Meth Houses, Landlords and Insurance

Media is hyping up meth houses as potentially being take two of the leaky homes saga. Graham presents some tips for landlords on getting your insurance on track to reduce the risks of being stuck with a meth house rental.

If you search on Stuff.co.nz for “meth houses” you come up with a long list of headlines. One of the top five is the Real Estate Institute’s comment that meth houses could be as big a problem as leaky homes in the future.

That’s a big call and I don’t know if I agree with it. But it certainly emphasises the fact that meth houses are a growing problem that we, as landlords, need to be aware of and manage.

One of the main things to consider with the risk of meth houses is how your insurance company treats the issue. 

Firstly, your insurance company needs to know that your house is tenanted in the first place. Second, make sure you have landlord’s protection cover and/or extensions that cover you. Third, it is imperative that you inspect the property every 90 days and that there is documented evidence of this (a property inspection report). If there is not, you may well not be covered.

All this emphasises the point that it is a good idea to have your property professionally managed (I know of very few, if any, private landlords who are disciplined enough to do regular inspection reports). And, to put it in context, giving up 10 per cent of your annual rental to a property manager looks pretty cheap in the face of potentially being hit with a $30,000 meth clean up bill.

My prediction is that, in the future, tenancies will need to have a certificate of meth cleanliness and these may well accompany house sales. In the meantime, cover your basis with good insurance and regular property inspections.

Graham Goodisson is a Registered Financial Adviser with Velocity Financial. No investment decision should be taken based on the information in this blog alone. A disclosure statement is available free of charge upon request.

Letters to Tully #8: Does Added Value Actually Add Value?

Listen in as Graham “educates” his eldest child on the ins and outs of buying investment property. Lesson #8: Adding Value to Investment Property.

Dear Tully,

 Firstly, congratulations on the new job. Not only will you have extra pocket money, but you will also now have the privilege of paying board. I call this a privilege because it is a great life lesson! So, welcome to the learning.

Last time I mentioned that some people invest in property due to the fact that you can also add value to properties. This is an interesting concept because adding real value is something that most don’t really think through. 

Doing up a bathroom for $25k isn’t probably going to add $25k to the value of the property or increase the weekly rental. But adding a bedroom via a sleep out that adds say $150 per week to your rent does add value (if it's less than 10 square metres it may not even require council consent). If it costs 10,000 it’ll pay for itself in 66 weeks.

I’m not saying don’t do up the bathroom of your rental but just think about what you will get in return. If I had a five bedroom flat and had the ability to turn it into a six then I would seriously look at putting a bathroom in because it would add some value. For example, what sort of tenants would want to live in a 6- bed home with only one bathroom?

Beautifying the gardens again might look nice in the short term, but turn out to be a total waste of money as tenants may not have an interest in keeping them up to scratch.

The key question to ask is this: What does my dollar spend bring in turns of increasing rent and adding end value? If it doesn’t do either then save the money as a deposit for your next rental.

Graham Goodisson is a Registered Financial Adviser with Velocity Financial. No investment decision should be taken based on the information in this blog alone. A disclosure statement is available free of charge upon request.

Letters to Tully #7: Why Invest in Property?

 Listen in as Graham “educates” his eldest child on the ins and outs of buying investment property. Lesson #7: Why Invest in Property?

Hey, there.

Happy New Year and strange that as yet I haven’t received your Christmas Present!  You could buy me the after shave I like, you know the one as you seem to like it as well!

 Its 2016 and obviously a time for reminding yourself as to what the year is going to look like and what you are going to achieve. Investing is the same as much as its important to remind yourself why you are doing it and what you are trying to achieve.  There are many reasons why people invest and your goals need to be your goals, real and alive to you not some body else. Obviously being your Father I have very strong opinions around what I think you could do but history has shown us that you are only going to do what you want to do anyway (remember your year 12 exam results!)  

We invest to make our money do as much as possible for us in an investment option that we are comfortable with. We also tend to invest for future benefits, people my age (50) tend to invest so they have money for their retirement whereas people you age tend not to invest at all.  You starting early is a brilliant idea and sticking to it will give you a future lifestyle that at the moment is a little difficult for you to imagine. It will, all things going to plan, give you options around travel, work and study. The list is endless around what you are trying to achieve.

Whypeople invest in property is a long list as well:

1. You can improve and add value to some properties
2. You can subdivide
3. You can leverage off the increases values
4. Banks love to lend against houses
5. Property investment can give funds for other business efforts
6. Property is saleable
7. You can control how its managed
8. You can drive past it and feel good (or bad) about it.
9. Other people pay for your borrowing
10. Tax breaks help …..

I’ll talk about theses in more detail as we go on but my point today is just to remind yourself why you’re doing this and what the goal looks like.

 Your Loving Father.