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Buying or selling? Get the right advice

Are Canberra landlords greedy?

By Property Manager 23 November 2011 56

money business

Here’s what ACT residential lessors (landlords) understand very well:

Traditionally Canberra’s rental market sees considerable seasonal fluctuation. The transient nature of the population regularly sees high prices and strong competition for vacant properties in the Summer months, particularly around January when everyone is moving in and out of town.

Here’s what ACT residential lessors (landlords) rarely know:

Beyond the initial fixed term (usually 12 months) there is little you can do to control when the tenants vacate. You cannot force existing tenants to sign a lease renewal, and if they choose to remain on a periodic tenancy they can leave at any time by giving 3 weeks notice.

Scared that their tenants might move out when the market is slower, owners often surmise that they should get rid of those tenants to find someone willing to commit to a new 12 month term; and many are shocked when they are told that they have to give the tenants 26 weeks notice if they don’t have a valid reason (eg moving in or selling the property).

“Why?” or “That’s not fair” are the usual owner responses to this. Let me explain why…

The legislation is generally weighted to ensure that the tenants have some protection against owners who make decisions based on the business of owning an investment property, without due consideration for the human factor.

Ironically these are often the same people who believe that the banks are faceless corporations hell-bent on gouging every dollar from mortgagees, yet when they have to make decisions relating to their investment property they treat their tenants worse than the banks could ever get away with.

So this is a gentle reminder to Canberran lessors – your investment property is not just a business, it is someone’s home. If they treat it well, pay their rent and cause you no issues then they certainly deserve to be considered when you are making decisions that will affect their lives.

If you can’t afford to wear a short period of vacancy because the tenants move out during the quiet time of year, or if you can’t afford to lose a few dollars a week in rent to secure tenants outside of the summer-time-wallet-gouge, then you probably can’t afford to own an investment property.

And let’s not forget – any property marketed at the right price will be tenanted fairly promptly in Canberra, regardless of the season. If you’re sitting on a vacant property it’s probably because you are trying to screw tenants out of more money than the place is actually worth.

[Photo used by permission of Stuart Miles]

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56 Responses to
Are Canberra landlords greedy?
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farout 10:02 pm 05 Jul 12

Here’s something you don’t see often in Canberra – A week’s free rent.

Shanski_0 3:38 pm 06 Feb 12

My landlord is amazing!

Our rent hasn’t risen in 5 years, We have had 1 inspection in 5 years…

She is even now talking about refinancing the house to renovate it… so it stops breaking on us… i love dealing with her, It’s a private rental, We have a great relationship, We are even facebook friends!

NoImRight 2:50 pm 14 Dec 11

Interesting that so many people are experts on the financial positon of these evil landlords. Id like to know where youve got your figures to back up the claims? In my experience, and yes its anectdotal I dont claim to have audited all landlords, most owners of residental rentals are just average wage earners themselves. Theyve worked hard and now are making an effort to secure their financial future by taking control themselves

Of course they hope to make a profit out of it. Why else would they do it? They arent ACT Housing. Often these people are risking there own homes and future income. Those of you decrying incentives for people who own rental properties what do you see as the alternative? If the rental market wasnt seen as an attractive investment for mums and dads who would own rental properties? Without rentals whre would the tenants then live? Or esle it would become the domain of large organisations who would definately not be too concerned about tenants rights.

A lot of posts here seem like sour grapes. A case of envy over someone else having something you havent got. If you think landlords have it so good now why arent you doing it too?Too noble? Or just you arent prepared for the sacrifice and risk youd have to make now for a future gain?

fragge 12:07 pm 14 Dec 11

milkman said :

fragge said :

I personally hope the bubble bursts and those that have contributed to this mess are stuck with a bunch of debt that they and their children and their children’s children can never climb out of. At the moment, the opposite is true, but nothing lasts forever.

What a lovely thing to say about children.

Children don’t stay children forever, champ.

Classified 1:21 pm 28 Nov 11

Deref said :

ramblingted said :

I wouldn’t think there would be too many investors around anywhere who are thinking about guaranteed capital gain…this morning’s papers are talking about a possible 25% drop in property prices in many countries including Oz in the coming year/s..

People have been saying this for a long time. Like the next San Francisco earthquake, you could take that either to mean that it’s never going to happen or that it’s overdue – I suspect it’s like the shampoo ad – it won’t happen overnight, but it will happen.

I think Canberra and surrounds is already well into it’s correction, and that this will last for a number of years. If infaltion is 3% or thereabouts than 5 years of static prices equals about a 15% drop in real terms. Add to this a 10% average drop in actual price and there’s your 25% correction.

What’s interesting to investors, of course, what happens after that.

Deref 12:49 pm 28 Nov 11

ramblingted said :

I wouldn’t think there would be too many investors around anywhere who are thinking about guaranteed capital gain…this morning’s papers are talking about a possible 25% drop in property prices in many countries including Oz in the coming year/s..

People have been saying this for a long time. Like the next San Francisco earthquake, you could take that either to mean that it’s never going to happen or that it’s overdue – I suspect it’s like the shampoo ad – it won’t happen overnight, but it will happen.

Grail 11:32 am 28 Nov 11

Property Manager said :

If we’re talking about the apartments at Parkview then there are two currently listed on allhomes, at $390 and $400.

Yup, mine’s a two bedroom ensuite apartment with two car spaces. Both of those have only one parking space. The apartment is on the second floor (better security and views than ground floor), immediately opposite fire stairs, with the two parking spaces immediately adjacent to the fire stairs in the basement (i.e.: distance from bed to car is about two flights of stairs). The level of natural lighting in this apartment is awesome (it’s facing North) for the moment, right up until the new commercial property goes up in the vacant postage stamp of land between the Parkview and the Magpies Sports Club next door.

Thanks for everyone’s input, I think I’ll leave the rent right where it is since I’d like to reward the steady tenant who has been there for two years with no troubles.

Grail 11:15 am 28 Nov 11

Property Manager said :

… The Greens plans for minimum standards will probably address this, but forcing lessors to spend money on achieving a certain standard will (IMHO) increase the cost of rent for all lower-end properties – not what renters need.

The greens plans for minimum standards are EER2 by 2013, EER3 by 2015, “water efficiency standards can be met by fitting low flow shower heads and taps, and installing a dual flush toilet” and “deadlocks on external doors, along with locks on other external openings” (i.e.: windows). Other standards they are hoping to set include electrical safety, hardwired smoke alarms, ventilation, lighting, laundry and cooking facilities.

These are not particularly onerous, and don’t significantly impact the ability of slum-landlords to offer residences for rent with rotting carpet and collapsing ceilings. I don’t believe for one minute that offering tenants a house with rotting carpets or a non-functional kitchen is actually saving anyone any money (except the landlord, perhaps). Requiring rental properties to have functional kitchens and laundries will simply remove the shitboxes from the market, leaving only fair dinkum landlords interested in providing liveable residences for renters. I don’t plan on fitting my rentals with home automation or cable TV, but neither do I expect my tenants to cook on an open fire in the back yard due to a broken kitchen.

From the Greens media release on the issue which can be easily found by asking Bing about ACT Greens rental standards: You can follow this initiative on facebook at http://www.facebook.com/FairGoRentals.

Classified 10:39 am 28 Nov 11

wycx said :

I wouldn’t think there would be too many investors around anywhere who are thinking about guaranteed capital gain…this morning’s papers are talking about a possible 25% drop in property prices in many countries including Oz in the coming year/s..

I guess they will curse the papers for not warning them that before they made their investment/dice throw. And then they will run to Jooolia asking for a bail out.

Many (most) landlords have enough headroom and contingency that a soft or even dropping market for a few years won’t hurt much in the overall plan of several decades.

What will be more interesting is to see what happens to rents. My guess is they’ll level off a bit, but then increase again in the inner areas.

wycx 4:16 pm 26 Nov 11

I wouldn’t think there would be too many investors around anywhere who are thinking about guaranteed capital gain…this morning’s papers are talking about a possible 25% drop in property prices in many countries including Oz in the coming year/s..

I guess they will curse the papers for not warning them that before they made their investment/dice throw. And then they will run to Jooolia asking for a bail out.

ramblingted 1:51 pm 26 Nov 11

Violet68 said :

Tell that to the families I have been seeing on a daily basis who are constantly declined private rental due to their low incomes, or the families who go without food and other necessities just to pay their poor Landlord over 75% of their income in rent.

Except the poor landlord isn’t getting it…if the Government wanted to reduce rents for long income families they could introduce a land tax rebate concession for landlords renting to these sorts of families…but I wouldn’t hold your breath..

ramblingted 1:48 pm 26 Nov 11

wycx said :

So this is a gentle reminder to Canberran lessors – your investment property is not just a business

Well, if the property is negatively geared it is not a business at all, it is a speculative investment. If it wasn’t for the free ride it is getting on the back of all Australian tax payers it is unlikely the lessor would have even be in the game.

Negatively geared properties lose money every week by definition. Why would the lessor care about further small losses incurred by an low season tenant vacation with all those capital gains on the horizon…

I wouldn’t think there would be too many investors around anywhere who are thinking about guaranteed capital gain…this morning’s papers are talking about a possible 25% drop in property prices in many countries including Oz in the coming year/s..

wycx 1:06 pm 26 Nov 11

So this is a gentle reminder to Canberran lessors – your investment property is not just a business

Well, if the property is negatively geared it is not a business at all, it is a speculative investment. If it wasn’t for the free ride it is getting on the back of all Australian tax payers it is unlikely the lessor would have even be in the game.

Negatively geared properties lose money every week by definition. Why would the lessor care about further small losses incurred by an low season tenant vacation with all those capital gains on the horizon…

Violet68 11:58 am 26 Nov 11

Tell that to the families I have been seeing on a daily basis who are constantly declined private rental due to their low incomes, or the families who go without food and other necessities just to pay their poor Landlord over 75% of their income in rent.

OpenYourMind 10:21 am 26 Nov 11

ramblingted, it’s nice to see some sense in this discussion. If you read Violet68’s post, you’d think all these landlords are evil rich bastards, when in fact many are simply average everyday people who have worked hard, saved and are trying to set up some kind of income security into their retirement. What Violet68 doesn’t realise is that if you tried introducing further ‘security of tenure’ etc., there would be even fewer people considering renting out properties and the rental market would be even tighter than it already is.
Canberra’s average income is the highest in the country. Naturally Real Estate purchase prices and rental costs are going to be high because any renter is competing with many others on high incomes. Western Australia has the same problem whenever a resource boom is in full swing.

ramblingted 8:16 am 26 Nov 11

Are Canberra landlords greedy…well, not nearly so much as the ACT Government!

I’ve recently done the sums when looking at renting out the place we own. Say its worth $800k. We could get around $600-650/wk when rented. Minus weekly outgoings of rates and land tax ($220) property manager’s fee and disbursement charges ($60), Insurance ($12), water/sewerage supply ($12), provisioning for repairs ($40), and a monthly visit from a gardener to try and ensure things stay alive ($23)..leaves you with between $233-$283 before tax. (Not including the one-off inventory, advertising and letting fees etc which the property manager charges). Not to mention that some of these costs are incurred whether the property is tenanted or not.

On the other hand, if we sold it and put the cash in a fixed term deposit we’d get around $861/wk. And if you are over 60 you could wack the whole lot in an allocated pension and pay no tax on it all. And no worries about tenants and their secret goats!

I’m actually amazed that there are so many properties available for rent in Canberra. Particularly those properties on which people are still paying off a mortage.

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