Arrears

As Property Managers, arrears can at times, be a time-consuming task. One that seems to include the same tenants, the same conversations and sometimes, the same outcomes day in day out.

So, what can you do differently to get you different results? I know that it’s tempting to stick with the devil that you know. However sometimes we need a different approach.

These following processes may be worth a review:

  • Whilst a zero arrears policy sounds great in theory, explain your arrears policy at the lease signing is the best approach. Of course, there is no point in explaining how tough you will be in you don’t actually follow those actions
  • Diarise everything, including your follow up. This way, when you start hearing the same excuses you are one step ahead. This also allows you to remind the tenants of the payment promises they make to you. Keep them accountable too.
  • If you can, a conversation is always the best option, but in reality it’s not always easy to talk to the person you are chasing for arrears. An SMS to a late payer is more likely to receive a response rather than a call or email. For those habitual late payers, get in early! An advance SMS notice to remind them that their payment is due, before it’s overdue, just might be the reminder they need.
  • Payment plans are a positive approach, when you tenants are genuinely struggling. Again, accountability is key here, but show you are willing to help them in tough times.
  • It’s important to check your state’s legislative requirements and issue notices on the dates required. If you have a Landlord who is determined not to allow you to issue those notices, make sure you advise them of the reasons why they should and then follow it up in an email, just to cover your office.

Of course, one the most important, and often overlooked area of arrears is communication with your Landlords throughout the arrears process. Keep in constant contact to advise them when the tenant falls into arrears and ensure that they don’t receive a nasty surprise on their monthly statement. And to throw a positive call in the mix, it’s also great to give them a call when the rent has been paid up to date.

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Adapting to a strong rental market

I spent time in the industry this week where I had the opportunity to view data that validated the increase in demand for rental properties and confirmed that renting is definitely the more affordable option for most.

I thought then about how we adapt service levels to the reality of a strong rental market, increase in applications, landlord demands on expected rents, management of data, regular contact points for prospective tenants, nurturing of relationships for future opportunities. Perhaps this is the time to ensure we have thought about the opportunities that this market presents for the future.

Here are some tips…

Managing applications

Open home is set and the turn out is encouraging, plenty of groups through the property – what are the next steps. Thinking about the customer experience and how you manage this process could create a path for future business and also help to create a short list to find the best tenant application and minimise problems for the future. Capture the prospects information as they either register for the open prior or at the time they enter the property, engage and connect so that you can get a feel for character and be clear about the next steps for application.  Online applications will be easier to capture and manage so looking at implementing a smart system is key. 

Management of data

Once the applications are reviewed and a tenant has been selected what happens to the other applications. Do you manage and enter the data into a CRM for future use and marketing purposes both for rent and sale opportunity? Contacts are willingly providing you with all their information and each one is a golden ticket to business – think about how you could leverage this data and create meaningful relationships into the future. 

Regular contact points

This first experience is the one that will remain in the memory bank – thinking about how you deliver news of successful or rejected applications and perhaps even redirect the enquiry to a more suitable option could turn into a winning situation for both. Take a moment before moving on to the next task, make time to brain storm possible next steps with the team.

The key is to take advantage of information shared, to think outside the box – consider customer experience, consider opportunity and consider the value of the data you have.

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Risk Management

We are all aware of the common safety risks associated with the running of an office. However, we don’t often consider the risks associated with trust management.

From a recruitment perspective, trust accountant roles are quite rare with trust accountants staying in their roles for longer than an average Property Manager.

Whilst most offices will have one trust accountant, quite a lot of offices have no one manning the trust accounting desk and this task is largely delegated to an existing Property Management team member. This is, in some cases, a different skill set and the team member allocated to carrying out the trust accounting may not completely understand the requirements under trust accounting legislation and it’s guidelines.

It is imperative that whomever you choose to carry out those trust functions in your office understands the requirements and the potential risks associated with trust management.

Legislation

With high fines associated in the trust account legislation space, consider if your trust accountant is up to date and knowledgeable on the current legislation.

What is the best method for them to stay up to date and are they notifying anyone if something is amiss? Each state’s trust account legislation differs slightly and up to date versions will be available on your governing body’s website.

Processes

Trust accountants are usually (not always) a stickler for the process! They will learn the process and follow it month after month. What if there is an easier or quicker way?

Most trust accounting software has a wizard to process owner payments for mid month and end of month or they will certainly provide a checklist to follow.

If your software has these features and you are not using them, it is possible that could your process could be missing steps or be taking longer than needed.

End of month should be a smooth process using the software as it is intended for. Reviewing processes regularly will ensure that the most efficient processes are being looked at for your business.

Diversification/cross training

What happens when your trust accountant goes on holidays or is sick? Can they only take holidays after end of month? Is there anyone else in the office that can process these tasks? If not, this is a big risk to your company. While we are not suggesting training all your staff on all the trust accounting task, it may be useful to have a couple of team members know different tasks in the event the trust accountant is away sick or on leave so that they can step in and process those vital tasks if needed.

Reporting

Trust accounts are required by law to be audited once a year. Do you know the reports you are to provide to the auditor and the requirements surrounding them? Are you being given the correct reports to view. In the day to day processing of your trust account do you know if the account is reconciled and what the adjustments are there for? By not knowing this information, are you putting your agency at risk? Could you request a few daily reports to ensure that the trust account is running smoothly during the month and just not at the end.

At Real+ Outsourced we have considered all of the above risks when formulating our processes. Why not give us a call (02 8355 4999) to see how we manage these risks for our clients.

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Top 10 Tenant Selection Mistakes

When it comes to selecting the best tenant for a property, it’s about finding the right balance between:

  • Evidence
  • Dialogue
  • Process
  • Privacy
  • Common Sense
  • And sometimes just a smidgen of detective work

Save yourself time, and save your landlords potential risk, and ensure you don’t make the following mistakes:

  • Not collecting a minimum of 100 points of identification, which must include at least one of each of the following – Photo ID, proof of income, proof of current living arrangements
  • Calling mobile numbers for references – Wherever possible, ask for a landline number that passes through the company reception. Ask to speak with payroll or accounts for income confirmation. For small businesses, go to extra effort to verify the phone numbers provided and that you are indeed speaking with the business owner – not the applicants best mate!
  • Only emailing the portfolio manager for rental reference. Remember, email references may be efficient, but phone references often include much better detail on the quality of a tenant when it comes to general behavior, the vacate process and overall feedback on the tenancy.
  • Accepting the application on face value. Income should be supported by written and verbal evidence. Self employed applicants need to demonstrate financial ability to pay the rent, by way of bank statements and previous tax returns.
  • Not using the rule of thirds – as a rule, the rent of a property should not be any more than 1/3 of the total income of the applicants.
  • Accepting that a private landlord referee is the rightful owner of the property without confirmation. Use RP Data or other property records to verify ownership details and conduct further investigation if the details don’t add up.
  • Forgetting to pay close attention to all previous addresses that may be listed on bills, bank statements or credit card records. If these are not in the tenancy application, you need to know why!
  • Considering parents and personal references as a valuable source of information. Yes, for first time renters they may the only option, but it wouldn’t be the first time a Mum or Dad told a white lie to help the kids fly the coup. Consider follow up questions you can ask the employer to supplement the application.
  • Discounting first time renters immediately – If no one ever rented to young renters – no one would ever leave home. Everyone needs to start somewhere, and first-time renters can be some of the best renters. Consider a shorter lease term or co-applicants.
  • Underestimating good old google – the world wide web holds more information on each of us than we care to admit. Googling your applicant can often fill in the blanks or tell a story you may need to know.

The final piece to A+ tenancy selection if getting your dialogue right.

Click here to download our leasing dialogue cheat sheet.

Kate

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Increase your deductions sooner using the low-value pool

When it comes to claiming depreciation deductions for qualifying plant and equipment assets*, property owners should be aware of certain tactics which can increase their deductions sooner.

This will increase their annual cash flow and allow them to realise the benefits from their investment property sooner.

One of the simplest ways to do this is to claim immediate write-off or to place low-value or low-cost assets into a low-value pool.

Certain assets may qualify for either an immediate write-off or the low-value pool, depending on the value of the asset at purchase.

For example, if an asset is valued at $300 or less, the owner will be entitled to write-off the full amount in the first year.

If the asset is valued at $1,000 or less, increased rates of depreciation can be applied through the low-value pool.

Low-value pooling                                                                    

Low-value pooling legislation allows owners to group qualifying depreciable assets in a pool which will depreciate at an accelerated rate. Assets normally depreciate at a pre-determined rate set by the ATO, which varies between assets. Property investors who acquire low cost assets and choose to place them in the low-value pool can claim them at a rate of 18.75 per cent in the year of purchase, regardless of how long the property has been owned and rented. From the second year onwards the remaining balance of the item can be claimed at a rate of 37.5 per cent per year.

Low-cost assets

A low-cost asset is a depreciable asset that has an opening value of less than $1,000 in the year of acquisition. This can include things like cooktops, range-hoods, exhaust fans and blinds.

Low-value assets

A low-value asset is a depreciable asset that has a written down value of less than $1,000. That is, the value of the asset is greater than $1,000 in the year of acquisition. However, the residual value after previous years’ depreciation is less than $1,000. Assets meeting this classification are placed in an itemised, low-value pool. An example could include a hot water system acquired with a value of $1,100. In the second financial year of ownership, the asset would have depreciated to a written down value less than $1,000, which would make it eligible to be placed in the low-value pool.

* Under new legislation outlined in the Treasury Laws Amendment (Housing Tax Integrity) Bill 2017 passed by Parliament on 15th November 2017, investors who exchange contracts on a second-hand residential property after 7:30pm on 9th May 2017 will no longer be able to claim depreciation on previously used plant and equipment assets. Investors can claim deductions on plant and equipment assets they purchase and directly incur the expense for. Investors who purchased prior to this date and those who purchase a brand-new property will still be able to claim depreciation as they were previously. To learn more visit www.bmtqs.com.au/budget-2017 or read BMT’s comprehensive White Paper document at www.bmtqs.com.au/2017-budget-whitepaper.

Article provided by BMT Tax Depreciation.
Bradley Beer (B. Con. Mgt, AAIQS, MRICS, AVAA) is the Chief Executive Officer of BMT Tax Depreciation.
Please contact 1300 728 726 or visit 
www.bmtqs.com.au for an Australia-wide service.

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