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How we turned a nightmare tenancy into a profitable investment

How we turned a nightmare tenancy into a profitable investment

By Sarah Lefebvre on May 08 2019


Have you ever faced an uncomfortable situation where nothing you can do will fix it? Many landlords have been in tough spots when it comes to things like late rent, unruly tenants and broken rules. What adds to the distress, though, is when family or friends are mixed with business. While it may seem simpler to handle tenants on your own, especially when you know them and there’s no real need for a third-party, when things go wrong that third party (in the shape of a property manager) may be the solution you’re after.
 
Here’s a cautionary tale from one of our own – Debbie Copley, Senior Property Manager with LJ Hooker Kensington-Unley.

The backstory

A self-managing landlord agreed to rent his property to a family friend without using a property manager. Believing that his property was safe in the hands of a friend, the landlord was happy to rent the property privately without organising a bond, but stated that no pets were allowed on the property.
 
When the self-managing landlord arrived on LJ Hooker’s doorstep (so to speak), it was established that the tenant had stopped paying rent and was seven weeks in arrears. Importantly, prior to the initial conversation with LJ Hooker, the landlord was privately handling the property with the tenant. By the time the first meeting was conducted, the damage had already been done. As a result, the homeowner was desperate for a solution. Which is where we stepped in.

What happened next

The LJ Hooker Property Manager immediately jumped into action in an attempt to get the tenant to pay the seven weeks of rental arrears. A form was submitted to the tenant requesting they pay the rent within seven days or face eviction. The tenant didn't comply so LJ Hooker was forced to take the issue to the Rental Tribunal. Meanwhile, in an attempt to block the landlord and the team from LJ Hooker entering the premises, the tenant changed the locks.

Thankfully, the Tribunal introduced a payment plan and gave approval to change the locks again so the landlord and LJ Hooker could gain access to the premises and conduct an inspection. Upon inspection, despite the landlord stating that no pets were allowed on the property, Debbie found four cats inside that did not have access to a litter box. Consequently, the carpets were soiled, resulting in a horrendous smell, plus the curtains had been ripped to shreds by the animals. In addition to this, there were at least three or four other people living in the house that the landlord was not aware of. Despite these extra people paying 'rent' none of the money was being passed onto the landlord.

Not surprisingly the tenant still didn't comply with the payment plan so after another trip to the tribunal the tenant was evicted.

However, when Debbie did the final inspection, not everything had been cleared from the property. The clean-up bill alone, including removing extra car parts, furniture that was left, full car bodies, and sorting out the garden that had been left to its own devices, cost $7000.  And with no security bond to help cover the cost…that meant $7000 out of pocket for the landlord.

LJ Hooker managed the entire clean-up and rejuvenation process, including removing everything from the property and conducted a rental appraisal to determine how much the landlord could charge in the current market.   Once the property was ready to take to market, it took Debbie only two weeks to find a suitable tenant and was able to charge 10% more rent than the landlord had previously charged.

Two years later, LJ Hooker is still managing the property, the tenants are happy and the landlord is thrilled as he's receiving his monthly rent on time, every time.

What can you take away from this story?

As with most horror stories, there’s bound to be a lesson here. In this case, it’s that property managers are essential.
 
While local investors are sometimes inclined to trust family or friends as tenants, this blurs the lines between friendship and business. Remember, if things go wrong, as they did in the example above, friendships can be ruined.
 
Second, property managers are objective third parties. They can play the role of the bad guy when it comes to rental inspections, dealing with tenants, and other ‘tricky’  matters. They can also advise you on what you should and shouldn’t be doing as a landlord. In the case above, Debbie successfully advised the landlord to take out insurance, which had not previously been done, in case something like this ever happened again. Having an objective third-party involved also means you, as a landlord, can enjoy peace of mind and limit any risk involved with renting to people you may know.
 
Finally, property managers conduct thorough screening, to help ensure they find the best and most reliable tenants. In the case above Debbie checked all references, including work and personal, and spoke to a previous agent who had managed a property with the tenant. She even went so far as to drive past the tenant’s current rental to see what kind of condition it was in, because that’s just what the team at LJ Hooker do - they go above and beyond for our clients.   
 
An LJ Hooker Property Manager is your on the ground expert, a barrier between you and your tenants, who is able to handle difficult situations such as this one on your behalf.  Trust your local LJ Hooker property management team to achieve the best outcomes for your property. Enquire today

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