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It doesn't just rain it pours

Discussion in 'Property Management' started by Blacky, 2nd Aug, 2016.

  1. Blacky

    Blacky Well-Known Member

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    early this month I was advised that two of my tenants were vacating.
    This came as no real surprise as I knew that one was building a new house the other was house hunting.

    Today I have been advised of a third property becoming vacant.

    This, in one of the quietest rental markets oil can remember.

    I've reduced rents slightly. But thinking I may need to reduce further.
    Paid for the premium listing. And still the home open had 2 prospective tenants come through.

    Blacky
     
  2. Coota9

    Coota9 Well-Known Member Premium Member

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  3. Blacky

    Blacky Well-Known Member

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    Yokine
     
  4. sanj

    sanj Well-Known Member

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    All i can advise is to come in low and strong upfront becayse otherwise youre chasing the rental market down and you dont want to be the average landlord in perth atm taking over 60 days to lease a property on average. Downside is the hit to servicability but if youre not going for a refinance or futher resi lending in short term then from a commercial POV id recommend considering that approach.

    Pretty tough out there atm.

    Recently i saw a great, near new inner city standalone home that would have been worth about $1m not long ago and received at leaat $800-850 furnished in past stat at 750/wk, drop to 600/wk and still take a while to rent out
     
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  5. Azazel

    Azazel Well-Known Member

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    That sux.
    Good luck, hopefully you get them filled in a reasonable time.
     
  6. Blacky

    Blacky Well-Known Member

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    Cheers Sanj
    I didn't realize it was that quiet. I knew it was tough. I just didn't realise it was THAT quiet.

    Blacky
     
  7. sanj

    sanj Well-Known Member

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    yeah its bad, check this out.

    reiwa.com - 25 Monger Street, Perth

    highly liveable 2 story home with 2 beds with ensuites, large laundry, large kitchen, fully furnished, 2 outdoor areas+balcony, small private pool, 2 car garage, in NB, 600m or so walk into the CBD in an area getting more and more desirable day to day.

    i got it wrong, they were getting 750 last year, started at 650 around 4/5 weeks ago, dropped to 600 2 eeks ago and its still available.

    in sydney for the same price all youd get a box under a bridge, a 3 hour round trip to work and the reassurance it's all worth it in the end :D
     
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  8. MTR

    MTR Well-Known Member Premium Member

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    Unfortunately its a sign of the times, not sure how long this will last but clearly oversupply pushing prices down.

    All the best Blacky, hang in there and I agree with Sanj, get the rental pricing correct, come down to what is required to secure tenant.
     
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  9. Lacrim

    Lacrim Well-Known Member

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    Blacky any luck finding tenants yet? Hope so.
     
  10. Blacky

    Blacky Well-Known Member

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    One application accepted.

    We had a tennant look through yesterday who was apparently keen and took an application. Fingers crossed

    Looking at a 10% reduction in weekly rents. Which is still better than empty houses.

    Blacky
     
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  11. euro73

    euro73 Well-Known Member Business Member

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    Hmmm... how's NRAS looking now? :)
     
  12. Blacky

    Blacky Well-Known Member

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    I've always liked NRAS.

    The big issue for me is my personal situation. Where I get zero tax benefit. Which brings the numbers back to being roughly equal to a 'standard' IP.

    I've referred a number of friends and family to NRAS.

    Blacky
     
  13. Lacrim

    Lacrim Well-Known Member

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    Good to hear. Gives me hope.
     
  14. euro73

    euro73 Well-Known Member Business Member

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    Thats cant be so. The NRAS credit is a refundable tax offset and NANE. Even if you have no NG benefit, you still get the $11,048 tax free.

    If you are residing in Indonesia and dont have assessable Australian income to offset pre tax loss and depreciation against, I understand...but a non NRAS property would be bleeding your cash flow even at 4% rates.
     
  15. Blacky

    Blacky Well-Known Member

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    The risk of vacancy is the same. The difference being that you still get 30% of your income regardless of occupancy (at the end of the year).

    Like I said I like NRAS and won't dismiss it as an opportunity. However the difference in benefits for me personally aren't so substantial as others due to my tax status.

    I don't understand your cash flow statement. Yes, I'll have a month-or two of low cash flow but that is what buffers are for (the properties are cash flow +ve when rented).

    NRAS gives lower monthly cash flow due to the 20%rent reduction. This is corrected at year end when you get the tax free lump. But if CF is an issue, NRAS makes it even harder.

    I know you love your NRAS and I'm a supporter of it in some circumstances. But sure you must admit that it isn't perfect and it won't work perfectly for everyone all the time.

    Blacky
     
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  16. Lacrim

    Lacrim Well-Known Member

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    Don't want to digress and go off topic but just on NRAS, the reason I don't like it is because:

    - the properties have to be brand new - which you means you usually 'overpay'
    - they aren't in the best streets of suburbs they're built in.
    - they aren't located in the best of suburbs in the first place

    Much rather a crappy, fully depreciated fibro shack in a fantastic street/location any day of the week.
     
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  17. Blacky

    Blacky Well-Known Member

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    Just because it's NRAS doesn't make it bad.
    But just because it's NRAS doesn't make it good.

    Blacky
     
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  18. MyPropertyPro

    MyPropertyPro SE Qld Property Management & Investor Services Business Member

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    I think this scenario also highlights the importance of staggering leases when you have multiple properties to ensure they don't all become vacant at the same time which can put a considerable strain on cash flow depending on your person situation. I'm not suggesting this has happened here as notification dates/periods don't necessarily mean commensurate lease expiry dates but it's reminded me of quite an important aspect to multi-property investing. I always advise our multi-property clients/landlords to ensure that leases at lease have a month one spacing on a lease expiry date.

    Of course, this can become difficult as you want the lease(s) to expire at the most opportune time for re-letting should this become necessary and as sometimes this is the same time, it can be a bit of a juggling act. Of course, this is also another reason to diversify both geographically and by property type with different factors affecting opportune rental times depending on the investment and location e.g. school holidays, public holidays, seasons, major events, etc.

    I hope it works out for the best for you! :)

    - Andrew
     
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  19. Blacky

    Blacky Well-Known Member

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    @MyPropertyPro - it's nice to do that if possible.

    In fact I had deleberatly done that with all 3 leases spread over 6months.
    Last 'renewal' the tennant didn't want to extend as they were building their own house, which was expected to complete.
    3 months later the second tennant wanted to go to month by month, as their job was finishing and they were moving back to the uk.
    Last one didn't want to renew.

    So it wasnt unexpected that they would become available. However to happen within 3weeks of each other is just back luck/timing.

    That's life. We are investors and have buffers in place.

    Blacky
     
  20. MyPropertyPro

    MyPropertyPro SE Qld Property Management & Investor Services Business Member

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    Hi Blacky,

    It's always possible as you control it directly. What I'm getting at is that the initial leases should be adjusted to ensure they're not able to vacate all within 3 weeks of each other. You can vary the lease end date to whatever you like (obviously negotiable with the tenant), for example:

    Property 1: Lease end January 31st, 2016
    Property 2: Lease end February 28th, 2016
    Property 3: Lease end March 31st, 2016

    This could mean that some leases are an odd number of months to accommodate this and whilst tenants usually want either 6 or 12 month leases, generally speaking they understand why a strange date is required by the landlord for the first lease provided it is explained and from then on they can be 12 months. The lease end date is more important than the commencement date and yes, it can mean possibly a couple of months less guarantee cash flow, but it's better than bulk vacancy at the same time.

    From there you do have to be strict in not allowing tenants to go month-to-month and without going into the whole debate about "that is their right" (as there are a couple of threads on here about that now), you effectively then have strict control over your possible vacancy so it's not a matter of unlucky timing. It's always possible all three will still want to vacate at the end of their respective leases, but at least the pain is spread out over a longer period and in theory, putting less pressure on your cash flow.

    I hope that makes it a little clearer.
     
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