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Neglected to check IP's electricity...

Discussion in 'The Buying & Selling Process' started by chylld, 22nd Mar, 2016.

  1. chylld

    chylld Well-Known Member

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    Just sold an IP and had a mild heart attack 2 days before the auction. Sharing here to hopefully save someone else from the same issue.

    Tenant was on a periodic lease so we gave them the 3 month notice to vacate as we wanted to repaint and stage etc. Campaign started a week after they moved out.

    Thursday before the auction, the agent took someone through for a private inspection and noticed that the power was out. Called me immediately and I signed up for a temporary account with AGL (16% discount, no cancellation fees) due to be connected on Friday. Head over Friday night and thankfully the power is back on just in time for Saturday's auction!

    Very lucky that someone requested a private inspection on the Thursday, otherwise by the time we would have found out (Saturday) we wouldn't have been able to do anything about it. Wasn't keen on spending thousands on repainting and staging only to have no electricity to light everything up!!

    Turns out that the tenant had cancelled their electricity account after receiving the notice to vacate, and had been using up the 'grace period' for the remainder of their stay. Found an unpaid electricity bill addressed to "The Occupier" in the mailbox. Agent is forwarding this on to the ex-tenant; I hope I will not have to pay it myself.

    So, lesson learned: next time I sell, I'll call Ausgrid, find out which retailer is currently supplying power to the property, and verify the account status with them before I even think about releasing the bond.
     
    Terry_w and Simon Moore like this.
  2. Marg4000

    Marg4000 Well-Known Member

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    Didn't you realise that the tenant would disconnect the electricity when they moved out? Surely that is standard practice.
    Marg.
     
  3. chylld

    chylld Well-Known Member

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    Yes, but normally the electricity is left on for a certain grace period which is usually sufficient for a campaign to run, and even settlement. My issue arose because the tenant closed their electricity account 3 months before they actually moved out.
     
  4. Marg4000

    Marg4000 Well-Known Member

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    Certainly a grace period is often allowed, but you can't rely on it. From what I know, it usually lasts till the next meter reading, which can be anything between 1 and 90 days.

    In your case the tenant would know from the last bill when the next meter reading was due, and took advantage of that.
    Marg
     
  5. chylld

    chylld Well-Known Member

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    Agree, I simply neglected to check the status of the grace period. I asked the agent why he didn't ask me to sign up for a temporary electricity account; he said the grace period is normally more than sufficient.
     
  6. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    That's pretty cheeky of your tenant!

    How did the auction go?
     
  7. chylld

    chylld Well-Known Member

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    Fastest auction I've ever seen, was over in about 3 minutes. Must admit I think we could have eeked out a few grand more if the auctioneer milked the bidders properly. Still, we achieved substantially more than both the reserve and what I thought it was worth.

    Works out to ~18%/yr ROI. It sounds like an OK result, but the important thing is that we are one step further along on our plan :)
     
    Elives, Gockie and House like this.
  8. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    Well done - great result!

    So what's next?
     
  9. chylld

    chylld Well-Known Member

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    Thanks Jess :D

    Next we'll do top-ups on other IPs and continue diversification into other asset classes. We are a bit property-heavy atm (am I allowed to say that here? ;) ) Working towards passive income goals and retiring before 40.

    I must stress that we are accidental property investors... our IPs are places that we bought to live in, and our journey just happened to line up well with market movements. Randomly happening upon the somersoft forums nearly 7 years ago armed me with enough knowledge to not stuff everything up :)

    The IP just sold was actually our worst-performing one so I have been discussing CGT exemption strategies with my accountant...
     
  10. dabbler

    dabbler Well-Known Member

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    Oh, that is all ok, I thought you had an actual heart attack !