The unicorn of property investment

The Unicorn of Property Investment

When it comes to investing in property we all want a property in a fantastic location, close to facilities and transport, in great condition that won’t require a lot of maintenance.  We want it to appeal to tenants, have phenomenal capital growth, high rental yield and we want it at a bargain price….right??

The problem with this property is that it doesn’t really exist, it’s the unicorn of property.  At some point in the journey, hopefully early on, you must work out what aspects of your criteria are the priority and be prepared to compromise on others.  This is the sign of a mature investor and recognising this will save you a lot of time and frustration!

When it comes to deciding what you are prepared to compromise on, here are three tips I’d like to share:

  1. Your budget will have a lot to do with what you can buy – Sounds obvious, doesn’t it!  If you have the flexibility to be able to increase your budget, then great! The truth is, however, if you have a fixed budget, then you may want a lot of things but you will have no option but to compromise.  When your budget is fixed then you can choose to compromise on land size, the condition and features of the property or the suburbs you can buy in.  Tweaking one or more of these things may just bring you back on track.
  2. Always keep in mind the driving factor for the purchase – Sometimes I see novice investors getting more caught up on a ‘pretty house’ than on a good investment.  To me, the location of the property is more important than the appearance of the house.  Not to say I don’t want a good looking property with street appeal and tenant appeal, it’s more that if I have to choose between a cracking location with a slightly older or less renovated property then I’d choose this before I chose a lovely renovated property in the middle of nowhere!  Determine what your ‘driving factor’ is for the purchase, are you going for growth or yield (I know, I know, we all want both!).  If you dig hard enough and ask the right questions then you’ll work out what your driving factor is.  Keep this in mind with all purchase decisions, don’t get caught up in the shiny objects!
  3. Don’t get hung up on insignificant issues – Ceiling fans, air conditioner, built in robes, ugly paint colours, ugly front fence…all these things or a lack of these things are fixable items.  Don’t get hung up on these issues, they’re insignificant and make the difference between a property being a good investment and not being a good investment.  This point brings us back to the previous tip – keep your eye on the ball!

If you need help working out what you can achieve within your investment budget, give us a call at Property Zest!

How to get your investment property ready for tenancy

As the owner of an investment property there are several things that you must do to get your property ready for tenancy. Below is a list of items that any owner should have completed before a new tenancy or advertising of a property.

At Property Zest will always advise our clients and gain instructions and quotes prior to undertaking any activities but also highly recommended undertaking these tasks as quickly as possible to minimise any vacancy time.

Cleaning

Cleaning is always an issue when it comes to a tenancy, especially when a tenant vacates premises. We advise at the start of any new investment property to have the property professionally cleaned. This enables us to provide a high level of cleanliness as the baseline condition of the property at the commencement of the tenancy, which effectively sets the standard of how a tenant should leave the premises when it is time to vacate.

Waterwise Compliance

It is a common question from property owners to ask whether a tenant can be charged for water usage. We advise that the owner obtain a water wise compliance certificate, to be completed by a licensed plumber. This is a once off fee and can be used for the whole tenancy of a property. A licensed plumber will go to the property to review and advise if anything needs to be replaced to make the property water compliant. Once any required items have been rectified the plumber will supply a certificate and this certificate allows an owner/agent to pass on water usage to be paid by the tenant throughout the whole tenancy.

Smoke Alarms

Another common question relates to smoke alarms and requirements for rental properties. This is an area that is tightly legislated and one that owners must comply with. Laws are put in place to protect all parties involved and here at Property Zest we make sure that the property is compliant by engaging with a licenced smoke alarm compliance company to check and issue a certificate of compliance. This will protect the tenant, owner and ourselves for any future issues that may arise. This is an annual cost at the time of writing starts from $79 for a basic level of service, though various packages may be on offer. A certificate of compliance is supplied to owner and agent and then during the tenancy if anything needs to be done with the smoke alarms, the company attends fee of charge.

Professional photos

When advertising a property for rent, it is in the owners best interests to get a professional photographer in to take photos. This will help advertise your property in the best way possible instead of photos from an iPhone or with poor lighting.  Poorly photographed properties won’t do your property justice and will result in a lower number of enquiries about your property.

Keys

Once a tenant has been selected, we will need to provide them with keys. The rule of thumb is, a full set for the managing agent, and full set for how many tenants are on the lease.

Maintenance

In between tenancies is often a good time to get any outstanding maintenance issues sorted out at the property as it can be easier for tradespeople to gain access for quotes and attend to maintenance or improvements whilst the property is vacant. Staying on top of maintenance and making ongoing improvements will improve the longevity of the property and improve its appeal to prospective tenants.

 

If you have any questions in regards to the above, please give one of our friendly Property Managers a call on 1300 799 114.

Carmen Derfoldy – Property Manager – Property Zest

Property Background

Carmen was first exposed to real estate through her mum who was a sales agent and she loved tagging along to open homes with her mum over the weekends.  She has always had a keen interest in property investment and having a family of investors has taught her much about investing and property and encouraged her to get involved.  Carmen also got a taste for renovating through family projects mainly doing the clean up jobs, but fell in love with whole transformation process.

Professional Background

Carmen is a qualified Chef by trade with 9 years in the hospitality industry.  Her entrepreneurial nature lead her to purchase her first food business at the age of 20 which she operated for 2 years.  She later started her own café from scratch at the age of 24 which she sold after 18 month.  Carmen holds a Diploma of Business.

Life interests

  • Oil painting
  • Playing guitar
  • Running, kayaking; staying fit and healthy
  • Travelling
  • Food/Cooking
  • Crazy about cats

Something interesting

Carmen’s café was called Hungry Hippo Café, and she sold an enormous burger called the Kilimanjaro along with a half-size version called the Kosciusko.  She grew up in South Africa but the accent didn’t stick after moving to Australia.

Safety switches in rental properties

Did you know that the lessor has a general duty of care to provide a property that is safe for the tenant?  Safety covers many aspects of the building including electrical issues, which we all know, can be annoying at best and catastrophic at worst.  Your tenants, their family and friends and tradies/professionals who may be carrying out work at the property.

Legally, homes built after 1992 were required to include a safety switch on all power circuits, whilst all homes built after 2000 were required to also have safety switches on all lighting circuits.  Regardless of when a home was built it is a legal requirement to have a functioning safety switch on all power circuits in a rental property.  Although this is as far as the legal requirements goes, it is still recommended to have safety switches on all circuits – including power, lighting, solar, pool, ovens, hot water systems and airconditioners.  If you do not have a safety switch at your rental property you may be fined or worse, you may at risk of litigation should there be a death or injury.

There is no doubt that safety switches save lives, but like anything, they do require regular testing to ensure they are functioning as age, lack of use or other circumstances may render them non-functional.  Safety switches have an inbuilt test button that should be tested every 3-6 months and we educate tenants on doing this regularly.  It is also a recommendation that a licensed electrician perform an operating time current test at least once per year.  Most smoke alarm compliance companies can include this type of test in their annual inspection services.  
If you’re unsure about the safety switch status of your rental property – or even your own property – have a licensed electrical do an inspection for you to advise.  It’s worth the piece of mind.

Tom Williams – Buyer’s Agent – Property Zest

In this article, we learn a little more about fabulous buyer’s agent, Tom Williams!

Property Background

Tom’s property interest started as a teenager, helping out his family with the family investment property.  Over time he has developed an interest in researching the market for good properties.  He says his biggest learnings have come from being on the receiving end of a bad property transaction!  His well honed analysis and intelligence skills give him a keen eye for detail and making sense of a variety of important information about potential locations and properties.

Professional Background

Tom has spent 11 years in Royal New Zealand Air Force starting as an Avionics Mechanic, then commissioning as a Mission Support Officer.  His work has involved travelling the world, working in exotic locations alongside a number of foreign militaries and governments.

Tom has also studied a Bachelor of Arts in Politics with two semesters on exchange in Denmark.

Life interests

  • Travel, aviation, and exposure to new cultures and ways of life
  • Studying international politics and the effect on people
  • Running, yoga, and walking in the wild
  • Fine red wine and strong blue cheese

Something interesting

Tom spent his teenage years flying gliders and powered aircraft around the Canterbury Plains and the Southern Alps in New Zealand.

Terminating a lease earlier than lease end date

It’s becoming more and more common for tenants to terminate their lease before the lease end date. It is very important to remember the lease is in place to cover a tenant, agent and also owner in all facets of renting.

What does terminating a lease earlier mean for a tenant?

It is quite clear that if a tenant requires to terminate a lease earlier than the lease end date, they must first provide the property manager with the correct form (form 13) and notice. A property manager will need to notify the tenant what is required of them.  Please note, there is no such thing as a ‘break lease fee’, however, the tenant must:

  1. Must keep paying rent and maintaining the property until a new tenant is found
  2. Reimburse the owner for any out of pocket expenses that may incur i.e advertising fees, letting fee

It is in the tenants best interest to work with the property manager, for them to gain access to show enquiries through the property. This will help the property rent as quickly as possible especially during a time where the tenant needs the property rented as soon as possible. The tenant also has to understand that the owner has to treat this as any normal application process and that the application must check out with good references.

What does terminating a lease earlier mean for an owner?

When a tenant is terminating a lease earlier, this mean the tenant pays for any out of pocket expenses to the owner. It also means the owner is getting a new tenant into the property with no out of pockets to them. BUT it is very vital that the owner takes everything into consideration when approving a tenant for the property, as it is their investment property. We still need to do all the correct checks and make sure they can pay the rent. We do need to make sure we minimize the timing as the tenant is paying for extra expenses.

What does it mean for a property manager when a tenant terminates a lease earlier?

When a tenant terminates a lease it can become a very stressful time for the tenant and also property manager. The property manager must do everything possible to minimize the cost for the tenant in every way. They also must keep the owner up to date but also the tenant due to the circumstances. Having a good relationship with your tenant from the start of the lease and also the start of the terminating the lease earlier, does make it a lot easier on all parties. The property manager must:

  • Work with the tenant to gain access to show enquiries through
  • Process applications as quickly as possible
  • Speak with the owner to get applications approved, get all monies, documents signed and returned.
  • Perform a a vacate inspection and make sure the property is left as per the Entry condition report (ECR)
  • Organize for the bond refund
  • Organise for the new tenant to move in

When it comes to terminating a lease, for all parties involved it can be a very difficult and stressful time. It is very important that as any parties is to just breathe, not to get angry, upset in the situation. It is a time that all parties must work together to get the best outcome possible.

 

Making sense of your building and pest inspection

So you’ve purchased a property? Fantastic!!

Hopefully, you’ve organised a Building and Pest inspection?

You are getting a building and pest inspection, right???

At Property Zest we strongly recommend having a Building and Pest inspection on your property before going unconditional, which usually means after you’ve signed the contract and before the end of the designated building and pest condition timeframe on the contract OR in the case of a property going to auction, pre-auction.

Why get a building and pest inspection?

There are many benefits of having a building and pest inspection, but of course, the big one is the help you to identify any issues with the property before you commit to buying it.  Issues that may be identified at the inspection include major structural issues and pest infestations or damage, right through to minor maintenance issues and potential risks.  This can help you stop you from buying a property that may cause you much stress and financial outlays or it may help you to renegotiate on your purchase price to compensate for some of the issues found.

And trust me, it doesn’t matter how old your property is or how new your property is or how expensive your property is – there will be issues identified!

Who should you use for the building and pest inspection?

Firstly, you should make sure your building and pest inspector is licensed with the Queensland Building & Construction Commission (QBCC) and holds current Professional Indemnity and Public Liability insurance.

Secondly, where possible, I’d recommend using someone who has been recommended to you by a trusted source.  At Property Zest, we provide recommendations to our clients for building and pest inspectors that we have used over a number of years.  We have strong relationships with several inspectors who we know do a good job for our clients.

What is involved?

The inspection usually lasts around 1 – 1.5 hours. The inspector visually inspects all aspects of the outside of the property, including the fencing, garden areas, external cladding of the house, roof and gutters, decks, patios, sheds etc.  On the inside of the property  the inspector visually inspects all aspects of the inside including all rooms and the roof space.  The inspector usually ‘taps out’ the property which helps to identify areas that have been affected by termite activity and many inspections also use thermal imaging camera to look for areas of heat and moisture.

The inspector prepares a written report, usually with pictures, which must comply (provided you have used a licenced inspector) with current Australian standard for building and pest inspection.

What doesn’t the building and pest inspection cover?

A building and pest inspection does not cover plumbing, electrical or details inspections of any particular special areas – it’s a general overview.  Specialist areas such as plumbing and electrical, or any detailed inspections of specific structures may require other professionals.

Should you attend?

Yes.  Either you or your buyers agent should attend.  Reading a large and wordy report of issues can be frightening but in most cases, many of the issues are relatively minor.  Having been onsite to view the issues first hand you can get a better grasp of what is a significant issue, versus what is a minor issue.  Also, having seen issues ‘in the flesh’ is helpful if you are going to be arranging tradespeople to fix the issues, so that you can adequately explain the items.

What do you do once you have the report?

There are three courses of action following the building and pest inspection:

  1. Accept the issues without further action and satisfy the building and pest condition
  2. Where serious issues have been identified or a large number of costly issues have been identified you can elect to terminate the Contract
  3. Negotiate with the seller to provide compensation for the issues identified

For the most part, we tend to go with item 3, unless of course a large issue is identified that would be a ‘showstopper’, such as major structural issues or termite infestation.

This part of the buying process can be frightening for new buyers and your buyers agent will be able to help you to navigate the building and pest stage of your purchase.

Pets vs No Pets at your rental property

Pets in rental propertyOne of the biggest questions asked by property owners looking to rent out their property is whether or not to allow tenants to have pets and what the potential impact is of this decision.

NO PETS

Allowing no pets at all will potentially reduce the pool of tenants who will want to rent your property.

On the upside though, having no pets obviously means there will be less wear and tear on the property in terms of damage to the property and potentially, odours in the property.

In our experience, around eight times out of ten the tenant will ask for a pet. It’s a common thing that happens throughout a tenancy.

PETS

At the start of a tenancy when being advertised, we always ask owners to consider listing a property as ‘pets upon application’ (this does not mean pets are a definite ‘yes’, it means that each application will be considered on its merits and each pet considered). Ultimately it is the owner’s decision on whether to allow pets.

At Property Zest, we have a pet agreement form that a tenant must use to request permission for a pet to reside at a property. The tenants and also the property manager sign this agreement. This is a safeguard for all parties involved. The tenant signs to say that they understand that should their pets do any damage that they will be held responsible for rectifying this damage in a timely matter.

The benefits of allowing pets is that it will open up your property to a much larger potential tenant pool, possibly decreasing vacancy time. The reality is the most pets and pet owners are not an issue, however, not all pets are created equal! Having a ‘pets on application’ approach coupled with a signed agreement from the tenant is a good step in providing the right to ‘veto’ any pets you do not consider appropriate and safeguarding your investment.

Advertising your property for rent

When advertising a rental property with an agency, it is very important to find out the procedures used by the rental agency pertaining to advertising costs, methods and formats, inspection times and how they take prospective tenants through.

Advertising Process

Here at Property Zest Rentals we make sure our owners are part of the process every step of the way.

  • Photos – We first engage a professional photographer to take photos. Having professional photos can make your home more appealing than others.  If the photos are professional, light and shows the property for what it is worth, it will be more appealing to the eye for prospective tenants.
  • Script – Next step is writing a script, describing the property.  We write the script and then send it to our owners for them to add, delete or change anything.
  • Launch – Once we have received the script approval from the owner, we begin the process of uploading the property to various websites to advertise the property for rent.
  • Inspections – We take prospective tenants through any time of the day, the more time you make for prospective tenants, the easier to get everyone through the property.  We give tenants an option to automatically book their own inspection times and we send them reminders prior to as well as follow up after.

Pricing

The most important part of advertising a rental is the price.  The saying is “if the property is priced right than it will rent.”  We supply our owners with a CMA and an appraisal letter to guide them on a rental price for the current market.

At Property Zest rentals our turnaround time from listed to approving tenants is usually a week or less!  Through the whole process our owners are always informed once we receive enquiries to phone calls after each inspection.

Top Tips for advertising your rental property

  • Make sure you find out the agencies costings and procedures
  • Professional photos is a must
  • Get a copy of the script and make sure you are happy with it
  • Price the rental property for the current market
  • Get updated as regularly as possible

At the end of the day, this is your home, your investment property and you should be looked after and kept up to date at all times during the process.

You should also be confident that your property management team is looking to get you the rental return for your investment and get a tenant moving in as soon as possible.  Most importantly you want to make sure your property manager is invested in getting you the best tenants for your property as the right tenant, well managed can mean the difference between a good investment and a stressful investment to you as an owner.

Buying off market

One of the most common questions I’m asked when a potential client is speaking to me is “Do you have access to properties that are not listed on the market”?

I think there are lists out here in cyberspace of the ‘top 10 questions to ask a buyers agents” and that question is definitely on those lists!

My answer to this is ‘Yes’.

Yes, we do have access to properties that are not listed on the net for the world to see.  I am always quick to follow up, however, with some additional information.  Basically, just because a property is ‘off market’ doesn’t necessarily mean it’s good.  It must still be assessed just as any other property would be.

We will often have agents contact us with properties that they are going to be listing, so it’s more of a ‘heads up’ pre-listing that the property is coming to market and we may have an opportunity to buy it before it goes live – or not.  The seller may be happy for us to look at it but the plan is to still take it to market and ensure there is an open home. The seller may indeed sell it to us before anyone else sees it – bonus!

There are genuine cases of ‘silent listings’, however, where a seller doesn’t really want to go to market.  This happens for a variety of reasons, sometimes people just don’t want to have open homes or tell others they are selling or they may need a fast and uncomplicated sale.  The reasons may be due to personal or financial factors at play.

In all cases, when a selling agent tells a buyers agent about a property they are listing, whether it is on the market, offer the market, pre-market or whatever, the selling agent isn’t telling you about it because they think it would be an amazing property for the buyer (who is our client), they are telling us about it because they are trying to sell the property and represent their seller (their client).

The important thing here that same the level of assessment and due diligence that one would apply in considering any property must apply to this property, regardless of whether it was on-market or off-market.