Managing your own rental property can be risky!
December Property News
How to avoid the pitfalls when leasing an investment property!
Investing in property is a great way to generate an income and enjoy the fruits of capital gains over the years. But, it’s also a path fraught with danger if you try to manage the property yourself.
One of the biggest dangers facing landlords who try to manage their own property is navigating their way through all the legislation and regulations that govern rental properties.
It is not unusual for inexperienced landlords, who have tried to save money by managing their own affairs, to find themselves unable to handle a difficult situation because they don’t have the expertise to do so.
Below is an example of what can go wrong. It is not an actual case, but a composite of situations that have been known to arise in real estate.
An investor buys a rental property and leases it to a young married couple as joint tenants on a 12-month lease. Two months later, the couple quarrel and the young woman leaves the property.
The remaining partner agrees to continue to pay the rent but is unable to do so. Firstly, because he was relying on his wife’s income to help and secondly, unknown to the landlord, he’s lost his job because he was unable to handle the stress of a marriage breakdown.
He assures the owner that everything will be alright and he will be able to continue paying the rent but the situation worsens until finally he is months in arrears.
To make matters worse, the landlord in attempting to get access to the property to make the tenant pay the rent has breached the provisions of the Residential Tenancies Act. The situation is compounded by the tenant’s refusal to vacate.
In despair, the investor contacts a professional property manager who realising the gravity of the situation advises him that the only way to resolve the issue is to go to the Tenancies Tribunal.
The tribunal orders the tenant to vacate and pay the arrears and make good the costs but in reality the tenant is found to be in hardship and unable to pay the debts. He has to come to an arrangement to pay the money over a period of time.
What is the lesson to be learned from this situation?
Landlords should act at arms length when dealing with tenants by appointing a professional property manager who understands the pitfalls and traps involved in the leasing process.