Have you heard the (familiar) horror story?
Nightmare tenant stops defaults on rent, trashes property, invites squatters, devalues home, upsets neighbours and ruins cashflow putting investor into financial stress because they still have a mortgage to pay….that story.
One of my places got trashed once. Tenant stopped paying rent, spent the money on drugs, we commenced tribunal action but they did a runner owing quite a bit. The house was left in a terrible state and they stole a bunch of stuff. By the time I get the place cleaned up and rented again I was way out of pocket. I got my insurance money eventually but it took a long time to actually get paid.
Now before you cry for me, don’t worry I am a big boy, I can cope, chalk it up to experience. And no, it didn’t turn me off property (obviously).
But no one likes the thought of that happening. It scares a lot of people away from property altogether, and pushes others into overpriced new or off the plan properties because of some imagined promise that this wouldn’t happen if your rental is shiny enough. It isn’t true, I have heard the same story even in new properties and high priced markets.
How do we 100% avoid the risk this kind of thing happening to us?
Truth is, you can’t.
But you can minimise it.
When I reviewed why it happened to me, I was cranky.
Then I got honest. I was left with 1 main reason.
I should have picked a better property manager, they screwed up royally (long story) but I hired them so again, my fault.
Choosing a property manager is actually one of THE MOST important parts of the whole property investing shebang. Get it right and the experience of ownership is smooth and fun for the most part. Get it wrong, and….
I might do another post on this later but for now, here is a few quick things to look for in a PM.
1 - Accurate appraisals - knowing the numbers in their market so they don’t over or under rent your property.
2 - Being willing to instruct and help landlords on required renos and maintenance to put your property in the sweet spot of best local tenants. (ie yes to dishwasher, no to helipad)
3 - Being able and willing to screen the bad tenants out. (how they do this is everything, they have different ways but it must work)
4 - Having systems to pick up rent defaults and take matters to tribunal quickly when required, and being able to represent the landlord (not the tenant) in those cases.
In case you are wondering - no, I don’t do property management, and no, I don’t take commissions for recommending anyone. I just spend a lot of time looking hard for the good ones and stick them when I find them. Which makes me appreciate mine even more. Come to think of it, I might ring one today to say something nice.
When you find a good one, look after them. It’s a stressful often thankless task.