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How to make the most of a Property Manager

Q: We have recently purchased an investment property and have been strongly advised not to manage it ourselves but to use a property manager. How do we make sure we get the most from our property manager? Cheryl P.

A: We passed your question on to Delanie Horrobin, of Super City Rental Management, who responded:

Every landlord is different, with different needs, different investment motivations and different expectations of a property manager. Communication between all parties is key. For this reason we like

to discuss some of the following questions to help us customise our service to your requirements as a landlord:

  • What is most important to you in respect to how your property is managed?
  • How often would you like to hear from your property manager?
  • How would you prefer us to contact you? Phone, email, text?
  • Are there any chattels at the property we need to be aware of or that you are considering adding?
  • Do you have any concerns around the management of your property now or in the future?
  • Have you ever used the services of a property manager before, and if so what did they do well and what could they do better?
  • Are you interested in ongoing advice on how to grow your portfolio?
  • Do you prefer a low or high level of communication from us around minor issues or updates?
  • Do you understand the importance of ongoing property maintenance and how this can affect your investment return?
  • Do you have an investment goal or strategy?
  • Are you interested in ongoing advice on how to grow your investment portfolio?
  • Do you have a landlord insurance policy?

This helps ensure that expectations are set and continue to be met throughout the working relationship.

 

Choosing to have your property professionally managed is a big commitment. Whether it’s the family home or part of a million dollar investment portfolio, you

need to ensure that your asset is being maintained to the highest standard.

Here at SuperCity Rental Management, we understand that; so give us a call to hear more about what we have to offer.

Understanding Property Valuations

How much is this property worth? It’s a common (and smart) question to ask. Recently we’ve noticed a lot of confusion when it comes to property valuations. It’s understandable because there many different ways that people value property. Here are three of the more common ones:

Capital Value

Capital value (also known as Rateable or Council Value) is set by your local council and determines how much your annual rates charge is. Capital value isn’t property specific, it’s a general guide to your property’s worth based on other properties in the same area and the most recent sale prices for the property. This means it won’t include any

appliances, improvements and/or additions you’ve made since you purchased it.

A capital value is often used when buying and selling as an indicative price, although we discourage this – they are notoriously inaccurate and can be very misleading. Keep in mind too that they’re only updated every three years.

Registered Value

A registered property valuation is an assessment of a property’s market worth according to a registered valuer. It will be based upon a full inspection of your property as well as comparable sales in the area.

You’re most likely to need a valuation when you’ve had an offer accepted on a property, and you need finance (a mortgage). Most banks will require a property valuation done by a registered valuer as part of a finance application. A property valuation can also be done for other reasons including:

  • Calculating how much you should pay for

a property

  • To find out how much a property is worth

when selling

  • As part of a home loan refinancing application. Your bank requests a valuation to get an impartial and expert opinion on the market value of the property. The Valuers Act 1948 ensures that a valuation done

by a registered valuer is reliable so banks count on this. This is important to them when they consider the risk associated with lending you money.

Property Appraisal

An appraisal is carried out by a licensed real estate salesperson and, similarly to the registered valuation, is based on recent

comparable sales. What a real estate salesperson will also take into account is the current state of the market in your area, and how long properties are taking to sell. Remember that real estate salespeople can inflate your property’s value to flatter you, so bear this in mind when talking to them about selling.

 

Is Now a Good Time to Sell?

Q: Now that our children have all grown up and left home we want to downsize from our current property in Parnell to a smaller property. We are worried though that if we sell we won’t be able to find anything we like. What options do we have? Margaret B.

A: This is a very common question these days Margaret, especially with the shortage of houses on the market in Auckland right now.

Obviously, you have two choices: Sell first then buy, or buy first then sell. If you buy before you sell you won’t really know what your budget is (you can’t be sure how much your home will sell for) and you may very well need bridging finance to get you through the period between when you have to pay for your new home and when you settle on (and get paid for) your current home. (The length of settlement is the time between unconditional date, often the auction date, and the day the new owner pays and takes possession). You can minimise this by asking for a long settlement on your new home, and then be ready to go straight to auction on your current home as soon as you have an unconditional agreement on your new home. This may enable you to get sold and settled before you settle on the new home, but what if your purchaser wants a long settlement too? Either way you do run the risk of being forced to get bridging finance. In the very worst scenario, you may have trouble selling your home and end up owning TWO properties – not always ideal!

Alternatively, you can do what most people seem to be doing these days: Sell first and then buy. Of course, as you’ve said, the risk here is that you can’t find anything to buy once you’ve sold. However, what we have found is that people who have sold get very focussed very quickly on finding their new home, and they become a lot less fussy! And if it takes longer than you expect there is always the option of renting while you search.

 

Thinking of Downsizing?

Q: Now that our children have all grown up and left home we want to downsize from our current property in Parnell to a smaller property. We are worried though that if we sell we won’t be able to find anything we like. What options do we have? Margaret B.

A: This is a very common question these days Margaret, especially with the shortage of houses on the market in Auckland right now.

Obviously you have two choices: Sell first then buy, or buy first then sell. If you buy before you sell you won’t really know what your budget is (you can’t be sure how much your home will sell for) and you may very well need bridging finance to get you through the period between when you have to pay for your new home and when you settle on (and get paid for) your current home. (The length of settlement is the time between unconditional date, often the auction date, and the day the new owner pays and takes possession). You can minimise this by asking for a long settlement on your new home, and then be ready to go straight to auction on your current home as soon as you have an unconditional agreement on your new home. This may enable you to get sold and settled before you settle on the new home, but what if your purchaser wants a long settlement too? Either way you do run the risk of being forced to get bridging finance. In the very worst scenario you may have trouble selling your home and end up owning TWO properties – not always ideal!

Alternatively you can do what most people seem to be doing these days: Sell first and then buy. Of course as you’ve said, the risk here is that you can’t find anything to buy once you’ve sold. However, what we have found is that people who have sold get very focussed very quickly on finding their new home, and they become a lot less fussy! And if it takes longer than you expect there is always the option of renting while you search.

Don’t forget: We have a full catalogue of all our weekly questions and answers on our website www.thestones.co.nz – just click on Property-Tips.

How potential buyers best prepare for the day of an auction?

We have written about this before, but we are continually asked about how potential buyers best prepare for the day of an auction –an auction can be a stressful occasion!

It can move so quickly that you don’t fully register what is happening until afterwards. For potential buyers, this can mean getting swept up in the drama and bidding more than you can afford.

To stay grounded on the day, there are several things you should do ahead of time. The first is to speak with a mortgage adviser early in the process. They will be able to give you expert advice on what to expect, how to work out your budget and help arrange a pre-approval. Remember, you cannot bid at auction if you don’t have your finance arranged: It is cash, unconditional.

As a buyer, you’ll want to be calm and composed. Auctions can seem intimidating if you’re not used to them, so do your research and ask family and friends about their experiences bidding so you know what to expect. Attend auctions to get a handle on how they work. There are many articles online with tips from top auctioneers (like familiarising yourself with the auctioneer’s style) and the dispelling of strategies (such as holding back throughout the bidding). This knowledge can help you feel more assertive on the day.

Lastly and most crucially, make sure your budget is established (which your adviser can assist you with). Stay up to date with market rates to try to figure out how much the property could go for. Decide both on what you’d like to pay for it and how much you’d feel comfortable going up to if need be. Identify what your price limit will be.

It’s important that you put boundaries in place to make sure you don’t go over your limit. Even the most sensible person can get disorientated by an auction’s high stakes drama and sense of urgency, but once that adrenaline dissipates, you could be left feeling anxious about having committed more than you can afford. Having a buyer’s advocate or family or friends there with you can help you stay on track and avoid getting in over your head.

Whether you secure the home of your dreams at your first auction or become a regular fixture at a few auctions, being prepared will put you in a good position to make the most out of this fast-paced and exciting event!

Tips for a good Final Inspection

Some careful planning and a thorough inspection can make the difference between a smooth settlement and an expensive, frustrating or delayed one.

A final inspection is legally your opportunity to inspect the property prior to settlement to ensure it is in the same condition as the day you purchased it, but what does that really mean?

Basically, it means that you must be satisfied that the vendors are leaving the property vacant of their possessions and in as-inspected condition. You don’t want to move in and find a pile of old paint cans to get rid of or patch up the hole in the wall where they removed their TV bracket.

We recommend that your final inspection takes place three to five business days prior to settlement. If there are items of concern this time frame allows for everyone to sort it out without a mad rush at the end between the solicitors.

When you book this in with your real estate agent, remember to ask if the gas and electricity will still be connected in order for you to test the electrical appliances. Be prepared with the contract conditions so you know what chattels are included or excluded.

If you see obvious damage, take a photo of it and report it to the agent and your legal representative on the day. If the vendor says they are not going to fix/remove the item, then talk to your agent, and report it to your solicitor. It is unlikely that settlement will be held up for a few paint cans but sometimes vendors do need to be reminded of their legal obligations.

Some tips on what to look for in your final inspection:

  • Electrical appliances – are they all in working order? If not you can request the vendor fix it prior to settlement.
  • Keys. Are there window locks? Are there patio bolt keys? Gate keys? Shed keys?
  • Are garden sheds clear of any unwanted items, paint tins and old garden tools?
  • Is the underneath of the house clear of junk and debris?
  • Remotes – heating systems, garage doors; ensure they are left behind.
  • Are the correct number of rubbish bins on the property?
  • Hot water system – does hot water come out of the tap?
  • Are all the chattels still present?
  • Are any instruction manuals available for the appliances?

That’s a quick run down for you, but as always, if in doubt, ask your solicitor.

Body corporate warnings

Q: We read your last two articles about apartments with interest. We are about to buy an apartment to renovate and just wanted to get your opinion on body corporates and what we should be wary of. We have read some real horror stories! Angela M.

A: Firstly be sure to get all the information from the selling agent: A pre-contract disclosure, copies of recent body corporate meeting minutes, financial statements, budgets, body corporate rules and the long-term maintenance plan. Be sure to read everything! The rules especially will give you an idea of whether the apartment block will work for you. If in doubt about anything then ask the agent or your lawyer. This is a very important step because this will tell you whether the building is well managed and well maintained and whether you are likely to be happy there.

If you are buying an apartment in a very small block you may find that the body corporate is not being run legally. Beware! And speak to your lawyer.

Even in a well-run complex remember that the body corp will be run by owners in the block, and it is a democracy. Not everyone will agree on everything so be prepared for a possible occasional ’confrontation’!

One of the major areas of contention is often around on-going maintenance: Some owners will want the block and common areas kept at their best, while others may not want to spend the money. Reading the BC minutes should give you a good idea of how well the complex is run.

In terms of renovating – read the body corp rules. Most complexes will allow ‘redecorating’ but may require notice of anything more than that. Generally, if you want to make a change that requires building consent you will need to get the approval of the body corp committee before starting any work.

Our strongest advice is to get on the body corporate committee. This will at least give you some control over the destiny of what may be your largest asset.

Do you need a building inspection?

Q: Our agent has suggested that we get a building inspection before we list our home for sale. It seems like a waste of money to me – if a buyer wants one then can’t they just get it themselves? What’s your advice? James L.

Personally, we think it is a sensible idea. It costs money but it could save you plenty, in fact, it can be the difference between selling and not selling – especially at auction.

Why? We recommend that all buyers, whatever property they are looking at, get a building inspection before buying or bidding at auction. If we have a vendor’s inspection available for them to view then it can give them the confidence to do their own inspection – this is particularly important for monolithic- (plaster) clad properties. When an agent allows a potential buyer to view the vendor’s inspection report they must be very clear that the inspection was undertaken at the vendor’s cost and that the buyer should do their own due diligence, but it can certainly give the buyer the confidence to move forward in his or her decision making.

Getting your home inspected before you list it for sale can also help you avoid any unexpected surprises. Almost every home, even new builds, are likely to have issues raised in an inspection, so having one done before listing for sale gives you the opportunity to fix anything that may scare a potential buyer off. What most sellers don’t realize is the building inspection is the place where many sales fall apart. A pre-listing building inspection will allow you to get a clear picture about the state of your house – including any problems that may derail your sale. By getting most or all of the problems taken care of you increase the chances of having a smooth and pleasant transaction.

It pays to do this well before you go to market – there are few things as stressful as selling your home, and you certainly don’t want to add to the stress by having to do last minute ‘repairs’, so get an inspection well before you want to go to market and give yourself time to get your house ready for sale. Good luck!

Don’t forget: We have a full catalogue of all our weekly questions and answers on our website www.thestones.co.nz – click on Property-Tips

Top tips for buying an apartment as an investment

When choosing an apartment to rent out there are some specifics that can make a big difference to the desirability of your property. First is the number of bedrooms and floor size. Two bedroom apartments are most popular, and if you’re looking for a two bedroom unit, look at buying something above 80m2 and above 110m2 for a three bedroom. More bedrooms mean that as an investor you can charge more rent, and your tenants can split the rent further to reduce their costs.

The position of the unit in the building is the next thing to look at. If your unit is in a quiet suburb, your tenants or buyers will probably be young families or empty nesters. These tenants will be looking for an easily accessible but safe, smaller apartment block with a unit on the first two floors. Renting families are likely to want an apartment with its own garage or allocated parking spot. They may also pay more for a home with a good view of the city or harbour.

If you are looking to buy in an inner city apartment block, you will most probably be renting your unit to young professionals. In the upper-end markets these tenants will pay for good views, but in the general tenant market, any level of the building will work.

A unit which is newer or has been renovated to incorporate modern open plan living will also be more attractive to tenants. Look for an apartment which provides plenty of natural light and areas which can be used to entertain and relax.

Seasoned investors have told us that no matter who your market is, the ground floor of an apartment block is by far the best choice for an investor because you don’t eliminate any of your market. If you go above the ground floor you eliminate both the older generation who don’t want to go up the stairs and people with young kids.

Finally, as a landlord, you may be better off buying a newer apartment as there is generally less maintenance involved, and it may also be easier to rent out.