Welcome Guest [Log In] [Register]


Reply
Ten Ugly Truths About Property Investment; 4. Tenants disproportionately have more rights than landlords
Topic Started: 26 Dec 2013, 08:21 PM (1,003 Views)
Admin
Member Avatar
Administrator

Quote:
 
10 ugly truths about property investing

By Nila Sweeney | December 26, 2013

I'm a big fan of property investing and I believe everyone should have a go. But I feel compelled to talk about the often glossed over downside to investing in property.

Many of the so called advisors in the real estate market don’t often talk about what could go wrong. Instead, they highlight how you can triple your money in a week or make millions.

Unfortunately, the truth is quite different. Here’s why:

1. Vacancies are more common than experts admit

Even in the most in demand and tightest rental markets, more often than not, you will experience a vacancy. Even if you buy the best property in the best location, you won’t be immune to this unpleasant reality.

I was in this situation not so long ago. In fairness, I bought the property towards the end of the year and after the renovation, put it in the market. I can blame it squarely on the timing – it was a couple of weeks before Christmas – but the reality is that my shiny, newly renovated house sat in the market for about three weeks before the tenants moved in.

If you invest in an area where there are a lot of rental properties, the competition is even higher and you could lose tenants who can find a cheaper rental property than yours.

2. Maintenance costs can eat up your rental income

Many experts say that if you buy a new property, you’re pretty much guaranteed that your maintenance is low. Really? Try telling that to a landlord who has spent thousands rectifying plumbing or electrical issues on a new property.

If you buy an older property, be prepared to allocate at least 1.5% of the purchase price for maintenance. There will be broken cupboard doors or electrical and plumbing issues on a regular basis.

3. You could overpay

You know the drill: you see a property and get emotionally attached. You start imagining yourself in that bath or in that amazing kitchen making awesome dinner for your family, even if it is meant to be an investment. Then you end up paying anything to get it. Despite doing your research and due diligence, your emotions could betray you at the last minute.

4. Tenants disproportionately have more rights than landlords

There are so many things you can’t just do to your property if it’s tenanted. For example, you can’t do a reno, or even just casually drop in without giving your tenants ample notice.

Tenants can also alter the property without asking you. They can, for example, paint or install fixtures without your consent and you won’t know about it until the next inspection.

You also cannot simple kick your tenants out if they miss rental payments. You have to go through weeks (roughly a month) before you can start the eviction process. During this time, your property is held at ransom by the tenant.

5. You could have a dodgy tenant

This really should be right on top of the list, but I prefer to think of people as fundamentally good. But the reality is, there are bad apples out there and there’s no amount of due diligence or tenant screening techniques that would uncover the bad ones. We’ve been lucky with our tenants, but I've come across many landlords who lost a lot of money due to damaged properties – even with landlord insurance.

6. Your property could get flooded/burned

There’s really not much one can do if Mother Nature decides to flood your property. If it’s located in a flood-prone area, you can try mitigating this with extra insurance cover, but you’ll still lose income during the repair or reconstruction period. The same goes with fires. Even if you’re fully covered by insurance, there will always be losses to confront.

7. It can be difficult to sell your property

A quick glance at RP Data reports reveal that some properties can sit on the market for a year before selling. This can be quite challenging especially if you are desperate to offload that investment. Sometimes, the pricing also has a lot to do with the slow movement. Many agents have this silly and highly illegal practice of underquoting to bait potential buyers. The danger is that you are attracting the wrong crowd and end up not getting any offer.

8. There is no guarantee your property will go up in value

Even if you’ve done your research and bought in the hottest suburb forecast to soar in value, there is no guarantee your property will go up in value every year. Unlike shares, property values move slowly and there will be years when your property’s value will not move at all.

9. Buying and selling properties is expensive

This is one of the biggest hurdles for people trying to break into property. It costs a lot of money to buy and cash in. When you buy a property, you have to pay for stamp duty, which is calculated based on the purchase price. Then there are legal fees, inspection reports, property valuation fees and a buyer’s agent to think of, if you used one. And don’t forget the deposit.

If you’re borrowing a larger loan relative to the property price, you’d won’t need as large a deposit, but keep in mind that you’ll have to make higher repayments. You should probably factor in at least 35% of the purchase price to cover these costs.
When it’s time to sell, you’ll have to pay capital gains tax if the property goes up in value, in addition to legal and other costs.

10. You could get sued by tenants

There is a chance your tenant could sue you for negligence, damages, personal losses or anything they can think of. Even with landlord insurance, you are not totally immune to claims and if your tenants are determined to sue you.

Read more: http://www.yourinvestmentpropertymag.com.au/news/10-ugly-truths-about-property-investing-182566.aspx
Follow OzPropertyForum on Twitter | Like APF on Facebook | Circle APF on Google+
Profile "REPLY WITH QUOTE" Go to top
 
hoofarted
Member Avatar


"or even just casually drop in without giving your tenants ample notice."...

Quiet enjoyment is so cool... Should your bank be able to casually drop in and see how THEIR loan security is going?
Profile "REPLY WITH QUOTE" Go to top
 
goldbug
Default APF Avatar


Aside from stinkbug, every landlord on this forum is in a constant state of angry turmoil. They should have put down the psychological drawbacks of property investment as point 11. How being a paper millionare in a time of contraction is very stressful and unhealthy :lol
Shadow was hopelessly wrong about the Gold Bull Market.
What else is he wrong about?
Profile "REPLY WITH QUOTE" Go to top
 
stinkbug
Member Avatar


goldbug
26 Dec 2013, 11:53 PM
Aside from stinkbug, every landlord on this forum is in a constant state of angry turmoil. They should have put down the psychological drawbacks of property investment as point 11. How being a paper millionare in a time of contraction is very stressful and unhealthy :lol
As a fellow bug, I agree with the part about property investment not being for everyone. It takes a certain mindset to be comfortable with explicitly managing risk, and accepting the (inevitable) short to medium term fluctuations.
---------------------------------------------------------------

While it's true that those who win never quit, and those who quit never win, those who never win and never quit are idiots.

Profile "REPLY WITH QUOTE" Go to top
 
Poontang
Member Avatar


stinkbug
27 Dec 2013, 08:13 PM
As a fellow bug, I agree with the part about property investment not being for everyone. It takes a certain mindset to be comfortable with explicitly managing risk, and accepting the (inevitable) short to medium term fluctuations.
The same can be said for shares, some just can not bear to see red arrows facing down on their share investment page.
There are some people who seem angry and continuously look for conflict.
Walk away, the battle they are fighting isn't with you, it's with themselves.

The first lesson of economics is scarcity: There is not enough of anything to satisfy all who want it.
The first lesson of politics is to disregard the first lesson of economics. ~ Thomas Sowell.

Who was the fool, who the wise man, who the beggar or the Emperor? Whether rich or poor, all are equal in death.
Profile "REPLY WITH QUOTE" Go to top
 
1 user reading this topic (1 Guest and 0 Anonymous)
« Previous Topic · Australian Property Forum · Next Topic »
Reply



Australian Property Forum is an economics and finance forum dedicated to discussion of Australian and global real estate markets and macroeconomics, including house prices, housing affordability, and the likelihood of a property crash. Is there an Australian housing bubble? Will house prices crash, boom or stagnate? Is the Australian property market a pyramid scheme or Ponzi scheme? Can house prices really rise forever? These are the questions we address on Australian Property Forum, the premier real estate site for property bears, bulls, investors, and speculators. Members may also discuss matters related to finance, modern monetary theory (MMT), debt deflation, cryptocurrencies like Bitcoin Ethereum and Ripple, property investing, landlords, tenants, debt consolidation, reverse home equity loans, the housing shortage, negative gearing, capital gains tax, land tax and macro prudential regulation.

Forum Rules: The main forum may be used to discuss property, politics, economics and finance, precious metals, crypto currency, debt management, generational divides, climate change, sustainability, alternative energy, environmental topics, human rights or social justice issues, and other topics on a case by case basis. Topics unsuitable for the main forum may be discussed in the lounge. You agree you won't use this forum to post material that is illegal, private, defamatory, pornographic, excessively abusive or profane, threatening, or invasive of another forum member's privacy. Don't post NSFW content. Racist or ethnic slurs and homophobic comments aren't tolerated. Accusing forum members of serious crimes is not permitted. Accusations, attacks, abuse or threats, litigious or otherwise, directed against the forum or forum administrators aren't tolerated and will result in immediate suspension of your account for a number of days depending on the severity of the attack. No spamming or advertising in the main forum. Spamming includes repeating the same message over and over again within a short period of time. Don't post ALL CAPS thread titles. The Advertising and Promotion Subforum may be used to promote your Australian property related business or service. Active members of the forum who contribute regularly to main forum discussions may also include a link to their product or service in their signature block. Members are limited to one actively posting account each. A secondary account may be used solely for the purpose of maintaining a blog as long as that account no longer posts in threads. Any member who believes another member has violated these rules may report the offending post using the report button.

Australian Property Forum complies with ASIC Regulatory Guide 162 regarding Internet Discussion Sites. Australian Property Forum is not a provider of financial advice. Australian Property Forum does not in any way endorse the views and opinions of its members, nor does it vouch for for the accuracy or authenticity of their posts. It is not permitted for any Australian Property Forum member to post in the role of a licensed financial advisor or to post as the representative of a financial advisor. It is not permitted for Australian Property Forum members to ask for or offer specific buy, sell or hold recommendations on particular stocks, as a response to a request of this nature may be considered the provision of financial advice.

Views expressed on this forum are not representative of the forum owners. The forum owners are not liable or responsible for comments posted. Information posted does not constitute financial or legal advice. The forum owners accept no liability for information posted, nor for consequences of actions taken on the basis of that information. By visiting or using this forum, members and guests agree to be bound by the Zetaboards Terms of Use.

This site may contain copyright material (i.e. attributed snippets from online news reports), the use of which has not always been specifically authorized by the copyright owner. Such content is posted to advance understanding of environmental, political, human rights, economic, democratic, scientific, and social justice issues. This constitutes 'fair use' of such copyright material as provided for in section 107 of US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed for research and educational purposes only. If you wish to use this material for purposes that go beyond 'fair use', you must obtain permission from the copyright owner. Such material is credited to the true owner or licensee. We will remove from the forum any such material upon the request of the owners of the copyright of said material, as we claim no credit for such material.

For more information go to Limitations on Exclusive Rights: Fair Use

Privacy Policy: Australian Property Forum uses third party advertising companies to serve ads when you visit our site. These third party advertising companies may collect and use information about your visits to Australian Property Forum as well as other web sites in order to provide advertisements about goods and services of interest to you. If you would like more information about this practice and to know your choices about not having this information used by these companies, click here: Google Advertising Privacy FAQ

Australian Property Forum is hosted by Zetaboards. Please refer also to the Zetaboards Privacy Policy