Why Bad Tenants Shouldn’t Put You Off Property Investing

Expert Advice with Cam McLellan 16/12/2015
Fellow Director of OpenCorp. Al Lewison and I have been property investors and avid learners for a long time and we haven’t heard a tenant story as bad as what recently happened to our brother-in-law. So that drew me to decide to run through exactly what happened, as I think these sorts of horror stories worry a lot of people.

It all started when our brother-in-law Aaron drove by his investment property a few times and noticed the garden was out of control, so he called his property manager to see what was going on. The property manager said the tenants wouldn’t let him them through the house or answer any calls and had stopped paying rent - so alarm bells started ringing. The fact that none of this information was not relayed to him until he contacted his property manager is another story.

Eventually Aaron took the tenants to VCAT and they caught up on their rent, then they got behind again. Aaron went back to VCAT and the tenants caught up again but were always late paying and still wouldn’t let the property manager through the place. In the end Aaron went back to VCAT and the tenants received an eviction notice. He waited the mandatory 14 days to allow them to move, then with the sheriff went around and changed the locks and finally after another 24 hours, as per the rules, he was able to go into the house.

I went along with him and had a look and let’s just say it was a hell-hole! There was graffiti on the walls, all the bedroom doors were taken off, all of the kitchen cupboards, the front door and the heater were kicked in, there were holes in the walls, the garden was crazy and I don’t even want to talk about the bathroom! It was the most disgusting place I’ve ever come across. Understandably, Aaron and his wife Clare, were a little bit distraught. Fear of this kind of thing happening is one of the reasons many people don’t invest in property.

Now, this is the worst case I have ever heard of in my many years investing, but let’s try to look at it from running through the numbers. It cost about $6000 to fix everything and that included getting skips to remove everything because all of the tenant’s possessions were still there. Aaron took a couple of days off work and he and Clare went in and did a lot of the hard yards themselves, which is fair enough but I probably would have told the property manager to get a handyman in;  it might have cost me $8000. Anyway, they basically cleaned everything out, relayed the carpets, painted inside, hung new doors and kitchen cabinets, fixed the heater, put in a new oven, had the landscaping done and it cost about $6000, taking into account lost rent as well.

Now, keep in mind they have had the property for six years and it has nearly doubled in value, so they might have made $150,000 on it and it cost them $6000. Their experience is the worst I’ve ever heard of and it would no doubt worry any novice investor, but when you’ve made more than $140,000 on it in six years, who really cares? When it comes to property, money can fix nearly everything and if my property is going up in value, the worst tenants don’t scare me. Having said that, you should have stringent checks in place, which your property manager uses to minimise your chances of getting a bad tenant.

After seeing Aaron and Clare’s house, I came back to work and was talking to my PA, about it and she said, “You had something similar recently”.
Apparently some tenants wouldn’t move out of one of my properties in Queensland and ended up at the tribunal. I didn’t even know about it but it cost $1200 to fix everything inside, with the majority paid from the bond. I think we were chasing them for $200 in the end. My point is, I didn’t even know about it. If you get other people to manage the property for you, it is not stressful at all - the key is to remove all emotion from it. Don’t let bad tenants put you off property investing.
 

Director of OpenCorp, Cam McLellan is committed to sharing his passion and property investment knowledge with everyday Australians.
After thriving in the telecommunications, technology and recruitment sectors and making six BRW Lists in 8 years, alongside accomplished OpenCorp. entrepreneurs Matthew Lewison and Allister Lewison, founded OpenCorp. eight years ago.
Cam started investing in real estate at a young age and quickly mastered the art of building sustainable wealth. He has used the same wealth building strategy to develop a multi-million dollar business, sharing his knowledge and skill with ordinary Australians. Cam has personally bought, sold and developed numerous properties and has an extensive residential and commercial investment portfolio.

Disclaimer: while due care is taken, the viewpoints expressed by contributors do not necessarily reflect the opinions of Your Investment Property.
 

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