenant wanting us to pay their solicitors expense for exercising their options,

had the usual run of emergency plumber call outs including
three pressure relief valves in one weekend to the same hot water service, bath taps which fell off, shower heads which broke off,

had storm water flooding into downstairs light fittings

had cisterns which failed and needed replacing,

had possums in roofs and abusive neighbours when branches fell into their back yard,

had major tree pruning and lopping

had a tenant who turned all gas appliances off when leaving resulting in an $80 service call to check and turn them all back on,

had curtains ripped to shreds from the tenant hooking them back over the curtain tracks

had a new tenant who ‘forgot’ to register the electricity, resulting in daughter receiving an electricity bill for $700

had a tenant who looked me up in the phone book and took to lodging service calls with me after office hours and on weekends for problems which were weeks old then acted hurt when I referred him to the property manager (it was this tenant who gave my number to the abusive neighbour)

had a request for air conditioning, more cupboards etc then they handed in their notice

had tenants who raked all the mulch away exposing the roots of 20 standard roses and who also managed to kill three dicksonia antarctica

had tenants who requested service calls, made the appointment, then went out

had endless phone conversations and site visits with the property managers

And more!

By Christmas, full tenancies, all under control, everybody happy, me a bit stressed. Dragons? What dragons?!


All in all, 2004 was the annus horribilis of property investing. I figure we’ve notched up about 100 years of landlording so far across all properties and all the problems seem to have happened in one year.

However, onwards and upwards. Feint heart never won fair lady and it is not an option to sell up and move on. With any luck it will be business as usual in 2005 meaning about six phone calls for the year and nothing major.

So, sb, take heart, be brave and tomorrow is another day.

Why do you think so few people invest in property? You do have to have nerves of steel and a sunny disposition. It is not possible to be in for the long haul without a natural optimism. But hang in there, it really does separate the men from the boys (so to speak) and the victor takes the spoils.

You mention your children, well my children accept property investing as the natural thing to do. When out for dinner at their friends’ houses they are apt to open the conversation with the friends’ parents by asking ‘Well, Mr & Mrs Soandso, what type of investments do you involve yourselves in?’. They have come home scandalized when the parents have put them in their places by replying that they have no investments and only fools take those risks.

My daughter emailed me from work today – 3AW had a segment on tenants who damage properties, one property manager rang in to say the best tenants were single mothers, so daughter thought that would be the go for her next tenant. I reminded her we had to get an Eviction Warrant for her single mother but daughter’s corporate memory has already expunged that incident!

Daughter has had her property two years now (she’s 20), and loves to casually drop it into the conversation around the photocopying machine whenever anyone exclaims ‘Gosh, I’ve got $800 outstanding on my credit card!’ daughter likes to say ‘Yes, well, I’ve got $136,000 on my mortgage!’.

Raise your children by example, press ahead, and you, too, can have lively evenings around the tax record book discussing your mortgages, tenants, and Internal Rate of Return!

Good luck

Kristine

 

[sbblackangel]

Hi Kristine,

All this in one year. Thanks for the good wishes. Will hang in there.


Tribunal hearing on Friday 21st. See what happens.
Cheers
SB

 

[Able]

Hi sbblackangel,
Landlords insurance is a handing backup to have and usuall covers any rent owing in most situations. It also sounds like your PM hasn't done the best of jobs. I had a problem tenant in 2004 who would not pay on time and it took all up about 5 visits to the tribunal in order to gain an eviction order. The tenant ignored the order so in the end we had the Sherrif's department evict them. Very frustrating but we did have a tenant that was very good at exploiting every loophole in the system. IMHO the tribunal is very one sided towards the 'poor' tenant rather than the 'wealthy' landlord.

The PM actually did a very good job in dealing with all the above.. it would have cost them a lot more than their property management fees. This is what you should expect from a PM in this instance. Remind the PM that they checked out the problem tenant and had them sign a lease.

Regards
Alistair

 

[bootylicious]

Hi SBA,

A bit unlucky having this happen so soon in your property investing career. We have been doing it for 1 yr, and have a similar problem.
Property 1, the tenant, who is PM's friends' daughter, is behind on her rent, has been since before Christmas. But PM's office was closed for 2 wks over Christmas, so nothing happened. Then, on around the 7th Jan, she managed to pay some rent (not all), and having been at work for 4 days, the bloody PM then proceeded to have another weeks holiday! So we have got nowhere with sorting out that problem.
Property no 2 becomes vacant on Thurs, and hasn't been advertised yet because of PM's overwhelming holiday requirements. So, we have one soon to be empty, and one behind with the rent! (we only have 2!)

Kristine,
Did any of your properties function normally in 2004???

Karen.

 

[markpatric]

Seems there is two distinct sides to this fence where some say they swear renting out properties is a surefire way to financial freedom and many others who have non stop problems and wonder where they went wrong.
Seems to me anyone that gold coats the situation has something to gain.
If you are interested in this business I would say you had better be experienced or in it for the haul until you are.
You can only learn so much from a website, after all there are so many differing opinions how on earth do you know which ones to apply to your situation.....you don`t imo.

 

[quiggles]

Bootylicious,

Wonder what would happen if you let the principal of the agency know that you were about to walk with BOTH your properties and additionally lodge a demand for payment of losses.

Don't laugh, and don't tell me you're not within your contractual rights. I've done it, despite knowing what was in the contract. REA wasn't willing to risk the outcome and the publicity. Result - problem tenants gone the next day having miraculously paid the rent. Once you point out how much money you are losing and suggest that you are about to make it mutual, you get a bit more cooperation.

Other times I've simply made the assessment that I'm better off walking anyway and have told them so.

 

[Brenda Irwin]

I totally agree with quiggles, and if nothing is solved, be prepared to take your business elsewhere.

I currently have a defaulting tenant, who after 2yrs of tenancy has decided not to pay any rent at all. They have often been late in payment, but always caught up before. Now, for two months, no more rent. My pm has lodged the forms in the courts and we shall wait and see if they vacate and pay the rent in arrears.

Not excessively worried about the rent lost, but I wish they would hurry up and vacate, as my pm has tenants wanting to go in on an increased rent. Patience is not one of my stronger points, although I try hard.