Media canonises landlord for not being interested in making a profit

Image: credit SB Whaleoil
Penny Hayes says she charges enough rent to cover the costs of owning the property.

Being a Landlord and owning investment property is being a business owner and running a business but that is not how some people see it. The media would never think to do a series of articles on naive business owners who don’t feel that they should make a profit or business owners who accidentally fell into the business and only do enough to cover costs because they feel guilty about making money off their customers but they do think that it is a great story when a landlord acts like Santa Claus.

[…] Landlord Penny Hayes knows it’s common for tenants to be hit with regular rent hikes, at least annually. But the rent on the house she lets out is still exactly the same as it was eight years ago.

[…] It’s rented now for $220 a week. According to rental bond data, the market median rent for that part of the city is $350. Trade Me indicates asking rents in the city are up more than 4 per cent, year-on-year.

Hayes never intended to be a property investor but when she and her partner moved to Auckland and then Australia, they decided to rent their home rather than sell it.

Well, at least that explains why she is so bad at investing. She is a reluctant landlord, not one who made a well thought out financial decision.

During the time she’s been a landlord, she’s been renting herself and has seen what life is like for tenants.

“In Auckland in particular I had colleagues who would have the rent put up on them every time it was possible, 10 per cent or 5 per cent. It really upset us – sometimes it was a small amount and sometimes big but it makes a difference whether you can live there or not. It happens all the time and it makes us feel quite uncomfortable.”

If charging market rent makes her feel uncomfortable she is clearly not landlord material. Providing good quality accommodation is not a public service. Her property is not a State house it is supposed to be an investment that provides a return.

The house has been rented for 10 years and the same tenants have lived in it for eight.

Of course, they have, they can’t believe their luck. Inexperienced landlords like this lady are few and far between because without making a profit why would any serious investor stay in the market?

Friends who rent houses in Dunedin have told them they should put the rent up as rates and the cost of insurance rose. “We don’t think those things are the tenants’ problem.”

She said the idea of creating instability in a tenant’s life made her uncomfortable. If she were to decide a rent increase was needed, it would be done between tenants.

Shy, unassertive people should never be landlords. You are not there to be the tenant’s friend. Your job is to provide accommodation and to keep the property tidy and safe and it is their job to look after the property and pay you on time.

“When they moved in I vaguely remember having a conversation where we said it’s a bit under market and we could probably get $250 but we were happy with that as a starting point. It’s enough to cover costs.”

There are some downsides to the tenants from lower rent. Hayes says, if they charged more rent, they would be able to afford to do more substantial maintenance to the home. At one point, they painted half of it but have not been able to get the money together to do the rest.

They have kept on top of more urgent maintenance – the hot water cylinder has had to be fixed a couple of times. “That’s not the tenant’s issue. We scrabble around to find the money and do it.”

[…] At one point the tenants fell behind on the rent but Hayes said, rather than kick them out, she let them catch up by paying a bit extra once they got back on their feet. In that way, she ended up being paid what she was owed – something she was not convinced would have happened if she had evicted them and left them to find a bond and other costs associated with moving somewhere new.

Now they know she is a soft touch they will fall behind on the rent again and again and always with a touching sob story. A friend of mine has fallen for touching sob stories from her tenants many, many times and she never learns. One left after months of not paying and when she left she turned the bath taps on, put the plug in the bath and walked out. By the time my friend found it the house was wall to ceiling covered in mould and the floor and carpets were all ruined. That was what kindness got her.

Hayes said she would need to look at the requirements introduced by the Healthy Homes Act to determine whether work would be required on the house. If it was, she would look around and budget to find the money.

“It wouldn’t be the first thing to do, pass on those costs  to the tenants. If it was more substantial than we thought we might have to.”

A rent rise in future isn’t completely out of the question.

“When we said we wouldn’t change the rent we weren’t anticipating they would stay there that long. But I wouldn’t want to change it just because.”

I think a jellyfish has more backbone than this wannabe landlord.

Hayes teaches economics to international students at Monash University in Melbourne. Previously, she taught for six years at the AUT Business School.

She said she was not naive about investment.

“Our approach to renting is about a set of views that rejects the notion that housing should be just about profit. It is pretty clearly thought-out. We are also privileged that we own a cheaper house in which case this is a bit more achievable.”

What she has is not an investment, it is a hole into which she pours money. As an economics teacher, she must know this. She simply does not have the temperament to do what needs to be done to make it an investment.

– Stuff


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