Tenants From Hell

From: Danny Dwyer


Did anyone watch that Location Location program on 26.4.2001? I am wondering if there's any IP owners on this forum, who have also experienced any "tenants from hell"?.

For those who did not see the story, it showed this Sydney couple, who had a new IP, (has been rented for past 3.5 yrs and had to go to court to get the them out), which was left in a total mess and was totally unhabitable. In other words, a filthy dump! There were rats, mice, cockies, feas, spiders etc, you name it. It cost this couple more then $4,000 (I think?) to get it all cleaned up and re-carpeted etc which they sold in the end.

It was negative report for IP owners as I had just purchased my 1st IP (a similar new home in Bris metro)and am currently waiting on "suitable tenants" (to be screened out by the local estate agent), then will manage it myself. One would think that this sort of situation does not happen to all IPs and that the media just loves to cover these sort of stories.
 
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Reply: 1
From: Patrick Bellot


Dan,
It was actually $12,000+ they end up spending on the place to return it to it's original state. If it was my place, I would of definetly held the realestate agents liable. What ever happened to 'house inspections?'.

Patrick Bellot
 
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Reply: 1.1
From: Ian Findlay


Dan,

We’ve always used a single local real estate to get new tenants. We use them for a few properties and purchased an IP from them so it pays for them to keep us sweet. The estate agents have access to several databases listing bad tenants and have the time and inclination to check references etc. Its not bad (and is some sort of insurance) for 1 weeks rent and that’s tax-deductable too. We only had 1 bad tenant and he was out in 2 months and didn’t do any significant damage considering just scratches etc.

Might be worth using a single estate agent to find tenants for other IPS once you get them. They are also inclined to do favours for you once you get to know them.

Then we manage the property ourselves. In reality this mainly means giving the tenant our bank details and leaving them to it! This is the real money-spinner for the estate agents at 7% - $12 a week for doing next to nothing.

Good luck with your new tenants. If you have an organiser e.g. Microsoft Outlook its fun to put in reminders when they are due to pay. This does 2 things, reminds you if they are late and secondly you feel good seeing the money going in.

Ian
 
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Reply: 1.1.1
From: Rasputin .


doesnt insurance cover this sort of thing ???
 
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Reply: 2
From: Michael G


The answer...

Get yourself a Landlord's insurance policy. Your property manager should be able to act as an agent to get you one.

Cost about $200-$250 per annum

covers;

- $50k in fixtures
- $10mil in public liability
- $5k in legal costs
- covers lost of rent due to; tenants skipping town, place not rentable due to repairs etc.

- check your household insurance covers malicous damage.

Due your homework there are a few companies offering such cover, so ask around I use an AON policy myself

Michael
 
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Reply: 2.1
From: Rasputin .


seems like a cheap form of insurance, surely a must have for all IPs just in case.. does this mean these TV cases didnt have insurance, hard to feel sorry for them then
 
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Reply: 2.2
From: Apprentice Millionaire


Hi Michael G,

>Due your homework there are a few companies offering such
>cover, so ask around I use an AON policy myself

Could you expand (for newbies such as myself :) on what an "AON policy" is?

And also, for the $200-$250 p.a. policy you were mentioning, that would be an add-on to a normal buildings policy, wouldn't it?

Cheers
Apprentice Millionaire
(aka Jacques in the old forum)
 
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Reply: 2.2.1
From: Michele B


Landlords insurance which covers malicious damage and rent default is a VERY worthwhile expense. Shop around - some companies offer introductory deals which throw in malicious damage cover for free in the first year. One hint though - make sure you have a current lease in place as you may not be covered without!

My 'tenants from hell' truly lived up to the name but I actually came out ahead by the end, thanks to the insurance cover and because I pursued these tenants with the tenacity of a terrier with a rat! This experience was a steep learning curve for me but a valuable one. I've always done my own property management. As with all things, you get better as you go along. I continually tweak the system and can now suss out tenants pretty efficiently. I think these are skills which can help you down the track when you start wrapping etc.

My advice is to use agents initially but then give it a go just for the experience. Eventually though, you need to leverage your time and use agents, but at least you'll know what is required and can demand it of them!

Michele
 
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Reply: 2.2.1.1
From: Michele B


Another hint!

Employ a gardener as well as an agent so they can each keep an eye on the other as well as your property.

Trust but verify!

Michele
 
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Reply: 2.2.2
From: Kelvin Mooney


Dan,

We bought an IP 4 years ago and we took out a Landlord's insurance policy from the start. We have never had to use it, but it is good to know that if you were unfortunate enough to get the tenants from hell you would be covered.

We have been using a local real estate to screen prospective tenants. We have provided the agents with our own set of guidelines for selecting tenants. In four years we have only had one week where the house was not been rented (we needed the time to clean the house between tenants).

No two tenants are the same and can not be expected to treat the IP as you would treat your own home. There is a need to set the guidelines with the tenants prior to their taking up residence and ensure the all parties keep to the agreement (this also includes the landlord).

To answer your next question the house is about 20 years old and is at The Gap in Brisbane.

Hope this helps.


Moonshine.
 
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Reply: 2.2.3
From: Michael G


Hi,

AON is the company name;

Here's what's on the "Coverage Summary"

Class of Insurance: Landlords Property One

Period of Insurance: [from - to]

Real Estate Agent: [normally only purchased via an agent]

Covering & Limits of Liability (summary only)

Section 1A

Loss of Rent and Legal Expenses:

- premises untenantable - 52 weeks
- defaulting tenant - 15 weeks
- departure without notice - 6 weeks
- prevention of access - 52 weeks
- denial of access - 26 weeks
- legal expenses - $5,000 each claim

Section 1B

Building & Contents:

- $50,000 aggregate limit (this is for fixtures and fittings etc)

Section 2

Legal liability:

- public liability - $10,000,000

Deductable(s) (the excess for each claim above)

Section 1A

- premises untenantable - seven (7) day franchise
- defaulting tenant, departure without notice, denial of access bond monies following deduction of allowable reletting expenses
- prevention of access - nil

Section 1B

- earthquake - $250
- malicious damage - $500 QLD
- malicious damage - $300 elsewhere
- all other claims - $100

Section 2

- nil

This insurance is only valid while the property is leased. What this means is that you can claim a cent if you cant FIND a tenant, sorry but they dont cover vacancy. That's your job.

Well that's mine, what do others have that mine doesn't I'd be interested to make comparisons.

Michael
 
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Reply: 3
From: The Wife


I really dont know how these landlords ended up with their house in such a state....

I would be taking the tenants to court, as well as the property managers, I certainly would not be paying for the cleanup.

There is a lot of "fair wear and tear" to be shouldered by landlords, but the dumpish conditions that were on location location was ridicules, whatever happened to inspections??

Now my property is to hard for me to manage myself, I employ a property manager.

Employ is the key word there.

The property manager works for you, I like everything inspected on entry/exit of any tenant, as well as the scheduled 4 monthly check, where they go over the property with a fine tooth comb, I like it to be in a wonderful state of clean.

Not tidy, most tenants dont have the time or energy to be spot on tidy, but the property has to be clean, inside and out, no weeds, no cobwebs inside and out, exhaust fans have to be clean, oven has to shine, glass spotless, im serious on clean, not tidy, they can have kids toys strewn around the place, thats fine, but if they dont pass a "clean inspection", they are given 7 days to rectify, if its for mould in the shower for instance, and the mould is still there in 7 days, They are given notice again, my property manager has to do the old, 123, YOUR OUT!

And I'm serious, this is what I tell my property managers to do, because they work for me. Thats what I expect for my 7%.

There is also no cleaning to be done by me, or charged to me, it sparkles upon entry, thats how they leave it.

I read all tenant leases as they come across my desk, I spotted one the other day, where the tenant has marked on the lease in her own handwriting, that upon entry, the carpet was not clean. I chased this up, as I didnt want to foot the bill for cleaning, someone had slipped up somewhere, My property manager says that it is incorrect, the carpets were cleaned, I wanted to know why then would the tenants write this?

She didnt know why, I told my property manager to fax me the invoice for carpet cleaning that the old tenant had to provide her with when they left,

turns out that she couldnt find it in the file, this is gross neglect, and the property manager has now accepted responsibility for having the carpet cleaned ASAP, and I want to see the invoice :eek:)
 
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Reply: 3.1
From: Sim' Hampel


Ahh... the old "carpet cleaning" scam by the property manager. I've experienced that myself as a tenant. Apparently it's alarmingly common.

It pisses me off, but more so that there are so many "stupid" property investors out there that blindly take their property manager's word for things... then they never learn.

As Michele B said... "trust, but verify".

 
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Reply: 2.1.1
From: Terry Avery


Sad but true, often the horror stories one hears are about those who did not
insure for their risks. Whether it be landlording or against floods, fire or
space debris. C'est la vie! People who don't insure do so out of either
ignorance or trying to be cheapskates.

One point that most people miss however is that there have been a number of
comments about the cheapness of landlord insurance so what does that tell us
about the risk of landlording? The insurance companies obviously assess it
as low risk (read low claims history). I think someone mentioned less than
1% of tenants are the tenants from hell which is pretty low risk, after all
most of us at some time or other were tenants and I presume none of us was
the tenant from hell.

Given that it is low risk one might consider self insuring (not taking out
insurance) but for me the peace of mind of having liability insurance, loss
of rent protection and tenant damage covered makes for a better nights
sleep. After all it only takes one tenant, guest or workman to trip over to
wipe out all you have achieved.

One final point, read the policy carefully so you understand what is covered
and what is not covered and actions you must take or not take to make a
claim valid. For example, if there is a problem and you say something like
"No worries mate, my insurance company will cover that..." then you have
actually voided your policy by alerting the other party to the fact you have
insurance cover. They must discover that themselves. You must do nothing to
admit liability or volunteer information. Obviously if they ask "Do you have
insurance and with which company?" you can then disclose that information
but again don't volunteer information such as yes I have $10 million public
liability because they might sue you for $11 million and guess who pays the
extra $1 million?
 
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Reply: 3.1.1
From: Donna Larcos


I once heard an agent say that he always
took prospective tenants back to their
cars as much as possible to say
good-bye. His theory was that if they kept
the car clean then the property would be
clean and deodorised too. If you look in
the car and see 5 mth old McDonald's
wrappers and coke cans rolling on the
floor - be careful!
 
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