When Jeremy Iannuzzelli was handed the keys back to his most prized investment property after a troublesome tenancy, he was in for a shock.
“I seriously questioned whether getting into property investment was the right decision when I received the keys back to my St Andrews [News South Wales] house. The property was an absolute monstrosity, damaged on the inside and outside.
The oven was stolen, there were holes in the wall, drawings on the wall, the carpet was completely ripped up, all the flyscreens were gone and the blinds had vanished. There were cigarette butts and toys down the drains so they were all blocked and overflowing. I had broken lights, broken mirrors, smashed glass, smashed doors – you name it.
Having been served a termination notice and now 18 weeks in arrears, the tenants had obviously made the decision not to hold back.
I was absolutely heartbroken. Purchased four years ago, this was the first property investment I had made. A one-owner, well-looked-after home, I’d been planning on keeping it for a lifetime. It had immense sentimental value.
But with a portfolio of seven investments, I was determined to learn from the situation and press on.
As it turned out, in a strange twist of fate the $35,000 worth of repairs and renovations I was forced to do ended up generating around $140,000 worth of additional equity in the property. It also taught me several valuable lessons.
I take a lot of personal responsibility for what happened to the property. Perhaps due to my inexperience, I had failed to keep tabs on the management of each of my properties. I should have been asking for quarterly reports on each property, instead of assuming that everything was going to plan. I now ask for quarterly reports from all my property managers, including photographs.
Landlord’s insurance is an essential item for any property investor; in this case it has helped me recover a little under half of the costs associated with the damage and loss of rental income. That’s not to say making a claim is an easy process. Insurance companies and landlords have very different ideas about what constitutes damage, and it takes a long time for claims to be processed.
Luckily for me I had a well-structured portfolio primarily consisting of cash-flow positive and neutral investments. The funds generated from these properties allowed me cover the loan repayments on the St Andrews property while the tenants were in arrears. While rental income may stop suddenly, interest repayments do not and it was a weight off my shoulders knowing that my portfolio could cope with this. Considering the abysmal state it was in, I couldn’t draw on the property’s equity to fund the repair work so having cash flow helped with this too.
I’ve decided that I’ll be moving into the property for the next six months. After that, I’ll be self-managing and putting some close friends in there. It’s one of my better properties now that it has been renovated and I was burnt badly by my previous tenancy.
I just don’t feel that within the Campbelltown area I can find suitable tenants to maintain its quality. I know that self-managing is not a permanent solution, but when it does come time to source a new property manager and tenants, I’m going to be harsh with my terms.
I don’t care about the cost of management, I just want to make sure that the property manager is doing the right thing. I don’t want to be going through this same experience and spending another $35,000 on this property in three years’ time, no matter how much it improves my equity!”