investment

The age old dilemma for a Landlord is balancing the books between incoming and outgoings, in essence money in money out, it seems so often that you run out of money before you run out of month.

Between the mortgage, property management fees, body corporate fees, insurance, emergency repairs, wilful damage and every landlords favourite property taxes.

We can now add to the nightmare scenario that Covid 19 has foisted onto the market with ubiquitous rental holidays and negotiating with Lenders to try and get a mortgage holiday yourself.

DATA ON RENTALS

There are now 88,668 vacant rental properties in Australia, which is more than 11,000 properties higher than in April 2019.

Recent rental bond data from the Tenants’ Union of NSW, which showed the state’s median weekly rent for new tenancies fell more than $30 in April, hint that rental prices are already on a downward slope.

SQM Research founder Louis Christopher said a significant chunk of the vacancy blowout could be attributed to the conversion of short-term accommodation, including homes listed on Airbnb, to long-term rentals.

What does this all mean for the price of rent?

Anna Duong property development executive at the Locandro Group had this to say.

Covid 19 have created a “renters market” that gives an advantage to tenants actively hustling for cheaper property. It places pressure on landlords agreeing to increased rental reductions.

Anna suggested anywhere from 15-20% in many situations, she attributes the downward pressure to these key factors.

● No international migration

● No interstate migration

● No metropolitan migration (due to 5km lockdown)

So lets deal with a paradigm not often contemplated and that is how you see yourself.

Are you primarily a Landlord or Investor?

How you see yourself is predicated most often on the advice and education you received on the way to purchasing your property. Was it a purchase so you could own property and receive rental return or did you seek advice from a Buyers Advocate or Investment Strategist?

In my opinion a Landlord is the job title of managing properties and Investor is the process of creating wealth over time.

“Landlord is the job title of managing properties and Investor is the process of creating wealth over time.”

If you consider yourself a longterm investor here is some good news about managing and increasing value and longterm yield in your asset.

“There are basically three reasons people buy or rent a home: location, price and condition. I can’t do anything about location and price is determined by market, but you can work with a presentation specialist on the condition.

“Three reasons people buy or rent a home: location, price and condition.”

 If the condition is good, you can lease or sell at the higher end of the price bracket and faster.”

Buyers or Tenants tend to judge homes by cost and “move-in” quality – the less they have to do to move-in, the better and the more they are willing to pay.

SIMPLE TIPS FOR VALUE ADDING

Investors looking to get the best bang for buck in renovations, what would I recommend?

Actually before renovations there’s cleaning the windows and moving the blinds. It’s the cheapest and most transformative aspect of home presentation, It literally lets the light in and opens the exterior view.

After the windows an in depth forensic clean of every surface, cupboard, wall, bathroom, tiles and carpets within the premises.

I recommend pulling out every drawer and shelf cleaning thoroughly, the same with cooktops, extractors, ovens.

Best bang for buck is simply painting, a colour change and refreshing of the house can make small homes feel big and big homes feel stately.

It’s the equivalent of putting on a new suit, it changes everything.

“If you had to, could you sell your property in 6 weeks?” & why is that important?

My premise came from my days in the automotive industry, clients that serviced and washed their cars regularly found it was a cheap and quick task to get a Road Worthy Certificate (RWC).

In the car game it’s called keeping your car sales ready, it can be flipped quickly and for maximum return.

Those that didn’t service their vehicles had exactly the opposite experience.

Keeping your home in good and serviceable condition not only future proofs the value but allows for a quick short sharp marketing campaign to sell.

We have had many landlords and vendors through changes of circumstances good or bad require the sale of their homes.

I can’t begin to tell you the financial and emotional trauma that many go through when a home isn’t maintained.

It’s either prohibitively expensive to just get the property sales ready, alternatively it becomes a fire sale and they loose all financial benefits.

One in particular was a home in Melbourne’s outer east last year, amongst other issues the house had urine contamination from cats and dogs.

It was a $8000 solution and the vendor gave the go ahead, her dad became involved and put a stop to it. 

He felt spending $8k on urine decontamination was a rip off.

Apparently he owned a cleaning business years ago and knew everything.

When the house eventually sold the agent called me and suggested they got $50k less than could be expected simply because of the smell.

Why is it important to renovate between long term tenancies?

The rental game is geared towards back to back leases, occasionally the end of old lease and the commencement of a new one is the same day.

Property Managers are doing everything they can to serve their landlords.

The problem is homes fall into disrepair or lose lustre between rental agreements.

Simply painting a home, replacing worn fixtures and updating light fittings raises the appeal and desirability of the home, and with that the rental return.

If you’ve had a long lease say 3 years then leaving a 1 or 2 week gap between tenancies allows for updates.

More than that the asset increases in value and desirability, essential if the asset requires quick sale.

The four important investment property attributes

Cate one of Australia’s most respected Buyers Advocates and Property Investment Educationalists had this to say on 4 key factors when assessing investment properties.

1. Healthy capital growth,
2. Rental return in line with the expected gross rental yield for the area and dwelling type,
3. Continuous rental occupancy with quality tenants,
4. Reasonable maintenance expenditure demands.

As you’ll notice maintenance is a key factor in future proofing values of an investment property.

What is the Landlord-Tenant continuum?

Tenants have a natural tendency to follow cues of the Landlord.

The higher the standard the higher the expectations the tenants have of themselves.

Conversely if the landlord doesn’t care, the tenant literally say why should we, so this accelerates the demise and living standards of the home.

So in essence the tenants mirror the attributes of the Landlord.

My Big Fat Greek Landlord

Years ago I met a little Greek couple, Costa and his wife Eleni, they owned over a dozen rentals in Melbourne’s leafy east.

When I met him he was painting the house a tenant had just moved out of, he confided they painted every time someone moved out and spring cleaned every home.

He went on to say that in the rental agreement that the gardens are maintained by a gardener.

What he said next resonated with me because of my Greek/Irish background.

He reasoned that while this was his investment it was the tenants home, he had a family paradigm and understood that feeling proud and comfortable made for longer tenancies.

All his were long term tenancies in what are all now million dollar properties.

Costa and Eleni if still alive would have assets of over $20 million, with that value being realised over decades.

Why I advocate becoming Tenant Centric in order to maximise value.

By become Tenant Centric you actually begin with your customer in mind and think backwards, you move from being a mere Landlord to an Investor.

In essence real estate becomes your business.

Imagine you own a hotel and you’re competing with other hotels of similar size and design, you’ll either compete just on pricing or quality of accomodation.

You have a choice of being a Budget Chain operation or a destination 5 Star operation, one is price shoppers the other quality well healed clients.

If you’re not willing to stay in a substandard room after paying good money, why would you expect a tenant to accept that from your property?

Why you need a Presentation Plan

I implement presentation plan with Landlords I deal with, and it totally changed the quality of tenants and the length of time they are leasing for.

Heres what Anna Duong has to say on the importance of presentation strategies.

A properly maintained and presented property can achieve a 5-10% greater rental yield than similar properties, with the benefits of longer tenancies often 5+ years and much shorter vacancy days between tenancies.

Anna Duong – Locandro Group

  In Summary

Increasing value throughout Covid 19 is no different than any other time, simply plan your presentation and maintenance schedules, realise that being an investor is an active well executed business.

Remember you are in competition with 1000’s of properties and 10000’s of potential tenants, your property regardless of configuration or suburb will either be highly sought after or be the bargain in the market.

Here’s our basic checklist to help you think of what and how you value add to your property.

Peter is a Principal Presentation Strategist at Rent Sell Buy Move

With 30 years of training, he’s an educationalist to the multi national companies, real estate industry, international embassies, health institutions and domestic clients.

He can be contacted for a free audit or consultation on 0413656994 or peter@rentsellbuymove.com.au