Where does everyone honestly draw the line with wet nursing your residential tenants so that they don’t have to do the myriad small tasks that need to be performed to actually occupy a residential tenancy and keep a household functioning correctly ??
How far does everyone go in terms of wiping their noses just so they don’t have a whinge ??
Is everyone that wealthy in either time or money that they can afford to interrupt their business or personal lives to attend to every little thing themselves, or afford to pay handymen / tradesmen to continually go around and do it for the tenants via a PM who can only shuffle paper and pick up the phone ??
What conditions do people (either themselves or thru their PM’s) place on the “Special Conditions” sections of their standard residential lease agreements ?? Hopefully you don’t leave it blank.
I seem to read about Landlord’s complaints so often on this forum, it must fall into a big grey area. Does everyone take their one and only opportunity at the start of the lease to sort out little 5 minute domestic issues that can fester into bigger dramas due to the tenants not lifting a finger “Hey – we pay our rent, we’ve done our bit”.
I suppose I’m talking about little things like ;
1. Mowing lawns
2. Cleaning windows
3. Batteries in smoke detectors
4. Changing light bulbs
5. Scrubbing mould off ceilings
6. Changing the style of functioning electrical switches
7. Washing line positioning
8. Pruning trees and other non-minor gardening
9. Unblocking the kitchen sink after a whole bunch of fat and gunk has been shoved down there.
10. Lighting the pilot light on a gas HWS after one strong breeze.
11. Anything to do with a pool.
12. Flywire screen has a tear in it, not from a dog.
13. Unblocking a shower drain after girls long hair clogs it up completely.
14. and on it goes….Sending tradesmen around to rectify these plus every other thing would surely dent your cashflow just a tad.
What does everyone do, simply take the hit and be happy with the 4% gross / 2 to 2.5% nett yield ??
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
Hi Dazzling, This a bit off subject but this is a reference i did yesterday for one of our tenants that were applying for a new home with a private landlord. We live in a new home behind them.
To Whom It May Concern,
????? & ????? have been our tenants at ???? for the past 2 1/2 years. Due to us selling the house they have had to move.
It is easy to give a reference for tenants that are bad, but for ??? and ??? it is hard, because what can you say about the perfect tenants, we only wish that an investor had bought our house or we had another one for them so as we wouldn’t lose them.
All we can say is that if they become your tenants you will be very lucky landlords and that you will not have one ounce of trouble with them and they will look after your home as if it is their own. The agent selling our home also said he has never had tenants so easy to get on with for the inspections and the presentation.
I know it couldn’t be done legally but I would even go as far as saying that if you ever had a problem with them, the rent or the home itself that I would personally guarantee to fix the problem myself. That is how highly we think of them.
Please feel free to call around and see us personally or call us on the above Ph No’s.There is good tenants out there?
They got the new house.
RoboI have had bad tenants and great tenants. But mostly great tenants. We once had an ex-army guy who used to call me on mobile (I am a woman, he is a man) to ask me to arrange to change the washer on the tap. Goodness knows why his lovely fiancee was going down the aisle with him.
Generally though in the 27 or so years I have had one or more IPs the bad tenants could be counted one one hand. We once had tenants who kept some ducks (6km from Brisbane, suburbia) in the back yard (big block). No problems until I called one day to put something under their door. The ducks had been sick so they moved them into the front closed in vehandah. We had a little chat and they moved, but they had been great tenants.
The people in that house have been there nearly three years, with one request in all that time. Easy peasy!
I think that things look bad only because people generally don’t complain about great tenants. And some of us ARE happy to earn our 4% (or whatever – I never work it out) simply because our IPs have increased in value enough for us to be very, very happy.
Basically, you just have to judge any requests and give an answer. If tenants are unhappy with the answer, they can move. If it is for a ridiculous reason, like you won’t jump to change a light bulb, well then, good riddance.
Regards, Wylie.
Don’t have that problem Dazzling, tenants look after the majority of those issues themselves (touch wood) I also must have good PM’s?
There sometimes seems to be small issues at the start of a tenancy, then nada..
With Commercial and Industrial properties how do you solve the issue of long term vacancies that seem prevalent amongst those types of Investments at some stage especially if there is a downturn in the economy?
The risk (read fear) of a long term vacancy would worry me and kill my cash flow, I guess when times are good there great but when they’re bad…? The risk/reward ratio is more than residential IMHO..
Like I say I guess I’ve been lucky with my tenants (maybe it’s WA; as the more into the country you go the less complaints you get, according to some +CF proponents?)
REDWING
“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow CalculatorThanks guys….maybe I’m the only one with whingey residential tenants. Or maybe I’ve seen what industrial tenants are like and am comparing the two and they don’t scrub up too well.
We are happy with the cap. growth on our RIP portfolio so will just keep answering that phone…blustery and rainy winter nights are the worst.
In terms of vacancies with IIP’s….I haven’t found this to be a risk at all. They go very quickly, even in the dead of winter. If I had of had 70 or 80 little 100 to 120sqm little sheds I could of leased out the lot. The bigger complexes take a while, but the security is there with bigger tenants.
Just on that, I’m absolutely stoked this afternoon, as I’ve just concluded negotiations with the Director of a large national corporation to lease out one of our larger warehouses.
Managed to get a 4 yr lease, with a 2 yr option…90K p.a. nett rent, escalating at 4% p.a. and they pay all of the outgoings on the property (about 16K p.a.). Great to have all of that off my back. They are also going to spend about 60 K on our property doing it up for us. It’s risky I suppose if you can’t get anyone, but if you know your product, and play hardball negotiating…things work out in the end. Hell of a way to spend my time off though. The bright side is we’ll need to write only one, one page letter in the next six years…so happy to spend the time setting it up initially.
That rent combined with the other building on the property leased out, the entire block is now doing 7.5% nett, which means it is slightly cashflow positive. Managed to get 106% finance at 7.25%. I love it when tenants pay you to landbank. Picked it up for 140K under vacant block value. These are rare but do-able.
Better go, the Director expects the lease to be emailed to him tomorrow morning, and I’m still putting the finishing touches to it. We’ve cracked the champers already, so hopefully nothing squirrelly falls into the lease.
I’ve grown accustomed to phrases like “at the Lessee’s sole expense and responsibility, to the satisfaction of the Lessor. Lessor reserves the right to reject any improvements proposed by the Lessee.” Beautiful. Try that with your residential tenants and see how you get on.[biggrin]
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
dazzling, it’s a cyclical thing, commercial space today is at a premium – from my 8 yrs in commercial/industrial leasing and sales – i’d have to say i’ve seen more busted a#$e owners then tenants…keep an eye out for the next 150 hectares of soon to be released industrial land coming your way – you may just have to learn what ‘incentives’ are….6 months rent free, provide fit out, contaminated sites, downwardly spindling rent reviews, happy days! then again, you may not……
cheers
brahms
Purveyor of Fine Finances
aka Mortgage Broker BrisbaneHi all,
Have to say that 7.5% net yield if on a 5 yr lease, still looks good with a 1 yr vacancy (and even better with Dazz’s nil vacancy!), compared to 4% gross yield with 4wks vacancy.
But in terms of industrial property, I think that you really, really need to know the market/area/etc. I don’t think basing solely on yield is right.
Munjy
Dazzling,
In answer to your original question, I always make sure that the cashflow covers the tenant expense, including vacancies. That’s the same as you, really – the tenant pays me to landbank.I don’t really think it’s a commercial vs residential thing, I think it’s more about cashflow vs cap gains.
And yes, my contracts specify all sorts of things that the tenant picks up, where this is legally possible, because that is a real difference between residential and commercial – the law allows much more flexibility on commercial.
But the interest rates are lower, the LVR is higher and the leverage possibilities are a lot of fun. You shouldn’t be so down on residential, even by way of being up on commercial.
Although my tenants get it easier than yours, I’ve never had more than a month’s vacancy in any year in any property I own or have owned in Australia. If you can say the same, you are exceedingly fortunate, as Brahms pointed out.
Dazzling,
We rented in Sydney when we moved to a new area from the mountains and then again up here in Qld before we bought and have rental properties too. In both cases where we were renting, lightbulbs etc. had to be replaced if blown before we moved out, window tracks cleaned, windows etc. and if any of that wasn’t done, we were charged for a cleaner, electrician to change bulbs etc. and it came out of the bond. Naturally we left the place spotless as we know how it is on the other side of the coin.
Get your money working for you instead of a bank! You could earn up to 3% PER MONTH on your money. Ask me how!
Hi Dazzling
I’ve been pretty lucky with tenants. I don’t bother them and they don’t bother me. I find that if tenants feel that the house is their’s, they’ll treat it so. That means not doing inspections often [ohno2]From your list, just the mowing is what I do. The property is a duplex and I have a gardener go there, not especially frequently, to do that. If the tenants want it done more often, they do it. One tenant asked me once to get an electician out because one socket in a double powerpoint wasn’t working. I told her to buy a double-adapter and take it out of the rent.
Sounds like you have needy tenants if you do all that other stuff. I wouldn’t be encouraging them though.
Oshen,
As an electrician by trade I will warn you that if a power point on one side is not working, this is potentially a fault that could start a house fire.Dazzling,
Brahms has some wise words on dismissing the reality of a down cycle for commercial/industrial when you are riding high on good times. Have you posed to yourself the possibility of a recession on your portfolio. A long lease is not much good if the company is going bankrupt.All the property gurus agree that the returns from commercial/industrial can be much better, but this comes with a bigger risk!
Credit though where credit is due, it sounds like you really are doing well so far….so well done!
cheers
Live, Learn and GrowLifexperience
Never considered a recession or depression. Not interested in the macro side of things…far more interested in my micro economy.
Even if interest rates rose and ‘business confidence’, whatever that really means, took a dip…I’d still pursue what I have been doing.
Buying distressed large industrial land holdings for less than land value, cleaning them up with a bobcat and truck and leasing them out to national tenants for a positive cashflow will work in any environment. There is enough fat and profit in the end product to buffer against all eventualities.
I will never be scared of the “Yeah but what if” brigade. If I had listened to them I’d still be paying off my PPoR mortgage and wringing my hands worrying about investing in my first IP.
With a bevy of grumpy elderly mentors who don’t pull any punches now to draw advice and knowledge from, it feels like I am starting off afresh to tell you the truth.
It’s amazing how many levels there are in this property game. Having just recently opened the door on this higher plain, I very much like the look of the new rules and the flow of the game. I’ve noticed there’s a few big boys who play rough on this higher plain, but I’m sure I’ll give as good as I get.
I realise there are many levels well above me yet to be attained, but with steadfast determination and time as my allies, I’ll get to play them soon enough. A dodgy tenant or poor economy cannot and will not stand in the way.
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
Thanks for that LifeX
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