Forum Replies Created
You're right D, there are definitely circumstances where it would be appropriate to end a lease … I wouldn't want unhappy tenants and it seems my tenants don't want an unhappy landlord either! LOL.
I've maintained an approachable friendly relationship with all my tenants. I like to be flexible … just in this case, I think I needed to make the point that a fixed term lease is there for a reason; having agreed to letting them out of the lease the decision was up to them. In my opinion, they made the right one!
Hi all, thanks for your responses. I just thought I'd update the latest news. I sent the tenant an email last night saying that whilst we'd prefer they commit to the lease we would let them out of it with all advertising expenses and rent paid until another tenant was found. I was very 'nice' about it; they are nice tenants after all. Anyway, I got an email today saying that they'd reconsidered and would look at it again when the lease expired. I guess some people are perhaps a little 'naive' in what a fixed term lease really means and it just needed to be reiterated. I would have let them out of it … just thought the point needed to be made that leases are in place for a reason and not usually broken because you think you want to move somewhere else (I think a house in the same area too).
It makes me wonder though … what's the point of a fixed term lease if one of the parties can break it … but that's probably just my black and white view of life!
Hi D, they're moving because they've found another property they want to rent. I'm not sure of all the details. They mentioned on signing this lease that they might want to move after this lease expires and were looking to buy. I get the impression its 'just because'.
I don't anticipate in this market that we would have trouble getting another tenant. We've always done well in the past. I also appreciate your viewpoint of one good turn is rewarded with another … I wouldn't force anyone to stay if they really didn't want to. However, it would be good if people appreciated what a fixed term lease is all about …!
Amazing DD … there's definitely some enterprising souls out there! I can't say I blame them … its an interesting proposition to rent from someone then sub-let to others who'll pay your rent for you. As long as the lease says its okay and the owner is cool with it, why not?
I would go with a periodic tenancy from 25th June. Let the tenant know that you plan to sell the house. If you get a buyer, you can do settlement in line with the tenants notice to vacate … sounds like a plan!!
Many buyers will find the idea of having a tenant in place an attractive idea so I wouldn't think of it as cutting out a section of the market.
At the end of the day, you have to do what suits you best financially. If you can't afford to have the property vacant while you look for a buyer, then a periodic tenancy is probably the best way to go.
CJ: If you need to sell the property sooner than next year, then sell it to investors only. You could also assess the tenant as to whether they'd be interested in moving on … according to WA law, a fixed term lease can be terminated if mutually agreed by both parties. If you tell the tenant you'd like to sell and they'll have to move, they may choose to go sooner rather than later … its worth asking. If they decide not to move on, then it depends how desperate you are to sell the property as to whether you choose to sell now as an investment with sitting tenant or wait until closer to the end of the lease and run the risks that 'karen' did in having a potentially vacant property losing money while you find a buyer.
Wow, Matt, you've obviously got a lot of thinking going on … and some great support in family who are already investors.
My first thought is that with only a part-time job your possibility of getting a loan may be limited. I would talk to a broker who can assess your suitability right there and then. You could always run it through one of the banks' or brokers' online calculators. There's not much point going any further for now if you don't know the answer to that.
If you can't borrow now, then get your head down, finish your studies and save all your dollars. Look at it again when you can afford it. You can always ask the broker for some info on what income you'd need. I'm all for getting younger people investing but only if its affordable and not at the risk of everything else … you need to focus on study! One step at a time maybe!
Have you asked your grandparents and parents for some tips on how to get started? Great that you have their financial support too btw.
If it were me, I'd start closer to home … but that's a personal preference. I like Australian investment because the tax and legal implications are easy to get assistance with, the properties are local (or at least within Australia) and my tenants easy to control. Reading another post here regarding the troubles of an investor with a property located in the UK and using a property manager, it definitely seems less stressful to have your property located closer to home.
Start reading. There are plenty of very good books out there which will help with a plan regarding what sort of property to buy and the best way to invest. Research the internet, other investors and books.
Regarding your company query, perhaps a visit or call to the accountant your family use might be a good start for some answers as to whether this is a good theory or not!
Good luck!
Hi, my two pennies worth in answering your queries:
Is it legal? Check the council regulations to ensure what is a satisfactory number for a residential property. If it comes under a 'rooming' or 'boarding' house AND you have a lease for it in that situation, then obviously, yes, its legal. However, if you have a lease for only a few people, then any more than that on a permanent basis is not.
Does it matter? Well, it matters if you, the landlord/owner, don't want that many people living in the property. In my opinion, a two bedroom property is meant for no more than four people. Living conditions are awfully cramped, not to mention the extra stresses on the wet areas, cooking equipment and plumbing. If the other people living in the property do 'trash' the place, then the leasee will be responsible and is certainly not going to admit that they had more people living there. Why? Because it could cost you money to have things replaced more frequently. The bond may not be sufficient to repair damage caused by bigger numbers.
Is the wear and tear/damage to the property increased greatly? As above, with twice as many or more people living in the property, then there will be extra stress on the property and its facilities. Assuming they don't shower every day as DWolfe said, they will certainly be using the toilet, cooking, etc. Yes, the chances of your property being damaged will increase with greater numbers.
What actions I can take if I find out? Do regular inspections. If you find more people living there than on the lease, ask the tenant to explain. Work towards having the tenant evicted if the breach notice isn't complied with. The tenant will come up with all sorts of excuses, ie. the people are just staying a few weeks, etc. If you're not happy with any of these responses, issue notices and evict the tenant. Do regular drive-bys to assess whether there are more people living there than should be (without stalking!!). Get to know your neighbours … they may be more than willing to 'dob' the tenant in if there are lots of people living there.
What penalties can be incurred to the person on the lease? You can use the bond to repair/replace any damage. Over and above that you'll need to seek recompense from the tenant through legal means. Be wary of potential legal action to you from body corporate or the council if your property contravenes any by-laws caused through overcrowding. It is in your best interest to be firm and control the property and the tenants.
My suggestion is this:
Make your lease watertight. Specify the number of tenants on it and name them all. I always remove the sub-letting clause from my lease. Vet your potential tenants well … if they look dodgy they well might be (or not!). If you strongly believe there is potential for a sub-letting or overcrowding problem with the area and property, then be very specific in letting any potential tenants know that it isn't allowed and won't be tolerated.
Good luck!
Wow Steelar … you'd think having a managing agent would help solve some of your problems with tenants … even more so when you live so far away. I wonder how much of their decision making came as a result of knowing you were in Australia and, in their opinion, not so easy to contact as a local owner?
Good luck with the sale and your new life here!
Wow AndrewH … if I had $45,000 to spend I wouldn't be giving it to someone to find me a property … I'd be investing it in that property! I appreciate your drive to achieve properties in a small precise point in time, but I think with some research, read lots, surf the net, do some courses, talk to people and forums like this one and you'll probably learn enough to get you where you want to be in time.
I'm sure there are many investors out there who haven't needed to spend $45K to get themselves to where they want to be … and there are many who will take the money from you if you're impatient to part with it!
Beware of wolves in sheeps clothing!
GH, I live in Perth and have two investments here. I think you'll find that we're not too different from other areas of the country BUT for the fact that our economy is doing pretty well and we traditionally, don't drop prices too much. A discussion I had years ago with a real estate salesman was around what would happen if our 'bubble' burst (which of course, it did). I asked would Perth people be prepared to drop their prices and take losses … his response was that it doesn't happen here … generally speaking, Perth people would rather hang onto a property than take a loss, then sell it when the prices come up again. With a fairly strong economy, most of us would ask why should we drop our prices a lot when someone will eventually buy it for close to what we want.
Keep on trying, I'm sure there are good deals to be had … you just need to find the needle in the haystack!
Hi Ryan, first up congratulations on becoming a new dad. Its great that you're positive about teaching her about financial freedom and investment. I believe its one of the reasons why so many people don't achieve it … we're not taught basic budgetting skills as children (or in school) … and its so important.
I have two daughters. We've taught the girls' about putting money into their bank accounts and they've really enjoyed seeing their savings grow. I put their pocket money into the account every pay day and give them a balance every now and then. If they want to buy something they know it has to come out of their pocket and that means the balance will be less. I don't believe in giving them everything so I think its important that they learn a work ethic and that's what pocket money is all about. Just recently (as they're getting older), I've started offering money for other jobs, ie. wash my car (works for me! LOL) and I'll pay you $5. My youngest usually takes up the offer and puts the money into her 'piggy bank'.
As for investing, the girls' have watched my husband and I buy our first and then build our second investment properties. They can see first hand how the process works in the buy/sell and how the tenant/landlord relationships. My girls' came through properties with us when we were buying, they watched the whole building process happen, they were with us when we reviewed tenants and celebrated with us. We took it on as a whole family project and explained that it was for their future as much as ours. We outline the steps as we go.
Basically, they live it with us so the message is passed on … your daughter will do the same. Look at the children of the wealthy who take over the businesses because they've been raised on it … Lachlan Murdoch, James Packer, etc.
As a paramedic, I see lots of the low end of life. My general observation on this is (please excuse my crassness) that stupid breeds stupid. The children I attend are very often from families who probably haven't been taught the basic skills (or encouraged, or simply don't want to know) so they have nothing to pass on to the children and it becomes a perpetuating cycle. My heart breaks for these children because they're an open canvas with no direction and its such a waste. We can do better!!!
When the time comes, we'll be encouraging our girls' to be financially savvy and to invest but all we can do for now is instill messages and lead by example. Create a good work ethic, teach them about the value of money, basic budgetting and the importance of financial security … the rest will be up to them. You'll do fine … you're switched on, motivated and smart … I'm sure she'll be a chip of the old block!
Hi, I live in Perth and have two investment properties here. My husband and I built one and we bought the other established. My preference on affordability is to build over buying established. Many developers offer landscaping packages and carpets, blinds, etc. so you could pretty well sign up and get a tenant in when its done without much extra from yourself. The year of building is long but graduated on repayments and tenants love new houses.
I'm not sure what you'll get in Perth for $300-330. The average price here is almost $500,000. I prefer good areas (mine are Atwell and Success) for affordability, quality of homes and location rather than a cheap area, just my personal preference. I know its not always true but I go for good areas with a higher rent banking on good tenants …
Talk to an adviser about the figures. Personally, I would put the minimum into the interest only repayments (with a goal of paying it off when and if you ever sell) and the rest into a deposit on a second property or towards a place of your own down the track.
Perth is going up up up so I think if you're going to get in, do it sooner rather than later.
Happy to help with any thoughts on building, Perth and property investing here.
thecrest, I love the way you think …
businessglobal … wow, you've got some stories to tell. I totally agree over the PMs. The come and go and are often so unreliable. All the checks in the world won't save you from a bad tenant or a good one gone bad. Worthwhile advice you have there!
gmnicho … my opinion on your query regarding a long lease … I wouldn't give a long lease in the current climate. Like others have pointed out, things change with tenants and so does the market. We used to offer a maximum of one year lease but the market went up a LOT in that year (in Perth) and we had to put the rent up a LOT at the end of the year. It has to be done but hard on a tenant just the same. Small increases more often are easier to take. You could offer a one year maximum lease with a provision for market increase, or simply offer six month leases and up the rent each time. It depends on the market as to the increase. I think most tenants can cop a $10/week increase … maybe even $20. If they don't like it, you'll get someone else, especially if its market price.
If your tenant is trying to secure some future with you … perhaps you could just explain your situation and reassure them that provided the rent is paid and the place is looked after there's no reason for you to look for another tenant.
Yes, 2-3 years is a long time, for a tenant and a landlord. Anything can happen so don't lock yourself into it. Maintain your flexibility.
g0biin, as I mentioned in my previous post, you do need to stay on top of the market and cater for any increases so you're not in the current situation.
My advice on the reno's … if you can get market value without it, do it …
If you think you'll get more with some reno's, then taking into account how much you'll outlay vs how much extra income you'll receive (and of course capital gain) consider it …
I'm sure you'll have no trouble finding tenants, its really just the balance of emotion vs business isn't it?
I'd buy the best you could afford … better rent return, hopefully better quality tenant. Just MHO.
Good to hear you're not getting carried away. Start with one IP and see how you go from there.
G, I haven't had to 'boot' a tenant out to force a rent increase but I have had to increase the rent on my properties, sometimes considerably. I often have trouble with the idea of bigger rent increases because I'm philosophical about it, I already have a good steady stream of income, good tenants, regular payments and a house that's looked after. If I increase the rent, the tenant might move out, my property could be vacant for a while, I could end up with the tenant from hell and the list goes on …
My husband is more matter of fact; his view? If the tenant doesn't like the increase, someone else will rent the place and he's quite right.
However, I think there is a balance between being 'businesslike' about it and 'emotional' as he calls it!
Are you asking the question because you really want more for your rental income? Or is it just because others are getting more and it made you think about it? Are you happy with the rent you're getting and the tenant you have?
There is definitely a danger in letting the rent get too low on a property and I think you've struck it … you possibly haven't kept up with market values and now you've got a big gap to fix up. My way around it was to increase the rent about $20 for six months and then again another $10 after that (and again after that until I achieved market value). I only ever do six month leases now so I can factor in the changes in market value.You could perhaps suggest to the 'old' lady that you'd like to put the rent up. Sound her out over it and see what she says. She may well be getting rent assistance which will help with any increase. You might ask her if there's anything she'd like improved so you could add value and get the rent increase. If she's old and been there ten years already, she's not going to want to move. $125-$185 is cheap rent for most people.
At the end of the day, it is your property … your investment and your business … put the rent up (in increments as I suggested if you prefer) and if the tenant doesn't like it, she can move on, someone else will rent it at the value you want. Take into account the tenants' situation but don't let it influence you into losing money.
Cheers
MichelleIf it were me, I'd stick with property … have a look at the global financial crisis to give you a viewpoint on shares. Of course, picking the right shares and even the right property is a challenge in itself. I'm biased towards property but I also have some shares which I just let 'sit'.
You have equity in your own home to buy an investment property but are limited on time till official retirement age (sorry to remind you!), if you get cracking, put your extra income into an IP (or aim for positively geared) then you'll be on the way to getting your retirement income happening. You may even be able to add another within a few years once you've earned some equity in that property.
If you want financial advice, you need to speak to an advisor who can assess your whole situation and give you some pointers.
Good luck!
Cheers
MichelleI have two properties which I own with my husband so I can't talk from the point of view of a three way split. However, from the point of view of a joint investor, if I were in the situation of one of the parties wanting to get out, it wouldn't bother me if you bought me out or the property was sold. Either way, I get my third share of the value so why not let you carry on with it as a whole. Perth is a fantastic market to be in, so I'd jump at the chance if you can afford to buy them out.
In fact, if you really didn't want to sell, it might make better financial sense to the other two to let you buy them out so you avoid having to pay a real estate agent and their associated fees cutting into the final payout. I know you'd still have legal fees, etc, but it might save something on the costs.
Cheers
MichelleWell done Ranjeev on falling in love with property investing. I have two rental properties in Perth as well as PPOR. Perth has been a great place to invest and will continue to be for the future.
Its never too early to get started and once you do, you'll be hooked. Until you have job security, learn as much as you can, do your research on suitable areas to invest and watch your pennies. Talk to as many people as you can and read, read, read. There is a lot of many valuable information out there which will help you in your quest to join the rest of us.
Cheers
MichelleI have two rental properties where both tenants have cats. I don't mind cats (I have two). I live in WA. We charged a pet bond of $100 which is the maximum I can charge for pets, irrelevant of the number. The idea of the pet bond is that it covers for flea spraying, etc.
I also specified in the lease that the tenants have permission to have x number of cats on the premises. Carpet cleaning is standard on exiting the premises and written into the lease. If there were fleas on vacation of the premises, I would flea bomb and take the costs out of the pet bond.
Cats are clean, way better than dogs (and I have three of them!). My cat litter tray stays in the laundry on the tiles so I would specify in the lease that it needs not to be put on carpet. Most cat owners wouldn't do it … but you could get a feral who wouldn't think about it. Cover your bases.
I have had cats (and dogs) who destroyed the flywire on a screen door and window … again, its covered by the bond.
I'm with other people here … cats are way better tenants than some children (and I have two of them! LOL). I don't think you'd need to charge any extra rent, maybe a few dollars if you were really inclined.
Both tenants asked if they could have cats prior to moving in. In fact, one of the tenants emailed within a month or so of moving in to ask if they could 'petsit' her sister's cat. I had no problem with it … I couldn't charge anymore bond. Had I not been asked and we discovered it … I would have been less amiable about it.
On the issue of cats annoying the neighbours, cross that bridge when you come to it, if and when it comes up. My own cats, and those of my tenants are 'inside' animals. I don't let mine wander the neighbourhood and I think most responsible cat owners feel the same way.
It is hard to get a rental property with pets (and we all know why) so good on you for being flexible with your tenants and considering their request. All you can do is cover your bases by being as specific as you can in your documentation and explanations to the tenant.
I believe in honesty, approachability and flexibility and truly believe that is why I have such a fantastic relationship with my tenants!
