Author: Jamie Horner.
“When things go wrong, don’t go with them” ~ Elvis Presley.
We have recently seen many warnings from DMIRS about Perth properties being targeted and used as drug labs, leaving large messy cleanup bills. There are also private property owners that have leased properties to a friend or family member, only to be left financially crippled.
Whilst in many of these instances they did not have a Property Manager caring for their property, there are also many instances of things going wrong even when professional Property Management is in place.
Last month we received a call from an Owner in despair, emotionally exhausted and angry from the devastation left at their property. It can be hard to think straight if your property is damaged, it can be emotional and be financially and physically crippling.
This is a property that recently came to us, it had been tenanted for 4 years and the tenants paid rent on time, it was managed by a professional real estate company / Property Manager and inspections were conducted. The damage bill was over $8,000 as the walls needed heavy work and re-painting, the carpets replaced, blinds replaced, doors damaged, rubbish left behind and the bathrooms, kitchen were filthy and the air-conditioning damaged.
So what do you do when your rental property has been left damaged?
Step 1 – Minimise the Loss
This means taking plenty of photos for evidence and once you have done this, then clean everything up and bring the home back to a rentable state to secure a new tenant as soon as possible. When your house is trashed it's easy to get angry and look to blame, and yes whilst the past tenant and managing agent are squarely in your sights, it's important to stay focused.
Having been in Property Management for over 20 years, I have had my share of damage in houses, despite all the best processes being followed, but in the end, it’s the vacant period/loss of rent that costs owners the most. Insurance companies will only cover a certain period of time once you have possession of the property, so it's important to create a checklist of work that needs doing, prioritise it, get quotes and get the work done. Even if you don't have Landlord Insurance, getting the property back to a rentable state and re-tenanted in minimal time is key.
Step 2 – Past Tenant & Managing Agent
How willing are both parties to assist in getting the property back to where it needs to be? The first step is ensuring that you keep a copy of all your expenses so that you can claim the bond. You then need to weigh up if you have any chance of getting more than the bond from the past tenant, its highly likely that if they have trashed it, you have no chances of getting any more funds than the bond, so focus on getting the bond back.
With your Agent, are they going above and beyond to assist or are they just wiping their hands of the situation? It's easy to be a good Property Manager when things are smooth sailing, but this is when you need them most. If they are not assisting or you think it was poor management that led to this situation then its time to change Agents. If the Managing Agents services were poor, don’t stick around, especially if they won't assist. In the end, it will just cost you time in getting the property back to where it needs to be and the important factor of trust in the relationship between Owner and Property Manager is lost.
Step 3 – Contact your Insurance Company
A good Landlord Insurance policy is key to ensuring that you minimise your loss. Contact your Insurance company to start the claim process and remember you will need some key documents, like the Lease agreement, tenant ledgers, property condition reports etc so get a copy of a claim form and ensure you get the required documents from your Managing Agent. The forms are not hard to complete and if your previous agent won't finalise this for you, get out quickly and find a new Property Manager that will assist you.
Step 4 – Your Property Manager
If you are continuing with your current Agent, set clear guidelines that you want all items fixed ASAP, this means you may have to put money out of your pocket till you are reimbursed the bond and the insurance funds. If you are changing Agent, take the time to get recommendations, there are Agents that will assist in getting you out of this situation. If you are appointing a new agent, explain the whole situation, and see if they have the skills to assist. Ensure the focus is on bringing the property to a quality state, so it can be advertised and re-let.
Step 5 – Costs
The most taxing part of this situation is your time and your mental state, it can be time-consuming and frustrating, however, it’s important to put things in perspective and understand that it all can be fixed. Make sure all receipts/invoices for expenses eg cleaning, carpet cleaning, painting, gardens are kept.
When you total the accounts, remember that even though you feel the home has been left in the wrong way the tenant is only liable to return the property to how it was at the start of occupation minus fair wear and tear, this means that if you haven’t painted or re-floored in many years, you will only get a depreciated portion of the costs back.
If you have Landlord Insurance check how much loss of rent they will cover. For many Landlord Insurance companies it is 6 weeks, so aim to ensure that the property is back to a rentable state and a new tenant are in the property by this time. If you don’t have insurance or your Insurance company doesn’t offer comprehensive cover, then you really need to work very quickly on re-tenanting, in many situations the vacancy will be your highest cost.
There will likely be a gap between your total expenses, minus the tenants bond reimbursed to you and any insurance payment. Whilst these costs are extremely unfortunate…it's important to focus on the end outcome and your long-term property goals and learn from the experience.
For many Owners is important to understand that a rental property is an investment tool. A property left in poor circumstances can deter us from our investment journey, however, remember to never let a stumble in the road be the end of the journey.
Do you need help with your rental property? Give Jamie Horner our Licensee a call on (08) 9262 0400 or 0403 305 023, she would be happy to assist with ANY of your Property Management queries. Our experienced Property Managers are happy to use their wealth of experience to assist you in your property investment journey.
About our Licensee Jamie Horner
I started at a very young age assisting my parents with their rental properties. I have always had a love of property in its ability for people to build wealth. In 1997, yes more than 21 years ago I decided that it would be my career and hence got my Property Management and Real Estate License. I grew up assisting my parents who were migrants to Perth in looking after their rental properties...my journey included headaches, cleanups, court, rental arrears, damage etc...my job is to ensure that my owners never have to worry about this part and they focus on their investment journey. Please feel free to contact me any time about your property, I would love to help.