1. The process will probably start with an email or phone call from your Property Manager alerting you to the fact that your tenants have lost their job or that their work hours reduced, and requesting a rent reduction. Do not panic as it is not the end of the world, and you will most likely be OK! These conversations are being had right now all over Australia so you are not alone!
2. The first thing as a landlord you have to do, is to make sure to understand how your property manager will handle this, your options and to agree the strategy for the upcoming negotiations and beyond. Everyone’s situation is different and every tenant is different. YOUR strategy needs to account for what YOU could afford… best and worst case scenarios. Look for win-win outcomes (win for landlord and win for tenant) and be clear on what is most import to you. You may be in a great financial position with an amazing long term tenant and decide to be generous. OR you may be in a great financial position but a tenant that is always behind rent… and every other permutation. Your strategy needs to take your individual circumstances into consideration but also the tenants’! At the end of the conversation, you need to be crystal clear on how you want your property manager to go into these discussions.
3. Landlords should always let their Property Manager handle any and all conversations. These conversations are involved and quite often emotional, so best to let a 3rd party, that is not emotionally invested, handle them.
4. A landlord’s starting position should be one of empathy towards the tenants. If you are not that kind of person, force yourself to become one! The majority of tenants are in genuine trouble so it is important to start with an empathetic state of mind. A lot of landlords are angry right now and many landlord/tenant relationships were strained even before we heard the term Coronavirus…. but it is now more important than ever to go into these discussions, with an open mind, looking for solutions… Keep in mind that it is NOT the tenant’s fault and they probably hate having to ask for a reduction. Most tenants want to do the right thing!
5. Make sure to remind your Property Manager…
- to remember to explain to your tenants that a 6 month moratorium on evictions, does not mean 6 months free rent. Accumulated rent arrears over a few months, will add up to tens of thousands dollars, so it is best for everyone if tenants and landlords come to an agreement quickly whilst things are still under control,
- to let the tenants know that there are government supports already that could help. Pointing them to these pages https://www.servicesaustralia.gov.au/individuals/job-seekers and https://treasury.gov.au/coronavirus/households are good to starting point,
- to let the tenants know that you (their landlord) also have mortgages, land tax, utilities, and repairs to take care of during this period, and
- to explain that landlords will require some documentation, which – along with the agreement – they can take to the bank, utilities, council and state revenue offices for their own relief.
6. Make sure your property manager follows a formal process. A formal process should be one that
- starts with a form that the tenant and Property Manager fill together,
- requires documents that show impact (such as letters from employer),
- has regular (monthly) touch points, and
- ends with a formally documented agreement which stays on file. This will ensure that everyone knows how decisions are made, what they are and allows for the channels of communications to remain open.
7. Always aim for win-win outcomes and remove emotion from discussions. A win-win outcome is one that will REALLY work for you and REALLY work for the tenant. There is no point agreeing to something that either party can’t afford. It is also important that you are not angry with the world or the tenants during these times. No one likes the situation we are in, but it is important to accept that we are all in the terrible situation through no fault of anyone. Keep reminding yourself that this is a short term situation, which will be over in 3 to 6 months. The ONLY thing that matters right now, is that both landlords and tenants get by as best as they can, and that landlords still have their hard earned properties at the end of this, and that tenants have a roof over their heads and no debt. This may only be possible in some instances, if there are sacrifices by everyone involved (sorry but this is the reality), but what a great position will you be in as a landlord, when at the back end of this, your tenant is happy, back into full employment and life goes back to normal?
8. Think whether a rent reduction or payment plan is best for you. Rent reduction is easier for everyone to administer and track. It provides immediate relief but if you choose it, be sure to understand that this is money you are giving away and cannot be recovered. If you can afford it, then it will be a good way for both landlord and tenant to move forward. IF YOU PLAN TO CLAIM FOR THE LOST RENT though, you should choose to go into a management plan. My recommendation is to look at your relationship with your tenants and your own circumstances and decide what is best for you.
9. Make sure to NOT sign any new agreements. Leave the rent unchanged. A good way to do this, is to ask your Property Manager to hold scheduled meetings every month (see above regular touch points), in which meeting the tenant’s current situation is discussed and the rent credit added on the following month. This will ensure that reductions stay on the ledger and can be traced for insurers, banks and wherever else you will ask for relief (state revenue, bank, utility, strata, council etc). It is also a good way for you to remain abreast of how your tenant fairs during these times and to be step ahead of the game.
10. On completion of negotiations, send your tenant an email (via the property manager) to wish them well and to let them know you hope the temporary rent reduction is helping them get through. Maintaining a good relationship throughout is important. The end goal is to return to the normal arrangements at the end of these tough times, and the tenant will appreciate the nice gesture.
The following are good reminders for every property investor at all times, but more so now than ever!
- Owning a property is a business and should treated like that at all times.
- When they said “it is not easy to own real estate”, WHAT WE ARE GOING THROUGH NOW, IS EXACTLY WHAT THEY MEANT.
- Bad time pass, as do good times. These are the bad times, but if we learned anything from 2017, the wheels of fortune can turn quickly!
- Money in real estate is made during bad times, not good times! You make money during bad times either by being prepared for the opportunities but MOST likely by MANAGING TO HOLD ON TO YOUR PROPERTY!
Who we are:
If you liked the content of this article and would like to learn more about NextGen and the services we provide, feel free to make contact with us by filling in the form on this location https://nextgenpm.com.au/contact-us/.
NextGen Property Mgmt (www.nextgenpm.com.au) is a boutique Real Estate licensed agency that specialises in property management. NextGen Property Mgmt does NOT has a sales team unlike most other agencies that specialise in Sales and have Property Management as a side business.
Our area of focus is residential property and we operate in Inner and South West Sydney, as well as St George.
NextGen was created from its infancy to cater for investors as it was founded by investors who quickly realised that in a highly regulated industry like Real Estate – competence, expertise, care and service by property managers varies greatly.
As an investor, you need to have trust for and feel valued by your property manager. You need to know that your property is being looked after with minimal disruption and you are getting maximum return for your investment. At NextGen we understand that because we are investors living busy lives ourselves, so our promise to you is that you will no longer have to worry about your most valued asset because we will make sure to take care of it as if it is our own.