Great learning experience! Pick the 'errors' in this story.
- Thread starter wobbycarly
- Start date
I feel sorry for this woman, but here's my list of where she went wrong:
1. Didn't accept a bond.
2. Self-managed (OK, not really an 'error', more a mistake in judgement; she was not cut out to self-manage, something that for some can only be learned by experience)
3. Not starting the eviction process at the first sign of trouble, when she may have still had some control over the situation (she let them get about $3,000 behind; at $400/week, that's 8 weeks!
)
4. Letting emotions get involved in the decision-making
5. Didn't have landlord protection insurance
1. Didn't accept a bond.
2. Self-managed (OK, not really an 'error', more a mistake in judgement; she was not cut out to self-manage, something that for some can only be learned by experience)
3. Not starting the eviction process at the first sign of trouble, when she may have still had some control over the situation (she let them get about $3,000 behind; at $400/week, that's 8 weeks!
)4. Letting emotions get involved in the decision-making
5. Didn't have landlord protection insurance
Personally knowing tenants is a big no-no for me. You start getting friendly with tenants and you start to let things slide and before long things like this happen. Always have a manager between you and the tenant. Also think it's a requirement before you can get LL's insurance (might be wrong there).
Errors I can see, in story order:
1. TM is not a happy woman - you should always try to be happy.
2. After years of hard work and saving - what is saving?
3. the Brisbane....... - should be in Sydney
I could go on, but on a more serious note:
1. she was first referred to her horror tenant from one of her existing tenants
- der!
2. just arrived in Australia from New Zealand - uh huh!
3. He couldn’t pay the bond, but Tonya was happy to let him move in anyway. - just keeps getting better.
4. she sympathised with his moving to a new country - there is no room for emotions in investing.
5. Their dire situation became increasingly apparent each time Tonya visited the house - and yet no action taken early to nip it in the bud?
6. I tried to give them a break, even though it came out of my own pocket - see point 4. above
7. I wasn’t covered then because I thought it was too expensive - LL insurance!! please.
8. I can’t afford any of this. - where is the cash buffer?
At least she comes away with some learnings:
1. She says the experience has hardened her
2. Don’t judge a book by its cover
3. and always get landlord insurance
Cheers, Alan
1. TM is not a happy woman - you should always try to be happy.
2. After years of hard work and saving - what is saving?
3. the Brisbane....... - should be in Sydney
I could go on, but on a more serious note:
1. she was first referred to her horror tenant from one of her existing tenants
- der!
2. just arrived in Australia from New Zealand - uh huh!
3. He couldn’t pay the bond, but Tonya was happy to let him move in anyway. - just keeps getting better.
4. she sympathised with his moving to a new country - there is no room for emotions in investing.
5. Their dire situation became increasingly apparent each time Tonya visited the house - and yet no action taken early to nip it in the bud?
6. I tried to give them a break, even though it came out of my own pocket - see point 4. above
7. I wasn’t covered then because I thought it was too expensive - LL insurance!! please.
8. I can’t afford any of this. - where is the cash buffer?
At least she comes away with some learnings:
1. She says the experience has hardened her
2. Don’t judge a book by its cover
3. and always get landlord insurance
Cheers, Alan
as Dazz often says (in different words)... if your plan to wealth is to do business with people with little or no money and no vested interest in looking after your substantial piece of cap[ital, then it isn't a very good plan. She simply chose the wrong investment and then made matters worse with a host of other mistakes.
Nah, Resi doesn't have to be the wrong investment, but you do have to treat it like a Business. If you're too soft to do so, then for heavens sake, don't self manage.
Always, always, get a Bond, follow up on arrears immediately, do inspections, issue paperwork ASAP, get insurance, keep emotions at bay, etc......
I feel sorry for this woman, but here's my list of where she went wrong:
1. Didn't accept a bond.
2. Self-managed (OK, not really an 'error', more a mistake in judgement; she was not cut out to self-manage, something that for some can only be learned by experience)
3. Not starting the eviction process at the first sign of trouble, when she may have still had some control over the situation (she let them get about $3,000 behind; at $400/week, that's 8 weeks!
4. Letting emotions get involved in the decision-making
5. Didn't have landlord protection insurance
I have thought before of self managing my investment properties, but it just isn't worth it.
As was shown in this example, it can probably cost you more in the long run if you self manage, especially if you are a novice. (I am not a property manager, nor do I want to be one myself)
I prefer getting professional property managers, as there's less headaches for me, and less stress. You also get the added bonus of focusing more on what you're good at and what you should focus on, which is to find and buy more investment properties.
If you are self managing you should already know the rules, not casually read it somewhere and think, well that's interesting, I didn't know that. In WA the process starts the first day after they don't pay rent with a Notice of Termination for Non payment of Rent. If they don't pay within 7 days the lease is terminated.
Seriously, nearly 5000 posts on this forum and you are that casual about your property management?
Also shows that the number of IPs you have *may not* be indisputable evidence that you have the foggiest.
Thanks for the info,, what happens in your backyard in WA is not my problem only yours,and yes i am very casual about property management
everyone makes it out to be so serious,when in fact it's not just turn up every 2nd week pick up the cash,have alook around then go onto the next one,how hard can that be unless as we don't owe one cent to anyone,might be different if they were encumbered too the hilt,and if you miss 2 weeks rent your deck off cards falls down in the dirt..
Caveat emptor is always best through hindsight.
I can't help but feel sorry for this aspirational small investor, whose main faults -caring, kindness and trusting are some examples- are actually the laudable ones that set humans apart from other animals.
It is also true that professional tenants manage to fox even the most astute property manager. Rogues are devious and practiced. It is their occupation after all and they hone their skills from a young age.
I have sympathy for her. While there are lessons to be learned, it is a fact that a lot of needed housing is provided by mums and dads investors who are as busy and trusting as she was and do it on a limited budget. Otherwise they could never invest in the first place and nor would they be motivated to.
I would say that the risks of rental properties have increased markedly over the years. It is now a very complex business to be involved in. We should be asking why that is so and what changes we should be demanding from regulators to help manage those risks. Even government has admitted it cannot manage its own government tenants. See this story and yes it refers to indigenous and 'remote' housing but it could easily be any city.
http://www.abc.net.au/local/stories/2010/11/25/3076725.htm
Maybe rental property should become the preserve of larger institutional investors like insurance companies and banks who are better placed to negotiate with government and can develop the skills to manage. They would not be relying on sale of the farm to make a profit though, as do many of the hopeful individuals who invest in rental property.
Not trying to be controversial but what about some brick bats for the actual villains of the piece and not the law abiding citizen who was trying to do the right thing in more ways than one? Otherwise it is like blaming a victim of a break and enter for not having wrought iron over all possible entry points and standing guard with a Doberman.
I can't help but feel sorry for this aspirational small investor, whose main faults -caring, kindness and trusting are some examples- are actually the laudable ones that set humans apart from other animals.
It is also true that professional tenants manage to fox even the most astute property manager. Rogues are devious and practiced. It is their occupation after all and they hone their skills from a young age.
I have sympathy for her. While there are lessons to be learned, it is a fact that a lot of needed housing is provided by mums and dads investors who are as busy and trusting as she was and do it on a limited budget. Otherwise they could never invest in the first place and nor would they be motivated to.
I would say that the risks of rental properties have increased markedly over the years. It is now a very complex business to be involved in. We should be asking why that is so and what changes we should be demanding from regulators to help manage those risks. Even government has admitted it cannot manage its own government tenants. See this story and yes it refers to indigenous and 'remote' housing but it could easily be any city.
http://www.abc.net.au/local/stories/2010/11/25/3076725.htm
Maybe rental property should become the preserve of larger institutional investors like insurance companies and banks who are better placed to negotiate with government and can develop the skills to manage. They would not be relying on sale of the farm to make a profit though, as do many of the hopeful individuals who invest in rental property.
Not trying to be controversial but what about some brick bats for the actual villains of the piece and not the law abiding citizen who was trying to do the right thing in more ways than one? Otherwise it is like blaming a victim of a break and enter for not having wrought iron over all possible entry points and standing guard with a Doberman.
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PM fees are not only tax deductible but include:
- dealing with the tenants mundane requests
- arranging R&M and following up of same
- paying of all invoices
- make my payments direct into my bank account
- EOFY statement issued for my account
for 5.5% I think that it money well worth spent. The amount of time I could waste on my own properties rather than working is not worth the effort.
- dealing with the tenants mundane requests
- arranging R&M and following up of same
- paying of all invoices
- make my payments direct into my bank account
- EOFY statement issued for my account
for 5.5% I think that it money well worth spent. The amount of time I could waste on my own properties rather than working is not worth the effort.
LL requires a current and written lease agreement. For my insurers (2 different company), OP does not have to be managed by an agent to get covered.
MKP
MKP
Nice post fisherman. There were many years when we just didn't have the funds to pay for landlord insurance, so we took the risk and we have always self-managed.
I don't mind at all having a relationship with our tenants, depending on who they are and the circumstances. Usually that relationship only runs as far as meeting them, filling out forms and then managing the rental. We've never made friends with a tenant but whilst they are living in "our" house, we do deal with them directly, mostly by phone, text or email. We've rarely had any issues with this.
No matter how cordial the relationship is, I always keep very much in touch with the rent being in the account when it should be, and on the very few occasions we had a troublesome tenant, I issued the appropriate notices the minute I was able to. I cannot imagine I would ever have allowed a tenant to get up to eight weeks behind, not because I am heartless or gullible, but because for so many years we needed the rent in order to put food on the table.
I do know that over the years, many tenants have told us the reason they like private landlords is because they hate having to open their private lives and work and financial details to a complete stranger who has the power of saying "yes" or "no" to their application.
They also like that they can send me a text that there is a problem with the plumbing and I'll arrange a husband or a plumber very quickly. Just this week, a tenant sent an email saying the shower was leaking. I got her approval for us to let ourselves in next morning and hubby fixed it in ten minutes. Had we had a PM, we would have no doubt paid upwards of $100 for a plumber to do this job.
Of course, there are those who like private landlords due to the fact they know that we cannot do the checks that a PM can. But I have found that generally you can pick those types.
I don't mind at all having a relationship with our tenants, depending on who they are and the circumstances. Usually that relationship only runs as far as meeting them, filling out forms and then managing the rental. We've never made friends with a tenant but whilst they are living in "our" house, we do deal with them directly, mostly by phone, text or email. We've rarely had any issues with this.
No matter how cordial the relationship is, I always keep very much in touch with the rent being in the account when it should be, and on the very few occasions we had a troublesome tenant, I issued the appropriate notices the minute I was able to. I cannot imagine I would ever have allowed a tenant to get up to eight weeks behind, not because I am heartless or gullible, but because for so many years we needed the rent in order to put food on the table.
I do know that over the years, many tenants have told us the reason they like private landlords is because they hate having to open their private lives and work and financial details to a complete stranger who has the power of saying "yes" or "no" to their application.
They also like that they can send me a text that there is a problem with the plumbing and I'll arrange a husband or a plumber very quickly. Just this week, a tenant sent an email saying the shower was leaking. I got her approval for us to let ourselves in next morning and hubby fixed it in ten minutes. Had we had a PM, we would have no doubt paid upwards of $100 for a plumber to do this job.
Of course, there are those who like private landlords due to the fact they know that we cannot do the checks that a PM can. But I have found that generally you can pick those types.
There are some policies that require the property to be professionally managed but certainly plenty that don't. There are also some that offer different policies depending on whether they are managed or not, so best to look around.
As for thinking that landlord insurance was too expensive, insurance is always a matter of weighing up risk versus cost. For me it's a no-brainer even though I hate paying for insurance as much as the next person. Most people can wear the small losses if they are uninsured but throw something substantial at them....it's just not worth the risk in my opinion. That said, make sure you get value for money, which doesn't always mean the cheapest price.
Most people would be amazed at how many people remain uninsured, even for their own home, which means they won't even have liability insurance in place. This is highlighted in the face of natural disasters where everyone is asked to pitch in and help out the poor individuals who were uninsured, the Victorian bushfires a couple of years ago come to mind. I can sympathise, but in most cases they made conscious decisions to not take out insurance and pocket the value of the premiums themselves.
I cant believe the amount of people who don't look at what you get for your money and just buy the cheapest insurance.
Who would buy a car just on price without knowing whether it is a new merc or a 30 year old datsun 180b?
I spend ages asking questions and reading the policy for any type of insurance I buy. Rarely is the cheapest or the most expensive best for my needs.
