Archive for the ‘Property Management’ Category

Sometimes new investors make the decision to manage their own investment property. After all, its seems obvious…why pay an agent to do something so simple as banking a rent cheque?

“It’s only when they start doing it on a day to day basis that they realise the level of expertise required to maximise income and minimise expenses,” Monika Bonet, Principal of Raine & Horne Glenelg said. “And when they hand over to an agent it’s an enormous relief. Their net income increases, they have a lot more leisure time and they can sleep at night.”

Ms. Bonet said that professional managing agents have the experience, expertise and up to date legal knowledge to prevent problems developing.

“Mistakes can be costly and many do-it-yourself investors find themselves in crisis management mode,” Ms. Bonet said. “They end up trying to lock the stable door after the horse has bolted.”

Ms. Bonet said that fortunately most people hand over to an agent before things go wrong.
“They realise that they’re re-inventing the wheel and that it’s simply not cost-effective. Property investment managers need to be legal experts and do-it-yourselfers end up spending a lot of time familiarising themselves with tenancy legislation. Even then they worry that they haven’t thought of everything.”

According to Ms. Bonet investors can have difficulty staying up-to-date with week-to-week fluctuations in the rental market.

“It takes a lot longer for trends to become apparent to people who are looking after just one or two properties,” Ms. Bonet said. “They do all that work and it may still cost them money in higher vacancies. It’s also very hard to keep a distance from demanding tenants if you don’t have a third party to liaise.”

Ms. Bonet said that another area people find difficult is communication and arbitration.
“A managing agent can be more objective and less emotional,” Ms. Bonet said. “Dialogue via a disinterested third party minimises income reducing anger and personality conflicts. Even negotiating rent is difficult for a landlord, both because of the emotional involvement and because of lack of experience.”

According to Ms. Bonet things like knowing what rent to set and what are fair and reasonable repairs can be difficult decisions for the inexperienced.

“The lease is the bottom line. If it’s not done correctly tenants could end up squatting,” Ms. Bonet concluded. “Utilising the services of a professional managing agent is an investor’s Slip Slop Slap. It saves time, maximises rental income and minimises risk.”

This blog post is brought to you by Raine & Horne Glenelg, your Glenelg Real Estate Agents and Glenelg Property Management Experts.

Real estate buffs use the term “vacancy rate” with knowledgeable flair when talking about rental trends.

“But closer analysis reveals that many people do not know how to calculate vacancy rates,” Monika Bonet, Principal of Raine & Horne Glenelg said. “In fact, many people don’t even know what information the percentages actually convey.”

According to Ms. Bonet there is a very simple formula for working out the level of vacancy in your area.

“The easiest way is to use a calculator,” Ms. Bonet said. “Just enter the total number of properties actually vacant and express it as a percentage of the total number of properties available to rent. If the figure you arrive at is 2.75% or less, you can give your area the thumbs up as far as investment potential is concerned.”

Ms. Bonet said that in practical terms a vacancy rate of 2.75% means investors should allow for their property to be vacant for ten days every year.

“This is considered a reasonable number of days to allow for tenant mobility,” Ms. Bonet said. “However, when vacancy rates rise above 2.75% investors have difficulty locating tenants and downward pressure is placed on rent levels.”

According to Ms. Bonet the reverse is also true: when vacancy rates fall below 2.75% tenants experience difficulties in finding properties to rent and upward pressure is placed on rents.

“Knowledge of vacancy factors over a period of time is an important tool in maximising security and minimising risk when purchasing investment property,” Ms. Bonet concluded.

This blog post is brought to you by Raine & Horne Glenelg your Glenelg Real Estate Agennts and Glenelg Property Management Experts.

This blog post is brought to you by Raine & Horne Glenelg, your Glenelg Real Estate Agents and Glenelg Property Management Experts.

“Many investors embarking on leasing out their first rental property hold out for the highest rent possible before letting the property, thinking the sky is the limit in a competitive rental market.” said Ms. Monika Bonet – Principal of Raine & Horne Glenelg.

According to Ms. Bonet “many do this even if this means losing several weeks rent. What does this mean for their overall return on the property?”

Experienced property investors report that the best way to maximise the return on their investment properties is to keep the property let – in other words to mimimise vacancy. But it is not always easy to decide to lower the rent. It is tempting to hold out for “just another week” and before you know it, another one goes by. But experienced investors say that doing the sums shows that holding out for a high rent is counter-productive; if the property is never going to let for $400 a week anyway, losing $350 for even two weeks is $700 that, spread over a year, will lessen the overall weekly return to less than the $350 the property will actually eventually be leased for.

Furthermore, tenants talk to other people in the rental market and those paying top dollar are the first to notice a downturn in the rental markets, often reacting by moving out to a cheaper property when their lease expires – a further opportunity for vacancy while the landlord chooses again to go for top rent before accepting the changed circumstances. Higher turnover of dissatisfied tenants is a further opportunity for lost income.

Experienced property investors aim for long term occupancy by asking for 95% of market value, thus avoiding tenants moving to greener pastures when the rental market slows down. And when they do have a vacancy, they work by the rule that (provided the property is clean and presents well and is well-maintained) if a tenant is not secured by day ten of the leasing campaign, the asking rent should be reduced by ten percent. This takes the agony our of the decision, enabling the property owner to distance themselves from the process by working to a tried and tested system.

This blog posting is brought to you by Raine & Horne Glenelg your Glenelg Real Estate Agents and Glenelg Property Management Experts

When media reports start talking about static or falling home prices, many homebuyers think that it’s a good idea to watch the market and wait for it to reach the bottom. They feel that if they postpone their purchase long enough, they are likely to see prices fall further and snap up a ‘real bargain’. 

While bargains do exist, of course, for people who are in the right place at the right time, there are often more people who miss out by using this strategy than gain.  Most homebuyers buy their family home and live in it for, on average, seven to ten years.  And when we’re looking at averages, the property market continues, in the big picture, to rise. Based on historical property cycles, property may undergo periods of static growth and periods of galloping growth, but on average, well-located, well-selected residential property doubles in value every ten years or so. Certainly, if we could always pick the lowest time to buy and the highest time to sell we would do very well indeed, but the only buyers who need worry about the immediate state of the market are the real estate speculators who wish to buy then sell again straight away, or those who are too highly geared or who have entered into unrealistic amounts of debt. For everyone else, the chances of strong long-term capital gain are virtually assured, provided they buy well-selected property in well-selected locations.

It’s famously difficult to pick the ‘bottom’ of the market. Often buyers who wait find themselves having little to choose from as listings get scarce – and a sudden flurry of competition for the few desirable properties actually on the market for sale often causes them to sell for higher prices than expected, even in a market described as a difficult one for sellers.  Buyers end up paying more than they bargained for if they  keep on watching and waiting;  because the ‘flurries’ they waited out were signalling an upturn in the market or the end of the halcyon days for buyers.
 
Purchasers who wait too long for a ‘bargain’ or the ‘lowest point of the market’ often only realise that the lowest point has already been reached once they can look back on it with the 20/20 vision of hindsight.

This blog post is brought to you by Raine & Horne Glenelg, your Glenelg Ragement Expertseal Estate Agents and Glenelg Property Management Experts.

“It’s sometimes hard to work out when interviewing a new Glenelg Landlord, why they may feel vaguely dissatisfied with their incumbent property management service” said Ms Bonet Principal – Raine & Horne Glenelg.

“When you sart talking to them you know straight away it’s not working for them, but you can’t put your finger on why?”

“Our experience with our Glenelg Property Management business is that most property investors want to communicate with one person for their day-to-day needs” said Ms Bonet. ”They don’t want different jobs to be managed by different personnel (task management); they want their whole portfolio to be looked after (whether they own one property or several) by one person who is responsible for all tasks relating to their properties – arrears, re-letting, repairs and so on”.

When it comes to hiring a property manager, here is a checklist you can run through to reassure yourself that your agent is doing the best thing by your investment. Here’s a checklist thatall Property Investors should ask themself;

1. Does your property manager talk to you on the phone or does he/she send emails or text messages? Most landlords are baby boomers and prefer to discuss things directly when there is a problem so if you feel your property manager is hiding behind emails or text messages when you need to talk, let them know.  
    
2. Do they respond to your requests quickly? Property managers who take longer than half a day to respond to phone calls and emails are letting you down.
    
3. Most landlords prefer minimal vacancy; it’s obvious that even a week’s vacancy is money that will never be recouped.  If your property is vacant, don’t let your property manager ‘give it another week to see how we go’. If it isn’t rented in 10 days, it’s time to drop the rent by 10%.
    
4. Are you getting the best referenced tenants? Keeping the rent at 95% of market value minimises arrears, vacancies and maintenance – and therefore increases net return although the rent is slightly below market. Landlords who go for the highest rent lose money in vacancies and repairs – so check that your agent isn’t setting the rent too high.
    
5. Does your property manager keep you informed about further ‘good’ investments? This could be via an email with links to their website and properties for sale.

This blog post is brought to you by Raine & Horne Glenelg, your Glenelg Real Estate Agents and Glenelg Property Management Experts.

Moving into a new a home or out of an old one is commonly ranked in amongst the top 10 most stressful things that many people experience. Connecting or disconnecting electricity, gas, telephone, internet and cable television services and organising removalists are just a few of the challenges that moving house brings.

This short video gives details of an excellent FREE real estate service that removes the time consuming work and stressful issues associated with these and other moving challenges and gets you into (or out of) your property sooner and with complete piece of mind.

This is another in a series of short videos from Raine & Horne South Australia’s Team that give useful and practical real estate tips to help people get the best result possible from their real estate experience.

For more tips, hints, market updates and media scoops follow @rhSA_CEO on Twitter or call Raine & Horne Glenelg, your Glenelg Real Estate Agents and Glenelg Property Management Experts.

When a tenant moves into a property, both the tenant and the managing agent/landlord are required to complete a condition report.

“This report is an extremely important document as it is a record of the condition of the premises at the start of the tenancy” said Ms Bonet, Principal of Raine & Horne Glenelg.

Ms Bonet said “When completing a condition report it is not a quick process of ticking and flicking that everything is clean, working and undamaged.  Extreme caution and time needs to be taken to describe all of the fixtures and fittings.”

This includes:

• The colour of the carpets and walls,
• A full description of the window coverings and light fittings,
• Detailed information on appliances, including the make and model,
• A list of any inclusions, etc.

“If you fail to adequately describe the inclusions, fixtures and fittings it can cause unnecessary disputes at the end of the tenancy or lead to a possible financial loss for the property owner” said Ms Bonet.

“For example, if you just tick window coverings as being good and undamaged and fail to describe them, the tenant can leave any form of window coverings when they vacate.” “Or if the tenant decides to paint a bedroom hot pink and the condition report just has walls ticked as good, you will be unable to enforce that the walls be returned to the original neutral colour, as the tenant decide to be difficult and disputes it” said Ms Bonet.

The more detailed the condition report, the easier it will be to over-come pending disputes at the end You can be confident that our property management team are very thorough when completing condition reports to protect your investment.

As well as describing the fixtures and fittings, it is equally important that the property is presented in a clean and safe condition from the outset. 

Upon vacating, the tenant is required to leave the premises in the same condition (allowing for fair wear and tear) as it was at the commencement of the tenancy. If the property was not clean, the lawns were not mowed, there were weeds in the garden and marks on the walls, then the tenant can leave the property in the same condition – or often they leave it worse with no recourse for a claim.

Ms Bonet said “Once again, you can be confident that our office is constantly working towards protecting your investment, which includes our team taking a little extra time and effort to be thorough with our documentation when a tenant moves into the property.”

This blog post is brought to you by Raine & Horne Glenelg, your Glenelg Real Estate Agents and Glenelg Property Management Experts.

“You can claim a deduction for certain expenses you incur for the period your property is rented or is available for rent”  Monika Bonet, Principal of Raine & Horne Glenelg said.

Ms Bonet further noted “However, you cannot claim expenses of a capital nature or private nature – although you may be able to claim decline in value deductions or capital works deductions for certain capital expenditure or include certain capital costs in the cost base of the property for capital gains tax (CGT) purposes.”

Types of rental expenses

Ms Bonet stated that there are three categories of rental expenses – those for which you:

• cannot claim deductions
• can claim an immediate deduction in the income year you incur the expense
• can claim deductions over a number of income years.

For a detailed understanding of all rental property expenses Ms Bonet  recommend that you visit the following web link of the ATO and download a copy of their 2008

http://www.ato.gov.au/content/00131327.htm

This guide explains how to treat rental income and expenses, including how to treat more than 230 residential rental property items.

This blog post is brought to you by Raine & Horne Glenelg, your Glenelg Real Estate Agents and Glenelg Property Management Experts.

Most investors agree that successful ownership of residential rental property is all about maximising long term net income.

“Novice investors and property managers often simplify what is a complex interplay of forces and focus on the amount of rent being achieved right now,” Monika Bonet, Principal of Raine & Horne Glenelg said. “Because tenant harmony is a crucial part of the income equation, most experts agree that setting rent at 95% of market value usually achieves a higher income long-term than holding out for a 100% or more. Tenants paying top dollar are more likely to be finicky about the standard of the property, and make more demands for repairs and improvements. Furthermore they tend to start looking around to see what else is available for the money and move on if they find better value.”

Ms. Bonet said that the more often a property is vacant, especially if the advertised rent is high, the more chance there is of vacancy and loss of income.

“Even a few weeks vacancy per year can significantly reduce the investor’s return, thereby requiring an even higher rent to make up for it and setting a negative pattern in motion,” Ms. Bonet said.

According to Ms. Bonet a related factor that is often poorly handled by novice investors is the market rent review.

“Property investment managers carry out market rent reviews on a regular basis and the rents are raised according to supply and demand,” Ms. Bonet said. “Novice investors often think the best approach to raising the rent is to make frequent small increases, but these are seen by tenants as penny pinching and lead to disharmony, increased demands for repairs and higher vacancy over the long-term. Experts say that in most cases rent increases should occur when market indicators show that a 5% increase is warranted.”

Ms. Bonet said that experienced property managers report that the most stable income and long term optimum return is gained by investors who follow the advice of the experts they have selected to manage their investments.

This blog post is brought to you by Raine & Horne Glenelg, your Glenelg Real Estate Agents and Glenelg Property Management Experts.