Tag Archives: Property Management
By Landon Miller of Harcourts Premier Properties, California USA
If you’re like many other property owners, you likely cringe when you get your property tax assessment in the mail. But as annoying as it may be to have to open your wallet to pay these pesky taxes, they do actually serve an important purpose.
You’re not just throwing money at Uncle Sam; instead, you’re contributing to the greater good of your neighborhood and surrounding communities.
So, what exactly does your property tax money cover?
Your property taxes go toward a few different things, not just one. Public schools depend on tax dollars to be developed and to remain in operation.
This component of property taxes is typically the biggest item on just about every property tax bill; in fact, it generally accounts for more than half of it. And in areas with a large student demographic or top-rated schools, this number can be even higher. You can bet that along with highly-appraised schools come higher property values.
While public schools get plenty of their funds from the government, the biggest supply typically comes from local homeowners in the area.
Local Public Safety Departments
A big part of your tax dollars go towards paying public safety officers, including uniformed police, 9-1-1 support personnel, firefighters, paramedics, and anyone else involved in keeping the public safe. Property tax money also covers the costs associated with keeping these individuals working and on the road, including police and fire stations, and vehicles and trucks.
If any additional personnel need to be hired, or if any more cars or stations need to be added, city and municipal governments will typically have to hike property taxes to make it happen.
Public Roads and Parks
Nobody likes to drive on roads full of potholes or stroll through parks full of debris and overgrown weeds. The municipal government hires people to take care of roads, sidewalks and parks, and it’s the homeowners that flip the bill through property taxes. Such maintenance includes traffic light repairs, paving roads, filling potholes, removing snow, and other improvements.
Municipal and County-Level Operations
In order for municipalities and counties to be able to carry out their day-to-day operations, they need money. And the majority of that funding comes from property tax revenues. How the money is split up between the municipality and county is often apparent, but in many other cases, it’s not.
In some areas, money may be fully collected by one entity, then divided appropriately. For instance, you might pay your municipality for allocations on one single bill, after which the apportioned money is then sent over to the county.
How Are Property Taxes Calculated?
The amount that you pay towards your property taxes will depend on the market value of your home, as well as the pre-determined assessment rate. This rate is a percentage that will vary from one jurisdiction to another. In order to come up with your property tax obligation, the value of your property is multiplied by the assessment rate.
Whether you pay these taxes directly to the tax department or pay them through your mortgage lender, you’ll get a copy of the bill at least once each year. Make sure you take them time to look over the bill and see exactly how the money is allocated so you can get a good idea of where your hard-earned dollar is going.
Municipalities, counties, and school districts depend on property taxes to support their budgets. Without adequate funds, there wouldn’t be enough money in the pot to take care of the schools, streets, parks, and public safety officers. The more money a local government needs, the higher your property tax bill will go to meet the demands.
You may be one of many around the world who are considering buying a property with a home and income or granny flat.
If so, it could be for a host of purposes, and despite the name, it could be for a reason other than accommodating an elderly parent. You may have one or more “boomerang children” in tow – adult children who have returned temporarily to enjoy the multiple benefits of living at home. Or, you may be seeking additional income from renting your granny flat or need an office for your home business. Whatever your reason, the advantages of owning a property with a second living space on the same block of land are obvious and many.
With residential space in cities becoming rarer and properties owners looking for creative ways to maximise their income, granny flats are becoming the new black in real estate. Granny flats can either be attached or unattached to the main residence, but in all cases, smaller. They are often self-contained with kitchen, bathroom and living areas. In many countries – if the self contained unit is bigger than 60 square metres they cease to be a granny flat, and are then classified as another primary dwelling. Buyers need to be aware that when it comes to granny flats (or secondary dwellings as they are commonly called in the legal sense), there are different laws for each country and local councils applying to their building and renting. Different laws apply to the size of a block of land where a secondary dwelling can be built, the type of access, and in some cases, even the legality of collecting rent. So when buying a property with a granny flat, besides familiarising yourself with the appropriate laws at a local level, your first priority should be finding out if the dwelling is legal with all appropriate compliance paperwork in place. Should I buy a house with a granny flat? So what are the benefits and risks of buying a property with a granny flat?
The benefits of a Home and Income
Accommodating family members There is no doubt that part of the reason behind the exploding popularity of granny flats is the win-win solutions they provide for extended families. An elderly parent can live affordably onsite, while fulfilling the role of a handy babysitter. By paying mates-rates rent, an adult child can quickly save up for a deposit for their own house or an overseas odyssey. Extra rental income With new accommodation websites such as Airbnb or flatmates.com the possibilities of marketing an additional living space are now limitless. Granny flats can become handy earners.
Spreading your risk If you have only one investment property, an extended vacancy can be cruel, but with the addition of a granny flat, you immediately have another rental income. The likelihood of two vacancies at the same time is highly unlikely. More tax depreciation If the granny flat is new, and is being rented, then the owner has the opportunity to claim depreciation. Before making a decision based on depreciation, you should first talk with a professional who can advise you on depreciation schedules.
The risks involved with a Home and Income or Granny Flat
Increased property management costs An extra dwelling brings extra responsibilities and maintenance costs, particularly if there’s plumbing. It may be vacant The original purpose for your buying a property with a granny flat may change. The boomerang child may move out or you may no longer need a home office. If the granny flat is vacant for an extended period, maintenance will still be needed. Often, a vacant dwelling deteriorates more quickly than one that is occupied, and the last thing you need is a backyard eyesore. You may reduce your rental market or resale potential
When it comes to reselling, the presence of a granny flat will reduce the size of your pool of potential buyers, and therefore may lead to a lower price than otherwise possible in a tight market. Subdividing possibility on a bigger block, the granny flat could effectively stop you from subdividing into two titles.
Granny flats have outgrown their name. Multipurpose, adaptable, young and hip, these little dwellings can add a valuable punch to any property if handled wisely.
So how often should you inspect investment property? To ensure your investment property retains its value and marketability, you need to make sure your tenants are fulfilling their end of the bargain and looking after your property. On the flipside, you also have obligations when it comes to upkeep of the property.
There are no guarantees. A tenant with the best references, and who appears to tick all the boxes, can still damage a house or apartment, and cost you the landlord thousands of dollars.
Through neglect a garden can die or a lawn can become overgrown. By accident an oven can be caked for weeks with the remnants of an exploding one-pot wonder, or a pet may be leaving hair and odour in your pet-free unit.
Prevention over cure
When it comes to prevention over cure, there is no substitute for making regular property inspections.
Inspections can sometimes become a point of contention between landlords and tenants. Some tenants see them as an intrusion of their privacy, or feel that inspections are unnecessary.
While landlords cannot control the attitude of tenants to inspections, you can conduct inspections in such a manner so they are more likely to be welcomed.
Remind tenants that inspections are mutually beneficial, presenting landlords and tenants an opportunity to discuss ongoing maintenance issues, or other matters relating to the property. Giving tenants ample notice before an inspection will also build goodwill.
An experienced property manager will know how to conduct an inspection quickly, and with as little intrusion as possible. They will also be systematic in capturing evidence and details of any damage or maintenance that needs attention, and then report back with accuracy.
A five-minute inspection by an experienced property manager can often avert major expenses down the track.
Property inspections should be conducted as regularly as allowed under legislation, and be aware that each state is different – see table below:
DIY or property manager
If you own an investment property a few hours travel (or more) from where you live, you can claim travel expenses as a tax deduction. You are allowed a full deduction where the sole purpose of the trip relates to the rental property, however, in other circumstances you may be able to claim a partial deduction. If you wish to claim tax deductions for the inspection your own investment property, ask your accountant for more information.
The most comprehensive property inspection is only as good as the action that follows
That’s where engaging a local property manager, who has ready access to tried-and-tested tradesman ready to respond, presents a more convenient option.
If you inspect your own property, and do not have these qualified, verified, local contacts, you will probably cost yourself more money in the long run. Also, let’s face it, inspecting a tenant’s property is an uncomfortable experience for everyone – everyone except a specialist property manager who does so every week.
* In Victoria, a landlord can enter a property within 24 hours’ notice if they provide a written application, state the reason for entry and either post or personally deliver the application (allowing two days for postal delivery).
* In New Zealand, a landlord can enter a property within 48 hours’ notice if they provide a written application, state the reason for entry and either post or personally deliver the application (allowing two days for postal delivery). They can also inspect the property as regularly as every four weeks should there be reasons for concern.
To choose a high performance investment property, and reduce your chance of buying a dud, buyers need to first and foremost focus and understand the big picture or macro-environment.
No one wants to find themselves in a situation where they are caught with problem tenants. The trick to making sure that never happens, is to vet tenants well in the first instance, so you’re not setting yourself up for any surprises.
So what steps can you take to make sure you really are choosing good tenants for your investment property? Here, we share our property managers’ top tips:
- Get references. Both personal and professional i.e. their employer. References are essential in finding a suitable tenant as they will help you to assess a candidate’s personality, professionalism, employment status and behaviour.
- Ask for bank statements. Checking a tenants bank statements will help you to verify they are being paid regularly, and the amount well and truly covers their weekly rent.
- Check with past landlords or real estate agents. The tenant should provide the details of the last home they rented. Follow up with their previous landlord or agency to make sure there were no issues.
- Get a copy of a passport/driver’s licence. This one is important to confirm they are a citizen or permanent resident, and are legally able to rent property.
- Check online. These days there is information available through tenancy databases online on a tenant’s potential rental history. Note though that most databases require you to be a licenced agent or apply for membership as a landlord.
- Meet in person. If possible, it’s always a good idea to meet with potential tenants in person to make sure everything checks out and you’re 100% comfortable.
Of course chasing down all of the necessary documentation and meeting with tenants can be quite a time consuming process, not to mention all of the other tasks that go along with managing your own investment property.
At Harcourts, our property managers use detailed checklists for prospective tenants, including intensive due diligence, employers’ references and credit checks to mitigate any risk.
Let a property manager take the hassle out of finding and choosing good tenants for you. We’ll spend the time filling out the necessary paper work, collecting and checking in with references, looking through bank statements, obtaining copies of passports and licences and of course meeting prospective tenants.
It’s also a consultative process. We’ll make sure you’re happy with any prospective tenant and let you know where we’re at in the process, every step of the way.
Our team would be glad to tell you more about our property management services in your area.