Being a landlord can be a trial
Some rental properties have disaster written all over them. No matter what you do, tenant after tenant is a nightmare and the property always seems to need more and more maintenance.
Those properties all too often fall into the “too- hard basket” whatever the landlord does to mitigate the problem.
Andrew King, president of the New Zealand Property Investors’ Federation has seen it over and over again. Certain properties are either hard to let or the tenants never stay. The problem could be down to bad configuration of the house, poor light, awful neighbours, lack of public transport or a number of other reasons, but the tenants keep moving on.
“Tenants take [ the house] because there might not be anything going. But they may not stay very long,” says King. “You are always struggling with that property.”
In that case it might be worth selling on and using the money elsewhere.
The ideal rental property isn’t the same as the perfect owner- occupier home. A simple box- like structure on an unlandscaped property, for example, is often much easier to manage than one with verandas and decks and manicured gardens.
What’s more not everyone is cut out to be a landlord. Many first- time landlords are accidental landlords, who have either inherited a property or kept their old home as a rental when they bought a new one.
Some new landlords find that they can’t sleep with the worry, or they can’t manage tenants.
New landlords may find that they are too busy to interview prospective tenants, following up references, doing credit checks, clocking the rent payments and doing regular property inspections.
It’s those landlords who sometimes fall foul of nightmare tenants. These tenants hope that a rookie landlord won’t investigate their poor renting history and even fail to notice things such as additional people living on the property, smoking or pets in a property that doesn’t allow them, or even a P- lab in the garage or loft.
The halfway house in that situation is to use a property manager to deal with this day- to- day detail. The landlord still needs to manage the property manager and check bank accounts to ensure that the rent is coming in as expected. But it can take a lot of the day- to- day worry away.
If that doesn’t solve the problem the answer may be to cut and run. There are other investments that don’t involve clients calling in the middle of the night complaining of a blocked toilet.
Finally, new investors who decide to sell up need to be very wary of tax. If they sell within two years of buying or bought with the intention of selling they will probably need to pay tax on the profits.
Exclusions to the two- year rule include your family/ main home, or inherited the property.
Inland Revenue may also claw back depreciation on the sale making it less profitable than you expected.
Ideally, therefore, it’s best to seek advice from an accountant before selling.