Investment property

PART 3 - Being a good landlord

Making a good return from residential investment properties is not as simple as leaving the money in the bank and reading a statement every month while your wealth accumulates.

Like anything else, earning a good living requires work. But smart landlords can minimise their risks, and eliminate the horror stories, with good management.

Leonie Freeman, owner of Interactive Property Management, has seen it all in her decades in the real estate business. Landlords tun to her when they either don't have the time (many are overseas-based) or realise that it takes particular expertise to stay on top of all the legislation surrounding tenancies.

``The Residential Tenancies Act is very clear, but pretty complex for a new landlord to get to grips with. Mistakes are costly because mediation or the courts usually find in the tenant's favour if there have been some technical errors by the landlord,'' she explains. ``My first bit of advice is to insist on tenant quality.''

Freeman hears time and again of landlords who have learned the hard way that not checking references, not doing credit checks, taking personal cheques for bond or deposit money and sloppy rent records can be costly.

She insists on being vigilant about rent every week as it takes two to three weeks to start tribunal processes to start retrieving arrears. ``Some landlords get really emotional about getting the money, and then find they've gone two to three months with no rental income.''

She recommends the Tenancy Services website (www.dbh.govt.nz/housing/tenancy) and help line (0800 836262) for clear advice, sample documents and other services for tenants and landlords.

Landlords must also be prepared to maintain properties. That means taking a tenant call at 2am if there's been a fire or water leak and being able to fix it immediately, as well as more regular upkeep such as painting or repairing normal wear and tear.

Some landlords love this part of the process, others would rather use a manager with a black book of good quality, fast turnaround tradespeople.

``Even if you have lovely relationships with long-term tenants - every landlord's dream - you must still run your property like a business,'' advises Freeman.

``You need good people skills, be organised and detail-oriented and be confident about what you do. You must also be willing to spend money on the property: build annual maintenance into your budget, plus set money aside for long-term improvements such as upgrading bathrooms or re-roofing. In this way your property keeps up its value.''

Freeman suggests new landlords think hard about where they want to invest: more affordable properties may attract more transient tenants, and end up costing the landlord in terms of lost rent or more maintenance.

``You have to think about who would like to live in this property - it is to be someone else's home,'' she says. ``Choose your location carefully as it determines which market segment your business is in. Respect your tenants but keep to a really strict process.''