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Property Investment Blog

APIA Property Blog

10-point health check for your property portfolio

Monday, December 15, 2014

It is astonishing to me that so many investors talk about how man properties they own rather than how well their portfolios are performing.  This kind of autopilot investing without context can be detrimental.  The coming holiday season is as good as any for you to give your portfolio a much needed health check simply because sometimes in life, more is not necessary better.  Here are some questions to get you started: 

1. What is your overall investment goal?

Why are you investing in properties in the first place?  Are you investing for cash-flow or capital gain?  Are you investing for a better quality of life in five years?  Ten years?  Or twenty years?  Without knowing clearly where you are heading any investment strategy would be haphazard at best.  Reaffirming your overall financial goal can help you visualise where you are at and how your portfolio is performing for you.  

2. What positive steps can you make to attain this goal?

Review your portfolio activities in the last 12 months.  Have you bought any new properties?  Have you added value by renovating or developing?  Do you action strict rent arrear and rent increase protocols to maximise your cash return on each property?  I will always remember Kesh Maharaj telling a room full of APIA investors how income from property investment is anything but passive.  Truly successful investors are anything but stagnant.  Consider this a performance review of yourself as and investor and work out which areas you can improve on in the coming year.  

3. How well do you know your properties?
No really.  How well do you know your properties?  When is the last time you did a property inspection?  Do you know the current market value of your portfolio?  Given the strong performance of the Auckland property market in the last 12 months, it is time to think about how you can accelerate your portfolio growth.  Consider getting a valuation report done to make use of the additional equity.   
4. Which are the stars and which are the slackers?

Now that you have a clear direction for your investment strategies and got to know your properties, it is time to look critically at each and every single one of your properties.  Which ones are propelling you towards your ultimate financial goal and which ones are holding you back?  Are any of your properties suffering from persistent high vacancy?  Giving you a poor cash flow or uninspiring capital growth?  These are your under-performers.  Start building a strategy to either sell these properties or make changes to them to improve their performance.  The APIA 10 Year Wealth Projection Calculator is a good starting point.  

5. How compatible is your portfolio to your lifestyle? 

We all go through various changes in life and your property portfolio can either add to or take away from your current and upcoming lifestyle.  When you started investing, you may had been single, footloose and fancy-free.  The investment strategy and portfolio style that suited you then would not necessarily be the best for you current lifestyle as a father of two with a third baby on the way.  You have have changed jobs or combined your finances with a new partner.  All of these changes have implications to your savings and disposable income capacity not to mention your cash reserve to remain active on the property market.  

Additionally changing circumstances in your life may also require a reexamination of the way your portfolio is structured.  To stay on top of maximising tax savings, book an appointment with your accountant in the new year to discuss changes in your life.  

6. Is it time for some TLC? 

Regular maintenance, repairs, and even moderate renovations are vitally important for your property to command a high rental return.  While these works are easy to keep on top of when the property is being managed full time, for many part-time landlords, they can slowly build up into an insurmountable mess.  Schedule in a property inspection during the Christmas downtime and take stock of what needs to be repaired or maintained.  

7. Are you paying too much? 

Without a doubt financing constitutes the highest costs faced by most property investors.  Now that we are three months away from the end of the financial year, examine your existing mortgages closely and look for ways to save on interest costs.  Have you utilised your 0.25% off home loan interest discount with the ANZ?  Have you been make the most of your relationships with the banks?  Is it time to consolidate or refinance?  

8. Do you have a safety net to fall back on? 
Once you have made real in-roads into various cost savings, take a look at your risk mitigation strategies and consider ways to increase your security.  Kevin Green at the 2014 NZPIF Conference talked about not holding onto debt for longer than 10 years as a way to continue building his portfolio in a sustainable manner.  Additionally you may also want to consider life or income protection insurance to guarantee your current lifestyle despite change in circumstances.  

9. Are you renting to the best people out there?  
You can do everything right and tick all the boxes when it comes to property investment, but all of your hard work will come to naught if you rent to the wrong people.  At his latest presentation to APIA investors, Craeg Williams from TPS Credit Control talked about there being $100 million a year of rent arrear disputes adjudicated by the Tenancy Tribunal, 'and that is just the amount we know about.' said the specialist tenancy debt collector.  Take a look at your tenants' performances in the last 12 months.  Do they pay rent on time?  Do they look after your properties?  Review your tenancy agreements and use this opportunity in the summer to consider whether you are better off renting to a bad performing tenant or go back to the market to look for better tenants.   

10. Are you up-to-date?
Property investment does not happen in isolation nor should property investors be ignorant of topical issues and likely policy changes that will have impacts on your portfolios.  In this rapidly changing market, knowledge is quite literally gold.  "The best way to stay connected with the industry is to stay connected." says Andrew Bruce, APIA President, "Networking with fellow investors and tuning in to industry presentations are the best way to stay current."  If attending events is not your bag, just know that property information is also readily available online and in print.  

These questions provide a good foundation for you to get a true appreciation of how well you have been investing so far.  Once you understand where you are at and map out the steps to get you to where you want to be, you will be on track for a truly rewarding 2015! 

Will you be doing a portfolio health check this summer? 

What is fair wear and tear?

Monday, December 08, 2014

Unlike most commercial leases which can require tenants to leave the property as they found it, residential landlords are expected to inherit fair wear and tear by the tenants at our own costs.  It goes without saying that there is a very fine line between fair wear and tear and what constitutes damages.  

Understandably both parties to a residential tenancy have good reasons to take a diagrammatically opposing view on the what is fair wear and tear, especially when it boils down to bond refunds.  Take carpets for example, while cigarette burn holes and rips are obviously damages, the thinning of fibres are usually fair wear and tear.  But that said, how thin does the carpet have to get for it to be deemed a damage?  

Fair-wear-and-tear vs damages

Current statutory ambiguity and a lack of industry standard have proven unhelpful.  In this state of flux therefore, what are your guiding principles to determine fair wear and tear?  

The overarching rule is that of betterment.  In terms of property condition, a landlord should not be in a better position materially than you were at the start of the tenancy.  Unlike commercial tenancies, the bond is not to be used as an insurance policy where you might get full replacement value with no due consideration for fair wear and tear.  From there, a few factors can come into play: 

  1. Length of tenancy - "You have got to consider the length of tenancy.  Fair wear and tear is very different for an 8 year tenancy and for a tenancy of 6 months," says Jan Galloway, Director of Corinthian Property Management.  The longer the tenancy, the more natural wear is to be expected.  
  2. Number and age of occupants - The more bedrooms and occupants, the higher the wear and tear in all the shared spaces (e.g. living room, kitchen) should be expected.  Are there children living in the property?  A property occupied by a young professional couple would suffer far less wear than a family of four with young children.  "I always think about the wear and tear that would have occurred if I had lived in the property with my family," says Galloway. 
  3. Quality of the property/fixture - A modern accommodation with thinner internal walls would require more maintenance and repair from the landlord's part as oppose to an older building that has a more robust construction.  
  4. Original condition - "You have to consider the condition of the property when they moved in," said Galloway,   "if you had brand new paint and there were a lot of scuffs on the wall then you should get some money towards repainting.  If there were a lot of preexisting scuff marks on the wall then you are not likely to get compensated for the sake of two or three additional marks."
  5. Reasonable lifespan - Don't forget that nothing lasts forever.  If a dishwasher breaks down after 15 years of good service then it is fair to say you have got your dollars' worth and claiming against the tenant (even if there are signs of abuse) could be petty and unnecessary. 
  6. Overall condition - Galloway's rule at final inspections?  "Look at the property overall rather than each single feature in isolation.  A slightly dinged front door can be balanced out by a pristine carpet and scuff free walls."  Do not get fixated by one single damage when the overall condition of the property is reasonable.  
  7. Overall relationship - **Caution** this is a contentious one.  At the end of the day, residential tenancy is about people doing business with people.  If you have had a good relationship with your tenant who paid rent on time and had been generally well behaved, it is not necessary to quibble over small maintenance issues.  Consider the value you have received from your tenant over the years and repay them with a suitable degree of lenience.  

Preventative measures

As a landlord, your aim is to minimise the level of wear and tear in the first place.  But it is not an easy feat as a tenancy agreement guarantee your tenant exclusive possession of the property.  Here are some tips:
  1. Tenant referencing - When you select tenant applicants, take the time to ring ex-landlords for a reference and ask questions like "Would you rent to xxx again?"  If not, why not?  
  2. Good relationship - If you maintain a professional and good relationship with your tenant, it is more likely that they will come to the party and look after your property well.  
  3. Decorate sensibly - No tenants, no matter how careful, can prolong the lifespan of cheap fittings and appliances.  When you fit out your property therefore, look beyond the price tag and take into consideration the quality, make, and after-sales service of your product selection.  
  4. Inspect and maintain regularly - This is especially important for longer term tenancies.  By refreshening up your property at regular intervals, not only will you have a more on-the-pulse handle of the condition of the property, you are also reducing the need for a big refurbishment job at the end of the tenancy period.  
  5. Communicate your level of expectations - Set your expectations from the outset.  Remind your tenant that regular cleaning and maintenance can make their property feel more like home.  Encourage them to contact you as soon as maintenance issues crop up and be responsive towards these communications.  

Dispute resolution 

Disputes happen - they are just a matter of course when it comes to residential tenancy.  While some disagreements do get resolved privately, others are presented to the Tenancy Tribunal for adjudication.  Drawing on her experience pursuing tenants through the Tribunal over damages, Galloway cautions landlords to always prepare for the worst from the outset.  "Property damages is a very arbitrary thing and quite challenging to prove at the Tribunal level.  Good documentation is crucial.  Always keep a thorough written and photographic inventory of all of the chattels and the property condition at the start and end of the tenancy as well as invoices for remedial work you are claiming against your tenant."  If you can, get your tenant to sign and date these documents.  Ultimately, the higher the quality of your evidence, the more likely you will be recompensed for remedial work done between tenancies.  

10 warning signs of a bad tenant

Wednesday, November 26, 2014

Because appearances can be deceptive and landlords risk being taken for a ride, here are some warning signs of a bad tenant to watch out for: 

  1. The friend - Pay attention to the old adage that you should never do business with family or friends.  Your friend is not automatically a bad tenant, he is just a bad tenant for you.  Residential tenancy is a business and during the normal course of doing business, you will disagree from time to time.  When that happens it is easier for you to maintain your professionalism as a landlord if you do not have to worry about ruining a friendship. 
  2. The credit-check-maybes - You know that tick box at the end of the tenancy application form authorising you to carry out a credit check on the tenant applicant?  Ever noticed the ones who start dithering about when they come to that box?  Or the ones who ask you if a credit check is mandatory?  If a tenant applicant is awkward about a credit check, chances are they have something to hide.  "I usually ask them straight up - If I credit check you will I find something that will cause concern?" says Andrew Bruce, President of the Auckland Property Investors' Association.  "Normally the first reaction tells me everything I need to know."  
  3. The bond negotiators - Considering the process of bond lodgement is tightly regulated by the Residential Tenancies Act (that no more than 4 weeks' rent can be collected unless otherwise agreed), and you have a tenant applicant who tries to negotiate you down, you really have to wonder about the size of his cash reserve. 
  4. Cash payers - Be wary of cash payers, especially those who pay you rent in cash upfront for an extensive period of time.  The two worst-case-scenario reasons for landlords are: 1). That the tenant has such bad rental history, she is offering you the cash as a diversion. and 2). That your property is being rented for the purpose of carrying out some form of illegal activity and that by paying you cash you tenant is hoping to not be disturbed by you.  
  5. Frequent movers - Make a point of asking for a reason for frequent relocations especially when a tenant has had multiple addresses in the same general area.  
  6. Parent/close friend referees - While there is no legal impediment for a parent or a close friend to act as a tenant applicant's referee, be wary of the references you do get from these referees.  Take a strategic approach to making reference calls and ask questions that will give you relevant information on the applicant.  Examples include: Would you go guarantor for this applicant?  When was the last time you spoke to them?  Can I confirm her phone number with you? 
  7. The hobos - I am not saying that tenants have to be in designer threads in order to be worthy of your property but do take of note of an applicant's general appearance, hygiene habits, the state of their cars, and their punctuality.  A tardy applicant who comes across as dishevelled and unkempt can hardly give you confidence that they would treat your property with respect.  
  8. The speedy gonzales - Don't cut your application process short just because a tenant applicant is in a massive hurry to move in.  Responsible tenants respect advertised move-in dates and those who do not may have ulterior motives.
  9. The drunk - Watch out for breaths that stink of alcohol, dilated pupils, slurred speech, delayed or intermittent response to your questions.  You wouldn't hand over wads of cash to a drug addict, so why would you let her move into your property?
  10. The something-is-up-but-I-can't-put-my-finger-on-it - Finally, always trust your instincts.  If a person is  not inspiring any confidence and giving you bad vibes, politely end the application process and move on.  By signing the tenancy agreement, your tenant is entitled to exclusive possession of your property.  Don't ever leave it in the hands of someone you cannot trust completely.  Be aware of human right and anti-discriminatory laws.  Get into the habit of saying to unsuccessful applicants, 'I am sorry but you are not the best applicant by merit.' and nothing else.  

These signs are general and by no means absolute.  In many cases there may be perfectly innocent explanations but if you take your responsibility and profitability as a landlord seriously, it should at least be incumbent on you to make necessary enquiries before entering into the tenancy agreement. 

Forget about nightmare tenants, what about nightmare neighbours?

Tuesday, November 18, 2014

It is one thing to deal with nightmare tenants but what about nightmare tenants who are not yours?  So often at APIA we get asked by frustrated landlords and tenants what can be done to renting neighbours who are causing significant nuisance in the neighbourhood.  This week we put the question to Scotney Williams for his views: 

APIA Ask An Expert

A neighbouring tenant is causing some distress to my own tenants and other neighbours.  The offending acts include blocking my tenants from accessing their homes, being verbally abusive, and parking their cars on my property (i.e. my tenant's home).  I have spoken to this particular person's landlord but nothing has happened.  Are there any actions I can take against someone else's tenant either through the Tenancy Tribunal or other avenues? 

APIA Ask An Expert

This is a difficult issue.  

It is actually an owner-to-owner issue and your cannot take proceedings under the Residential Tenancies Act (i.e. apply to the Tribunal) because the Tribunal only hears matters between a landlord and one of his/her tenants. 

Generally the only thing which can be done is to talk to the landlord which you have done already.  If the behaviour of the neighbour actually costs you money in lost rent with your tenants leaving because of the bad behaviour you should see your solicitor and obtain advice.  A tort of economic harm may be pursued but you will have to weigh up the cost-benefits of the legal fees and time involved.  

Scotney Williams
Craeg is a principal of Tenancy Practice Service, a tenancy consulting firm which advises major property management brands.  Scotney and his team are also involved in providing support for private landlords by way of training seminars, best practice protocols, drafting applications, advice about re-hearing and appeals, tenancy debt collection as well as human rights and privacy issues.  

Do you have any property related questions for our panel of experts?  Comment below or email us at  

New bylaw may mean more than just removing the fireplace

Friday, October 31, 2014

News of the Auckland Council's proposed air quality bylaw has understandably unsettled landlords who own properties that are heated by indoor wood/coal burners.  This week's Ask An Expert feature explores the possible legal implications this bylaw has within the framework of the Residential Tenancies Act: 

APIA Ask An Expert

Regarding the proposed bylaw to phase out pre-2005 indoor open fire burners, if it is passed would that introduce any RTA obligations for landlords for rent out properties with indoor open fire burners as the main heat source?  Would landlords be required to replace this 'amenity' for existing tenancies and if so, what with? 

APIA Ask An Expert

If the Council should require all pre-2005 fireplaces to be removed or permanently disabled, it is very likely that the Tenancy Tribunal would order a substitute appliance be installed. 

There have been some decisions of the Tenancy Tribunal in the South Island where the old "burners" were made illegal and had to be removed or replaced.  The Tenancy Tribunal has on occasion ordered that they be replaced.  This is likely to be where an old wood burner or similar was rendered legal and the tenant requested it be removed and a substitute wood burner be installed.  This does not necessarily mean that the Tenancy Tribunal would order a replacement "like for like" in every case but it certainly could do so if it felt it necessary.  There may be good reason for such a decision such as plentiful supply of free firewood.  

The Housing Improvement regulations 1947 are the authority for the minimum standards of fitness for houses.  Regulation 5(a) requires all houses to have a "living room" and Regulation 6 requires "[e]very living room shall be fitted with a fireplace and chimney or other approved form of heating"/ 

It follows that while the Tenancy Tribunal could order a heating device be installed where the tenant made application for one, it is just as likely that the landlord could offer an "approved" alternative which I am confident would be an acceptable solution.  The Tribunal would be mindful of the landlords cost of installation, the effectiveness of the unit, in the context of the house and the ongoing cost to the tenant.  

In today's world, heat pumps have proven a cost effective solution.  If the worst should happen, landlords would be wise to plan well in advance, to offer some other alternative rather than just hope for the best.  

Scotney Williams
Craeg is a principal of Tenancy Practice Service, a tenancy consulting firm which advises major property management brands.  Scotney and his team are also involved in providing support for private landlords by way of training seminars, best practice protocols, drafting applications, advice about re-hearing and appeals, tenancy debt collection as well as human rights and privacy issues.  

Do you have any property related questions for our panel of experts?  Comment below or email us at  

What to do when you suspect a meth-lab contamination?

Tuesday, September 30, 2014

Meth lab contamination

In this week's Ask An Expert feature, Craeg Williams gives you a step-by-step response guide to any meth contamination suspicion.  

APIA Ask An Expert

Two tenants who occupied a property of my recently had an acrimonious break up which resulted in one tenant moving out of the premises.  The remaining tenant has given me enough information to strongly suspect the departed tenant to be a meth user.  At this stage I don’t believe the property was used for P-manufacture but it may had been used for consumption.  Is it necessary for me to carry out any tests or alert any authorities at this stage?  What should I do to confirm my suspicions? 

APIA Ask An Expert

1. Do not alert the authorities until you fully understand the level of contamination as this could result in it being put on the property LIM;
2. Understand that having one tenant vacating the property makes no difference to how to deal with the problem; 
3. Get the property tested by a reputable company.  This part is crucial to get right, there are rogues in this industry, you can visit their Facebook pages to see what people say about them before getting the testing done. Once you have the test results you can proceed;
4. If the test results are above 0.5 micrograms then the place will need to be professionally cleaned by a company that specialises in meth cleanups.  We can recommend companies that we know are good to work with here; 
5. If the amount is below 0.5 micrograms then it does not legally require professional cleaning, however you can still do so if you wish to; 
6. The costs of the cleanup can be passed on to the tenant if you can prove it to the Tribunal.  This will come down to the quality of evidence you provided.  Consider obtaining a testimony from the remaining tenant, though this will not necessary guarantee an order to your favour, it is a starting point.  Be mindful that in theory you could make the other tenant liable for the cleanup costs so it may not be his/her best interest to provide that testimony in the first place.  Communication skills and prudent negotiation are key to resolve this impasse, consider obtaining the testimony in exchange of a waiver of liability.  

It is also important to note that all of the above depends on whether there was a joint and several liability clause present in the tenancy agreement. If there is not, then you can only make each tenant liable for half of the total debt, rather than one tenant liable for the whole total.

Craeg Williams
Craeg is a director of Tenancy Practice Service, a tenancy consulting firm which advises major property management brands.  Craeg and his team are also involved in providing support for private landlords by way of training seminars, best practice protocols, drafting applications, advice about re-hearing and appeals, tenancy debt collection as well as human rights and privacy issues.  

Do you have any property related questions for our panel of experts?  Comment below or email us at  

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