What if this happens? What if that happens? blah blah

Alex P Keaton

Alex P Keaton

My parents are worried about me.

What if you get a bad tennant and they trash the place?

What if they dont pay their rent and you cant get them out?

What if this? What if that?


It seems to be a recurring conversation every now and again. Maybe next time I should make a brief statement and walk away.


I tell them not to worry, I am and have been educating myself. With every investment their is a risk but you just need to ensure you manage those risks. I will have a property manager to screen the tenants. I would also like to be involved in this myself. I will have landlard insurance, income protection insurance etc etc.

You see.... they hear a lot of bad stories about tenants from friends, tv etc, but most tenants are usually good and if you get a bad one or something you will be covered by insurance, you will deal with it, you will jump back on the horse, move on... s*** happens. Your goal is wealth creation... accumulation of ips. Along the way you are going to come into all sorts of problems. You just have to manage and deal with them, learn from them. Factor that in. Also ensure adequate buffers too.


Oh and I also said to mum, I think a far greater risk is that of doing nothing. Mum is conservative with her super. It is not risky which she is happy with, but also the returns are not very good. I said well when I retire I want to be retiring on at least $50 K a year. She will be lucky to retire on $30 K a year and then I think it will probably run out after year 7 of retirement. What if she lives for another ten years. Then what? Anyway... I will be around to help my parents.


Do you have people close to you that are like this too? How do you deal with them?
 
The most negative people tend to be those closest to you eg family members.
My folks wanted me to go see a financial planner before I started buying IP's. Gee, ya think?
It's easy to avoid negative people when they aren't family or friends. But when they are, I try to filter them out. Like you said, roll out a standard line, then walk away.
It's a difficult situatiom because they are well meaning and are only trying to guide you based on their own experiences.
I try to show my folks what I've acheived. They tend to focus on the debt part of the equation, not the asset growth.
It's a mindset thing. Until that changes, they will continue see things as they see them.
Sounds like you're doing OK in dealing with the situation.
 
This was a big advantage for me about starting with a Defence Housing investment. Well, I was new to the game when I did it.

They guarantee tenancy for x years + y option (it used to be 9 + 3, I think 6 +3 is more usual now). And they inspect it with a vengeance.

Parents and others were very happy about the long lease.

Management fees are very high (15% + GST). But that includes all routine maintenance.

Sorry- that's not what you were asking.

It's just that it's something that helped me cope with the folks ;)
 
Hi Kim,

Geoff and I got alot of that with the purchase of our first one :D At that point in time, we talked about it alot more then with people who weren't investors - probably because it was so new and exciting.

Now that we have more, those same people tend to ask us questions more than give "advice". We generally don't bring up the topic unless asked anymore. When asked, I could talk for ages :D

At the time - when getting the more "negative" advice, I took note of everything (don't simply dismiss it - because they are general concerns, things that can happen and that you need a plan for if they do). It didn't stop us, and made us think of things and plan for things we hadn't considered. I even find it helpful to agree with them! For instance, when told about stories they've heard about how tenants trash someones property - tell them one of the horrible stories you've heard on Somersoft ;), or seen on TV - it keeps the topic lighthearted.

However, as you set things up and time passes - and everyone sees that sky isn't falling - the "negative advice" will start to change - and you'll probably them asking more questions. You'll probably also find that you stay quiet about what you're doing (unless asked).

One of the best things to remember when people are giving "advice" - consider their financial situation - if they're wealthy and are in the same financial situation where you want to be, then listen very well (and keep asking questions!!) - if not, just keep smiling and nodding ;)

Cheers,
Jen
 
Kim5 said:
I tell them not to worry, I am and have been educating myself. With every investment their is a risk but you just need to ensure you manage those risks. I will have a property manager to screen the tenants. I would also like to be involved in this myself. I will have landlard insurance, income protection insurance etc etc.
Click to expand...

This is important - take note of the questions, and make sure you have answers that make sense to you, and you are comfortble with. Use your parents as a tool to ensure your risks are covered.

Cheers,

The Y-man
 
Last edited:
Yeah and because I have some knowledge but no actual practical experience yet I can sometimes find it hard to explain exactly what I need to get across, because I am new to all this. All I know is if I do all the right things, educate myself, have a good accountant, mb, advisor etc then im off to a good start. I will work hard to manage the risks. I will make sure I have plans and stuctures in place etc etc.

Anyway I am careful when talking to mum about certain issues to do with money, cos my dad freaks out with anything concerning money. It just stresses him out. Throughout their marriage mum has looked after the finances and when I was younger he used to freak out when seeing a bill arrive in the mail. He couldnt deal with it.
 
I had some friends tell me to no no no never rent out the house, just sell it. They have a lot of properties, all are adjacent vacant blocks. I'll decide whether to hold the house as an IP or sell it when we get figures after we get the plumber in ... if the rent profit will be more than the bank interest on the profit from selling, we rent it out, otherwise we sell. Very simple stuff.
 
Rob Williams said:
It's a difficult situatiom because they are well meaning and are only trying to guide you based on their own experiences.
I try to show my folks what I've acheived. They tend to focus on the debt part of the equation, not the asset growth.
It's a mindset thing. Until that changes, they will continue see things as they see them.
Sounds like you're doing OK in dealing with the situation.
Click to expand...

Hmmm I guess they will be worried about me no matter what I do in life. Parents are like that lol.

They had a bad experience with an ip that they were talked into buying by some spruiker back in the late 90's or early 2000's I cant remember. They signed up, got caught up in the whole spiel etc etc. Mums original instinct was not to buy it, because of the area the property was in. She kicked herself that she hadnt followed her instincts, but got roped in... in the sales pitch. The house was near homeswest tenants in Nollamarra.

Anyway they couldnt get a tenant and the place was vacant for 6 months. She got scared because she thought it would get trashed, so they sold. Its a shame they didnt hang onto it for a few more years to ride the wave of the 06 boom here in Perth. They would have done well out of it. It turned them right off property investment. They lost $10 K on it. I can see why they are so concerned about me.

They will get used to it..... eventually.
 
Hi Kim,
Our 1st IP was a tenanted property and yet we received -ve comments like that. For our 2nd IP we just went ahead and did not tell them months after. We also do not talk much about properties, shares on 1 side of the family either as they are not interested in investing.

I found that surrounding yourself with this forum will help (even just read and not contribute much like me) :)
 
wealth101 said:
Hi Kim,
Our 1st IP was a tenanted property and yet we received -ve comments like that. For our 2nd IP we just went ahead and did not tell them months after. We also do not talk much about properties, shares on 1 side of the family either as they are not interested in investing.

I found that surrounding yourself with this forum will help (even just read and not contribute much like me) :)
Click to expand...


g'day, nice to see you popping in!! :)
 
My mother is exactly the opposite she is always interested in whats going on with my houses. Even though some times I sound born again.

she was interested in buying IP's but dad is old english and doesn't believe in debt. buy your house and pay it off and live off your super.
 
G'day Kim,

I am new at this game being due to settle on my second property (my first PPOR) on Tuesday, however I offer these thoughts:

People have different risk tolerances - what is acceptable to one person may cause another to have a break down.

Your parents will naturally worry about your future as you note, it is what parents do. I also believe there is a generational shift in risk tolerances - not all debt is bad debt, however our parents generation were largely brought up with a different mindset.

Everyone has an opinion on the property market, however it is unlikely that the majority of punters have taken the time to educate themselves as you have. Listen to all opinions, however try to surround yourself with people with specific experience in your area (i.e. property investing).

Being a West Aussie and following your other posts, I do not know the details of your purchase however you have purchased in a very solid area IMHO. To test your purchase go onto realestate.com.au and check out units in 'like' suburbs in other states. I think you will be pleasantly surprised at the comparative value of the Perth inner north suburbs such as yours.

Most importantly, I personally believe it is better to try and fail than fail to try. Look at where you hope to be in 10 years time - will you be get there by being conservative - unlikely. For me, I am stretching myself to make this purchase but if the sky does fall in, I will be 30 years old with no assets - plenty of people like that around. If it doesn't and I am right, then happy days.

And finally if things do go pear shaped, follow the below link for some VERY interesting reading.

http://www.des.emory.edu/mfp/efficacynotgiveup.html

Wishing you all the best.

Craig
 
some people are pessimists and some are optimists and there is nothing you can do to change them - the sooner you realise this the easier your life will be.

my mil is a pessimist - always expecting the worst. if we bought an ip she'd immediately rant on about tenants trashing the place. if we bought a reno she harp on about what a rotten old house it was ... i have a real filter on now as to what i tell her - only the good stuff.

however my fil is an ex-builder and very interested in what we do. he's an optimist and loves to pour over plans and ideas and scoure the properties we buy - he sees past the grime to the end product. i tell him almost everything - out of mil's earshot.

i think some of this came from them owning flats and one day a tenant lit a fire in the middle of the loungeroom. mil demanded they immediately sell the lot - and then still carrys on 10 years later that they didn't get enough money for them. if they'd held thru the boom they would have tripled in price, and she only sees the now price - not the value at the time when she insisted they sell.

but she's like that - goes on about how i spent to much on a second had piano for older stepdaughter - $400 - when her very swish brand new one only cost $1000. what she fails to remember is that it cost $1000 25 years ago!! and i can't convience her time/value of money - even using the loaf of bread example.

as michael yardney explained in his recent semiar - everyone has their financial thermostat set regarding their attitude towards money when they are children. it's set by their parents, teachers, culture etc and this thermostat cannot be changed unless the person themselves wants to, acknowledges their thoughts and works hard to change them. perhaps you can find out what her parents thoughts about money/rentals were when she was younger - might explain a lot.

in the meantime, just filter what you tell her ... she doesn't need to know everything.
 
lizzie said:
but she's like that - goes on about how i spent to much on a second had piano for older stepdaughter - $400 - when her very swish brand new one only cost $1000. what she fails to remember is that it cost $1000 25 years ago!! and i can't convience her time/value of money - even using the loaf of bread example.
Click to expand...

Don't you love that thinking!! I get it all the time "what, $20?! I remember when that used to cost $12!"

Yeah, about 10yrs ago, what's your point??!! Has your wage increased in the last 10yrs as well? Funny how they never mention that. :rolleyes:
 
good post and i am sure the majority have had the same experiences,this exact situation has thrown a serious drift within the outlaws and primarily due to the tounge in cheek comments, and the private calls my partner gets from her father, she mulls on the negative things her father says mostly fulse and threaded with d&g, not a good relationship to be in, but since i told them to mind their bussiness in other words of course, it has been great, and i feel i have a suport for the first time.
 
steveadl said:
Don't you love that thinking!! I get it all the time "what, $20?! I remember when that used to cost $12!"

Yeah, about 10yrs ago, what's your point??!! Has your wage increased in the last 10yrs as well? Funny how they never mention that. :rolleyes:
Click to expand...

That's the same thinking that holds a lot of people back from investing and building wealth for themselves.
"What! $250,000 for that? I remember Fred bought one like it 10 years ago for $50,000".
Like it's an argument not to invest today. As if values just stop rising all of a sudden, never to move upward ever again?
Never understood that logic and people who think like that about the small stuff have the same mindset (gee, there's that word again) with the big stuff, too. Makes me :confused:
 
You are doing exactly the right things Kim, listening to what people say and making sure that any negatives are allowed for.

Everyone has a different "sleep at night factor" and the right investment for me may not be right for someone else.

We have rented IPs for over 25 years, and in that time have had dozens of tenants. Only two went bad.

One tenant skipped, but when we figured out the rent owed we were more than covered by the bond. At that time the landlord held the bond, so from memory we owed the tenant about $120 but of course had no forwarding address.

More recently we had a tenant who turned the house into a pigsty, an absolute mess and the yard was worse with heaps of motor parts and tyres everywhere. We terminated the tenancy at the end of the lease and, much to our surprise, the property was left clean, neat and rubbish free.

My mother was horrified that we had IPs as my aunt owned one in the 1950s and had a toxic tenant. Took months to get him out, he even told my aunt the process she had to go through while he lived rent-free.

It's all part of growing up and making your own decisions. They won't all be winners, but with the advice you have received and the steps you are taking there is really very little risk, so long as you hold long term.

Good luck! - and at the end of the day you are very lucky to have parents who care so much about you...
Marg
 
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