Wide Bay Prestige Properties Blog

More and more tenants are finding themselves in a position where they cannot inspect a property before making an application.  People are moving towns (often interstate) and some people are simply working long hours and are unable to make time.  But what are the risks associated with applying for a property before you look at it?

First, take a moment to think about the things that could be wrong with the property:

• It may be unclean
• It may be missing essential items such as blinds or curtains
• The agent may have used old photos in the advertising when the property looks its best, and the property may have had some wear and tear since the photos were taken
• It may be located near something undesirable for example a petrol station or some undesirable neighbours
• The property may not be big enough for your requirements 

This list goes on.  There are many agents who refuse to rent to tenants “site unseen” because when tenants do not inspect the property first it is common for them to have issues or disputes with the landlord about what is acceptable after they move in. 

Some offices will accept a tenant without an inspection, however get the tenant to agree on their rental application to “take the property how it is”.  When the tenant has signed off on this condition they are waiving their rights to request some of the above problems to be rectified.  For example, if you move in to the property and there are no blinds or curtains, you have accepted the property how it is and cannot expect the landlord to agree to install these items.

So in summary, it is always best to inspect a property before you apply for it.  Perhaps if you are not able to you might have a family member or a friend that can do this on your behalf.  If you are in a situation where you cannot do either of these, you will need to ask the agent a lot of questions to avoid moving in to a house that you are not happy with. 

Recently in our office we have come across a situation where another local agent is approaching our clients with the promise of buyers who are waiting to see the clients homes.  A few of our clients, have signed listing agreements with this agent very excited by the prospect of a buyer who is particularly interested in seeing their homes, only to find out that there is no buyer. 

This particular agent has knocked on most doors of properties we have listed in the last couple of months with the same promise.  It makes me sad to see that our industry has to stoop so low just to canvass business.  As a home owner and a past seller myself, I know how emotional this time can be in someones life, and how exciting it is when you think there is a chance that the property might sell.  It is a real let down to expect someone to come look only to have no one show up.

This got me thinking of a few other tactics that some agents use to try to canvass business.  In particular, often in our mail boxes we receive letters from agents boasting about how good the market is, how many buyers there are, what little stock they have, or how they have people looking in your particular street or neighbourhood.  Often some of my landlords receive these documents and call me up very excited wanting to take advantage of this and list their properties for sale.

Being in the industry, I know that these letters nine times out of ten are just marketing and there is no substance behind them.  Often even while prices go down and buyers are scarce, agents will STILL send these marketing letters out and find the odd person who believes them. 

I write this blog to make others aware.  I ask you to always question the agents motives.  If an agent tells you they have a buyer (and it seems like they may be just making an attempt to secure you business), then ask them as many questions as you can - what is the buyers name, where are they from, what are they looking for, have they been qualified etc.  Make your own judgements, but always question the motive.

This is not to say that some letters are not genuine.  Often as an agent, buyers will approach me regarding a particular property or a particular type of property and I need to send off a letter to the owner. 

If your house is already listed for sale with an agent, and you are approached by another agent who “has a buyer”, ask the agent to contact your listing agent, they can do a conjunction.  This is where the agents work together on the sale and share the commission.  This is very common practice in the industry.  For more information on how conjunctions work, please contact our office and speak with Sue Brown, Sales Consultant.

I found this article on a website - www.yourmortgage.com.au, and thought it would be a good one to share…

Buying a good home or investment property can be a fantastic financial asset for you and your family.  Patrick Bright shows you how you can avoid making costly mistakes when buying your property

1. Lack of research
Before you can decide whether you’re getting a good deal or not you need to do some detailed research to work out the market value of the property. The process is called comparative market analysis and it’s extremely powerful when you’re trying to negotiate the best possible price.

You need to select a maximum of three suburbs and see as many properties as you can in preferably a 6-12 week time frame as 2-3 months is a long time in real estate and prices can move quite substantially. As a general rule I would advise you to inspect at least one hundred properties within that time frame and document all relevant features. 

If you’re serious about getting a good deal and saving yourself thousands if not tens of thousands of dollars then you will be prepared to invest the time.   If not, then the selling agent will certainly have the upper hand when negotiating the price with you!

2. Thinking Selling Agents are there to help you, the ‘buyer’
To put it bluntly, the Selling Agents are NOT there to help you get a good deal.   They are working for the seller, NOT the buyer.  Selling Agents will tell you what they want you to know about the property and they can be very persuasive especially when they’re using negotiation and influencing tactics.  If you want to really know important details about the property, then you need to ask the right questions and do your own research. 

Some good questions to ask when doing your research are:
* How did you come to the asking price?
* Are there any recent sales in the street or surrounding streets that are comparable to this home? If yes, make sure the selling agent can show you the evidence of this.
* What are the offers so far on the property?
* How long has it been on the market?

These questions will assist you in gathering important information when trying to establish a property’s market value and the vendor’s likely flexibility on price.

3. Searching without finance approval
Another common mistake is searching without finance approval. The last thing you want to do is to watch the home of your dreams slip through your fingers while someone else is exchanging contracts, especially while you’re trying to arrange an interview with a mortgage broker or your local bank. It can be a very emotionally draining experience.  Don’t waste your time and put yourself on an emotional roller coaster ride.  Make sure you know how much you can borrow before you start your search. 

4. Overstretching your finances
We’re currently seeing the heartache of thousands of people across Australia who have financially committed well beyond their means.  Don’t repeat their mistakes. 

I have two rules that if you follow you shouldn’t get yourself into trouble.
1. Despite what the bank says, make sure your repayments are no more than 25% of your total household net income. 
2. Don’t borrow more than 80% of the property’s value. That way, you avoid paying mortgage insurance and you actually have some equity in your property in case there is a down turn in the market. 

These days, you can obtain loans for 90, 95 or even 100% of the purchase price.  Why would you want to put this sort of financial pressure on you and your family?  I believe that if you don’t have a 20% deposit, then you can’t afford to buy that property.  Remember, it is much better to be able to sleep well at night in a smaller house, than to be at the mercy of a bank and constantly worried about having your home sold from under you.

5. Ignoring inspections
Termite infestations, dodgy wiring, sub-standard renovations… there are many potential problems with any home that you’re not likely to pick up yourself. Most solicitors I speak with tell me that only about 30 - 40% of their clients obtain all the appropriate inspections. 

For your peace of mind just get the inspections done. I have seen first hand many homes that are riddled with termites. It’s simply not worth the risk!

6. Not factoring in running costs
Unfortunately the price you pay for your home or investment property is only the first in a series of home ownership expenses. Before you rush off and make an offer on a property you should determine whether you can afford the running costs on top of the mortgage such as council rates, water rates, land tax etc.

If you’re buying an apartment, find out how much the strata fees are and how much money is in the sinking fund.  Strata fees typically range from $500 to $2,500 a quarter, sometimes more.

7. Being influenced by rental guarantees
Personally I would steer well clear of anything that comes with a rental guarantee. In my opinion a good property doesn’t need one. From my experience often properties marketed with rental guarantees won’t achieve the rental figure that is being guaranteed in today’s market. In addition, the inflated rental figure pushes the return on investment up against the yield (the ROI / Yield) and allows the seller to put a higher price on the property and still maintaining a yield of say 5%.  A rental guarantee is a form of insurance and you always pay a premium for insurance. As the saying goes - anything that’s too good to be true probably is!

8. Buying property sight unseen
Buying property sight unseen is a recipe for disaster. Sure you can do virtual tours on the web etc but how many times have you read the ad, looked at the photos, the virtual tour and then upon physical inspection the property looks nothing like your expectations.  It may look out over a car park, into a brick wall, face a busy road etc. This goes for buying off the plan as well.

Unless you do a site inspection yourself or have an exclusive Buyer’s Agent acting for you, who knows exactly what you want, then I would suggest you are being foolish. You’re parting with hundreds of thousands of dollars - surely you can take the time to inspect it.

9. Limiting your selection choice
A lot of people come to me for help with buying a property but they don’t want to go through the auction experience.  They perceive it as too stressful, emotional and out of their control.  The problem with this perception is that they are significantly reducing their property selection pool and automatically cutting out potentially good buys because they are not comfortable with the method of sale.

My advice is to again do your research.  Go to a number of auctions and see how it works.  Do your research so that you know the value of the property.  Set yourself an auction plan including a maximum bid price and stick to it. 

Be honest with yourself. If you know you are likely to get carried away in the auction hype, then hire yourself an expert to bid for you.   Auctions are growing in popularity as the sales method of choice nationally.  You can no longer ignore them if you want access to the entire market.
 
10. Listening to too many people 

Everyone’s an expert when it comes to real estate.  Family, friends, work colleagues will all offer you advice - some with strings attached and some without.   The only way that you will know whether you have secured a good property at a good price is if you put in the necessary hours and do the research.  If you don’t have time, then I recommend that you find a Buyer’s Agent to do the work for you, a good one will save you thousands.

From 1st July 2009, the Residential Tenancies Act that we currently follow will be repealed.  After this date we will be operating under the Residential Tenancies and Rooming Accommodation Act 2008.

The Act is similar to that of the Residential Tenancies Act of 1994, however, it has some differences/changes.  Many of these changes favour the tenant, rather than the landlord.

One of the key changes that landlords should be aware of NOW, is the notice period required to end a fixed term tenancy without grounds.  Currently, if you are coming up to the end of a fixed term tenancy and you want vacant possession back (for example you are moving back in to your property), you will need to give 2 weeks notice to the tenant to vacate prior to the end of their fixed term.

Under the new legislation, this will change to 2 months notice.  This means that you will need to know quite early on whether you would like the tenant to vacate at the end of the tenancy or not. 

There are quite a few other changes, many of them will also affect you if you are buying or selling property.

For more information on this Act, contact our office, we’d be happy to discuss some of the new changes, or provide you with a link to the Act so that you may read it.

September 26, 2007 by Steven Gillman

What are FSBO homes, and can you really make money flipping them? First some definitions. “Flipping” refers to buying and selling real estate for a profit over a short period of time. Some “flippers” are looking only to make money from buying low and reselling quickly, while others repair and improve or otherwise add value to the property before selling it - an important distinction we’ll get back to in a moment.

FSBO, pronounced “fizbo” means “for sale by owner.” Owners try to sell on their own primarily to save the cost of a real estate broker’s commission. This is often a mistake, for many reasons we won’t get into. The bottom line is that these houses statistically sell for less on average than those sold through an agent, negating any savings.

One reason this is true is that buyers know the seller is saving the commission, and are inclined to offer less as a result. Sellers are open to this because they think something like, “If the commission would have been $8,000 and I sell for $4,000 less, I still save $4,000.” For this reason, and because owners often don’t know how to properly price a house, many new real estate investors think that they are going to get some great deals with FSBOs.

The opportunities to simply buy cheap FSBOs and resell them for profit are just plain rare. It’s true that FSBO homes often do sell for less, especially after sellers get frustrated with their poor marketing skills and tired of waiting month after month for a buyer. But even if you buy a house for 15% under market value, the transaction costs of buying and selling it can run 10% of the final sale’s price, and holding onto the property while waiting to sell can eat up the other 5%.

So where is the potential for flipping FSBO homes? It is in fixer-uppers. A 10% discount from market value may leave you breaking even on a straight flip, but with a fixer-upper it just means that much more profit.

As a Property Manager, we are often faced with a lot of choice when choosing a tenant.  We can have up to 10 applications per property!  I have decided to write down some suggestions to help tenants get the approval for the home that they want.

• Fill out your rental application in FULL.  Nothing frustrates a Property Manager more than having to chase up phone numbers and fax numbers for your references, or to ask you to come back to the office because a section has not been signed or filled in accurately. 
• Treat the Property Manager with respect.  Ensure that you are polite and accommodating at all times.  Even though it is often the owner who ultimately chooses their favorite applicant, the Property Manager will give advice to that owner.  If you seem difficult to deal with initially then it is likely that the Property Manager will not want to deal with you as a future tenant either.
• Ensure that you understand how long the application processing process is, and give the Property Manager a reasonable time to process your application before ringing up to see if it is done yet. 
• Check your affordability.  Most real estate offices work off a 30 or 35% rule.  That is, if the rent is under 35% of your income, then generally it is taken to mean that you can afford the property.  If you have no income, but a large savings, be sure to write this in your application and include a bank statement as proof.
• Term of the lease - most applications will ask you to write down what term of lease you require, for example 6 or 12 months.  If the term is not important to you, make sure you let your Property Manager know, often Landlords who have more than one application to consider will select the one which is offering the most desirable term.  Some landlords favour long leases, whereas others require a short lease.  If it does not matter to you, state that in your application.
• Ensure your references are contactable during business hours.  Often tenants put down references and provide a home phone number for them when they are actually full time workers.  Ensure that if your personal references are working full time that they are going to have a mobile on them or that you can supply their work number.  Make sure your references are aware that they are listed as a reference so they are expecting a call.  The main reason it can take a longer time to process applications is that a Property Manager can not get a hold of your references.

Overall, the best way to get your application processed and presented to the Landlord first is to ensure that you are easy to deal with, and have your forms filled out correctly to give your Property Manager the best chance to easily process your application.  Of course, other factors will come in to play, but if you take the advice above it will definitely help.

Often, as a real estate agent, I am asked to take over rental properties from Private Landlords.  Most of the time when this occurs, the reason that I am taking over is that the private landlord has fallen into trouble with the tenant and needs some professional assistance. 

Common mistakes private landlords make include:

• RENT ARREARS - it can sometimes be stressful and difficult as a private landlord asking your tenant for the rent monies when they are going through financial hardship.  Often private landlords get relationships with their tenants, or they are friends to begin with and the emotional attachment they have to their tenants makes it difficult to be stern.  This can leave the landlord in a difficult position themselves financially.  We once took on a property where the private landlord had let the tenant get 7 months behind in their rent! 
• ERRORS ON LEASE DOCUMENTS - Real Estate agents are specially trained and updated by the REIQ every year on legislation changes.  The lease document is key to getting the tenancy off to a good start.  Many times we see landlords who have made critical errors in this document and it can cost them money down the track.  Some of the mistakes include - writting the tenants name under lessor and putting illegal special conditions on the lease.
• LOW RENTAL RETURN - professional Asset Managers are up to date every day with current market conditions, and always know exactly how much a rental property should be returning.  Private landlords can sometimes undervalue their homes, or at the opposite end of the scale, overprice their homes and have a very high vacancy period.  We have taken on a number of homes that are under-priced, and some as much as 30%.  Your agent can set you a rental increase plan so that the rent regularly increases in accordance with the market.  By pricing the home appropriately and exercising the rental increases at appropriate times, you will maximise your income.
• TENANT SELECTION - Private landlords do not have access to national tenancy databases, like TICA, as do agents.  These databases carry valuable information about tenants who have defaulted in the past.  Often Private landlords are targeted by these undesirable tenants, as they know the landlord will not have access to their past information. 

In summary, Private Landlords are every day people.  Many of them do a fantastic job self managing their properties, and some have even made a second job of it!  However, many do not have the professional skills and knowledge to handle the many situations they may find themselves in, and no access to the appropriate software, databases and programs that agents do.  Real Estate Agents manage properties every day, and have experience in all areas of the job.  

On average, in our local area, it costs $20.40 per week to have your property professionally managed.  For the money you will save, the hassles you can avoid, and the extra money a professional service can make you, why would you do it yourself?

You will often hear of horror stories of tenants moving in to rental properties and doing damage, not paying the rent and sometimes even refusing to move out.  Often this results in a very distraught landlord who may not have the money or the means to fix the problem.

Luckily, situations like this occur on the rare occasion, and the majority of tenants are good law abiding citizens who pay their rent on time and look after their homes as though it were their own.

At our office, we consider the initial screening of the tenant to be one of the most important jobs we have.  After all, if we select a great tenant, our workload is a lot less and therefore our profit margins are much higher – as well as the fact that our clients are happier.

However, despite all the systems and procedures we have in place to ensure the above does not occur, we recently have had one of these unfortunate instances with a tenant of ours, and the damages and loss of rent bill has totaled just over $11,000.

It broke my heart to see these tenants do such an awful thing to our client.  However, there are a number of important lessons that other landlords can learn from their experience.

The first thing to point out is that even good tenants who have great references, no bad recorded history, and a good income or occupation can still turn bad.  People’s lives change, they get divorced, they lose their jobs, they develop abusive relationships, or they can fall in to other traps and bad situations. When these changes occur their financial situations can change, as can their attitudes and personalities.   Just because they have a good history and are good when they occupy the premises does not mean they will be good forever.

The second thing you can learn from the experience is to protect yourself against these potential losses.  My clients did not have any insurance to cover their problem.  This means that they have to find $11,000 to fix the problem themselves.  While we are going through court proceedings to claim this money back from the tenant, there is no guarantee that the judge will rule in complete favour of the landlord, and no guarantee the tenants will have the money to repay the landlords.  Meanwhile, because of the state of it, the house sits vacant with a mortgage on it and does not earn an income.

As a landlord myself, I always make sure I am adequately insured.  The insurance you need is called Landlord Protection Insurance, and most large insurance companies offer this service and can package it together with your regular insurance policy.  There are also some smaller companies who specialize in the service. 

I have written this post today to demonstrate that bad situations can occur – even if you have a fantastic real estate agent, or if you have done the reference checking yourself and think that you have chosen well.  While these bad situations only happen on the very rare occasion, if you cannot afford for it to happen at all, I strongly recommend you be insured. 

If you would like to know more about Landlord Protection Insurance, or our tenant screening process, please contact me and I’d be happy to answer all your questions.

Our office offers a comprehensive Consumer Protection Guarantee which can assist in reducing the risks involved in renting out your property and we’d be happy to send you a copy of this should you be interested.

As a real estate salesperson I am occasionally called upon to appraise an old run-down house, a block of land with crumbling sheds, or an overgrown farm which has seen livelier times. Many would see this as a necessary evil of the job - stomping through snake infested knee-high grass and flea ridden moldy carpets. Me, I get a twinge of excitement every time I pull up to a seemingly abandoned property…. especially if there is a shed.

Why, you may ask, would an

Scattered all over the Queensland countryside are garages, sheds and barns with an old ‘classic’ tucked inside just waiting to be discovered. Some may have been farm workhorses, others daily transport, and just once in a while there’ll be a true classic desperate to find a new owner willing to bring it back to life.

Here are a few examples of some ‘finds’ around Maryborough that I have stumbled across in the last year:

-

- Jaguar S-Type

- 1951 Packard

- Very old Chevy pickup

- 1912

- Austin Sheerline

- Hillman Superminx

- 3x Ford Prefects (at one house)

- Ford Falcon XA GT

- H

- Cortina Mk1 2-door

- Rover P6

So, next time you see a dilapidated garage or barn, take a peek inside. You may just discover an

Trevor Newman, Wide Bay Prestige Properties

Recently I spoke with a landlord who had just purchased a property.  The property was vacant and he planned on renting it out as soon as possible.  He had left it to the last minute to find a suitable property manager and seemed only concerned about finding one who would negotiate on commission. 

After spending about a week running around and talking to some agents, he managed to find one who would do it 1% cheaper then everyone else.  He happily signed his management agreement.  About a week later I noticed that his property was not even advertised for rent, and probably a few days after that is when it appeared on the internet. 

The 1% that he saved equates to about $124.80 per year.  His property is a $240/wk home.  So if you do the maths you’ll notice that if he had have chosen an agent based on their efficiency and competence rather than their 1% discount he would have saved at least $300 for that year.

Other dangers with choosing cheap agents could include: getting a bad tenant, long vacancy periods, poor rent returns, poorly negotiated lease renewals, poorly managed rent arrears, less annual inspections or maintenace not promptly attended - many of these problems could cost you thousands!

Remember, you are dealing with a very large asset and you want someone who is professional and can handle your asset with care. 

If you have had a bad experience with an agent, post a comment here and let us know about it!  Thanks for reading!

Regards,

Jade Guilmartin