Being a Landlord is great
Investment property; where a tenant pays the mortgage as the property goes up in value.
What a great way to make money!!!
We all know that one investment property owner with long term tenants who look after the property, maintain it like their own home and do the gardens and pay on time. You know, the perfect tenants, the ones we all want.
I’ve had dozens of tenants, and possibly only one of my tenants have fallen into that category. At the other end of the scale I have had a commune in my home, with up to maybe 20 people living in the house at the same time, making a total nuisance of themselves and causing the neighbors a great deal of stress.
The dishwasher flooded the kitchen and because the tenants didn’t want anyone to come into the house to see what was going on, they denied access to the Plumber on 3 occasions and ‘fixed’ the dishwasher themselves. That meant I had no ability to claim anything on insurance, and when they left at the end of the tenancy, I discovered that half the kitchen had rotted from the ‘flood’ and had to replace it at my own expense. I’ve also had a hoarder, like the ones you see on TV. Doing inspections was er, interesting, to say it nicely.
My experiences are nothing compared to a friend of mine, Suzy.
Suzy had a beautiful house on the Sunshine Coast, and due to a new job offer in NSW, she put her property up for rent for $750 per week and got a lovely family to rent it.
All was going well until one day the police arrived….
And they arrived in force with battering rams to force open every door, garage and shed and arresting the all occupants. They were charged with being the kingpins of a major drug operation in the area and had been using the house as both a headquarters and a brothel. Turns out the ‘family’ was 2 family members and the others were the brothel workers.
Front door was a large beautiful pivot door, that had $2,000 damage. Then all the sliding doors, the garage door, the shed door…………. all damaged. The tenants had altered things in the house, like the plumbing with extra plumbing pipes that were used to hide the drugs, plus many other hiding areas. Rooms were ‘redecorated’ as a Brothel.
The nightmare had just begun.
When dealing with these types of issues there are 2 things to note. 1. IF police find evidence of a crime then they will not cover any damages to the house in the process of apprehending criminals or conducting the search. 2. Your insurance does NOT cover this, as there was criminal activity being conducted in the house.
So my friend now has a house worth around $800,000 with busted doors, tenants denied bail and no more rent coming in. Known associates would swing by seeing if there were any hidden drugs at the property that the police missed.
The nightmare continued
Rental laws are not drafted with this situation in mind so there were strict guidelines that had to be followed. The owner had to wait the obligatory 4 weeks of abandonment with notices put on the property. Suzy and her friends even had the enormous task of packing up someone else’s household stuff (& brothel) and paying for a storage facility to store all their goods in for 3 months, as per the law.
Suzy also had to pay out of her own pocket to replace the front door, all sliding doors, new garage door and shed locks. Plus repair all the ‘damage’ and redecoration the tenants had made to the house. All up she was out of pocket over $30,000. Forcing her then to have to sell her beautiful home to pay for all the repairs. Not to mention, the weeks off work she had to take to pack the house and deal with the issues, the stress factor was off the charts.
How often does this happen?
You may ask, how often does this happen, well sadly, quite a bit. Most criminals and drug lords don’t rent a $800,000 house, so the damages and losses are smaller, but still a massive inconvenience and a financial burden. Suzy had a 6-month nightmare, before she finally cleared out the house, repaired it and sold it just barely stopping her financial ruin.
Recent years has really got me thinking on the whole concept of having multiple investment properties and retiring rich from the rents. Well so far, it hasn’t quite happened. There must be a better way. There is lots of money to be made from property, but I’m not convinced anymore that buying and holding and renting out an investment property is the only way or even the best way.
The more I learn and understand the way land encloses gains (economic rent) the more I look at the different options other than simply set and forget (buy and hold). By creating active capital transactions, I can see time frames shortened and long term ownership risks reduced.
IMPACT method
Using RPA’s IMPACT Investment methodology has not only reset my mind, but now defines each property I own for a specific purpose and time frame.
Does it stop every property? No. But now I have a balanced portfolio with my capital being active (not lazy) and each property has a plan.
No more set and forget for me, ever!
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Karin is a passionate property investor who owns multiple investment properties. She has spent many years researching property, law and literature in her previous job roles with McCullough Robertson Lawyers and QLD Libraries. Karin’s is head of Research at Real Property Advice, not just focusing on properties, but regions, suburbs, social trends, industries, infrastructure and demographics.