Thursday, July 9, 2009

Renting Out Your Property

OK, many people have been asking me... how do I rent my properties out? Do I use an agent? Or do I look for tenants' myself? If the latter, how do I go about doing it?
Well... I've done a bit of both but lately been using real estate agents more because it's becoming harder to find tenants. Not surprisingly, I'd get 5 or 6 agents calling me to arrange viewing for the same client. Times are bad... In such a scenario, to avoid a nasty situation, I would normally ask what nationality is the client first followed by other questions which may narrow down identity of the client. If I discover the client is the same one arranged by another agent, I'd be honest about it.
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Anyhow, coming back to the issue about estate agents... I've had my fair share of problems with bad agents. For one, I can't blame them for being extremely aggressive and downright cunning (cos everyone is just trying to earn a living). Frankly, that's alright. What I cannot stand are those who take the commission then disappear and leave all the problems to me to manage. These are what I'd expect a good agent to do:
  1. Screen potential tenants before coming to me - obviously if the intention of the tenant is to rent my property to house his lot of labourers, I'm not sure I want to waste my time
  2. Prepare the property for viewing - i.e. airing the rooms, turn on the lights and aircons etc.
  3. Follow-up and negotiate with the clients - so that I don't have to!
  4. Prepare the contract, signing and stamping
  5. Collect the deposits and 1st month rent on behalf
  6. Help make sure the tenant pays the rent on time and follow-up with requirements
  7. Visit the tenant and the property every 3 to 6 months for inspection - to make sure they comply with the contract and not trash the place!
  8. If there is a default by the tenant within the 1st 3 months, they should find a new tenant to replace free of charge
  9. Become the arbitrator if any problems or misunderstanding occur
  10. Helping to renew the contract upon expiry
Most agents don't even do half of the above. They show the client your place. Then disappears and prays the client will choose one of the 60 properties they showed the client. If it so happen to be your property the client chose, they will do everything until their commission is paid. After that, they disappear again until the contract is up for renewal. But to be fair, I have dealt with a few good ones who take away all the hassles from me. They are hard to come by and remain my friends as well as my trusted estate agents.
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Having said all that, unless the property is hard to rent out, I would normally try to do it myself. There are some very good websites where one can advertise for free such as w w w (dot) e x p a t k l (dot) c o m and w w w (dot) e x p a t r i a t e s (dot) c o m . These 2 are my favourite ones because they are really well patronized by potential tenants. Typically during good times, I'd get 10 - 15 calls a week when I advertise here and the property would be gone within 2 weeks. Nowadays, I'd be lucky if there are 5 calls a week and rent it out within a month. Still, the savings of a month's rental is enough incentive to do it myself.
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I use an old template which I gathered from various contracts I come across in the past. On and off, I'd come across new clauses which are good and I just throw them in. I'm not sure how this will affect the overall contract when read in whole but that's a risk I can take.
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Few months back I had a very difficult tenant. For some reason, she expected me to give her a 20% discount on rental after 6 months into the tenancy. Then when she managed to find another cheaper place to rent, she expected me to refund her deposit. Of course I refused and she threatened to take legal action against me. So after 8 months into the tenancy, she decided to move out anyway. Since I did not refund her deposit, she took off with my expensive beddings, smashed my vase, scratched the surface of my LCD TV, broke my fridge trays, peed on my sofa (yes... she URINATED on my sofa!!) and left the place absolutely filthy! She also did not pay the utility bills for 3 months and it looked like the aircons were switched on 24 hours.
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The whole repair bill and utilities came up to almost the full deposit she put down and really nothing for me to gain. On top of that, it took me a good 2 months to find another tenant. So lessons learnt? Yes. I decided there should be a clause in the contract that says that if the tenant decides to prematurely terminate the contract, the deposit shall be forfeited and the tenant shall
also be liable to pay the remaining rental of the year as penalty...or something like that.... Then, it would make it worthwhile to sue the tenant if they default. Also, I think if you are looking for a no hassle deal, appoint a lawyer to do the real estate agent's job. The only problem is, they don't go out aggresively looking for tenants for you but at least tenants are less likely to mess with lawyers.
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I would like to congratulate Helmy who posts comments in my blog and he made it an effort to come and see me last month. He managed to buy an apartment in Bukit Ceylon at a price (which in my opinion) 30% below market. It is freehold as well and with today's market, he should have no problems getting a tenant with at least 10% yield. He asked if I could share my contract template... so here it is:
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TENANCY AGREEMENT

This agreement is made on the __ day of ______ 2009, between ___________with an address at _________of ___________located at hereafter known as the Landlord. And _____________ (Passport Number:___________ issuing Country:________________ Expiry Date:_______________) with an address at ________________________________, hereafter known as the Tenant.

1. It is hereby agreed as follows:

1.1 the Landlord agrees to let and the Tenant agrees to rent the condominium, furnishings, structures and grounds (hereafter called the Premises). The monthly rental rate shall be as follows: RM________Unit, Structures and Ground rental Ringgit Malaysia (Ringgit Malaysia _________________________Only).

1.2 the tenancy period under this agreement shall be 12 (Twelve) months commencing on the ___day of _____ 2009, and ending on the ___day of ______2010, with an option to renew for an additional year. The renewal rental and the period of rental shall be discussed and agreed by both parties.

2. The Tenant agrees as follows:

2.1 to pay the Landlord a rental deposit equivalent to ­­2 (Two) months of rental payment or equal to Ringgit Malaysia _________ (Ringgit Malaysia____________ Only), which will be returned to the Tenant without interest 30 days (Thirty days) after the termination of this agreement subject that the condominium and it’s furnishings are returned in their original condition less wear and tear and that there are no out-standing rental. However, should any damage other than normal wear and tear have been caused to the Premises by the Tenant, the Landlord shall be entitled to retain all or any part of this sum depending on the extent of the damages or the costs incurred to remedy the damages. The Tenant shall not deduct the monthly rental from this security deposit;

2.2 to pay the Landlord a utilities deposit equivalent to ­­½ (Half) month of rental payment or equal to Ringgit Malaysia _________ (Ringgit Malaysia __________ Only), which will be returned to the Tenant without interest 45 days (Fourty Five days) after the termination of this agreement subject that all utilities bills have been cleared.

2.3 to pay the Landlord the monthly rental payment of Ringgit Malaysia (Ringgit Malaysia Only) for the Premises in advance within the ___ of every calendar month commencing from ________2009;

2.4 to maintain the Premises in a good state, keep the interior in a clean and habitable condition and exercise reasonable care in keeping the grounds tidy and attractive;
2.1 to assume liability for costs incurred for damage to the Premises negligently or intentionally caused by the Tenant, his family or employees, or persons staying with the Tenant;

2.2 to permit the Landlord or his authorized agent to enter and inspect the Premises, and to effect repairs and renovations, at all reasonable times agreed between the Landlord and the Tenant;

2.3 not to make any alteration or addition to the Premises without prior written consent from the Landlord. Any fixtures, fittings, items of household decoration which are not of a permanent nature and which have been installed by the Tenant during the terms of this rental shall be removed by him at the termination thereof and put back as originally was;

2.4 not to assign or sublet the Premises or any part thereof without the written consent of the Landlord;

2.5 not to do or permit to be done on the Premises anything that may be or may become a nuisance or annoyance, or that may interfere with the quiet enjoyment of neighboring premises by the Landlord and other occupants and to act according to the condominium regulations;

2.6 to pay all bills relating to the rent of Premises for electricity, gas, water supply, telephone, satellite TV and others (if any);

2.7 to return all keys of the Premises to the Landlord at the termination of this agreement;

2.8 to use the Premises only for dwelling purposes;

2.9 not to keep any materials of a dangerous, combustible or explosive nature, or any illegal substances or narcotics in the Premises;

2.10 if the tenant fails to pay the rental fee according to sub-clause 2.3, the contract will expire automatically and the Landlord has the right to take all necessary actions to evict the Tenant including the changing of locks.


3. The Landlord agrees as follows:

3.1 to confirm that the Landlord is the sole owner of the Premises and has the right, without any restriction, to let the Premises. It is further agreed that the Landlord will fully inform the Tenant of any person to whom he may propose to sell or trade the Premises during the terms of this lease provided that there be no changes on the provisions and condition of this Lease Agreement;

3.2 that on commencement of this lease, the Premises shall be clean, complete and to be readily available for this lease. The landlord will only be responsible to the internal and external condition and any renovation of the Premises;
3.3 to allow the Tenant to peacefully hold and enjoy the Premises during the period of this lease, provided that the Tenant duly pays the rental payment and observes the other conditions of this lease;

3.4 to pay all land taxes and any other taxes levied on the Premises.

3.5 to pay monthly maintenance fee of the Premises to be imposed by the management of the condominium


4. It is also agreed between the Landlord and the Tenant as follows:

4.1 the Tenant has the option to renew the lease, in case that renewing the lease is agreed to by both parties;

4.2 In the event that the Tenant terminates this agreement before the expiry date, the Tenant agrees that the Landlord shall keep the whole security deposit as a penalty.


5. This agreement is made in duplicate, the Landlord and Tenant each to keep one signed original.

In witness whereof the Landlord and Tenant have hereunder affixed their signatures:


6. Place of Payment

Every payment to be made by the Tenant to the Landlord there under shall be made to the Landlord in bank transfer to:

Bank Name:
Branch:
Account No.:

Signed by,

Landlord Tenant


……………………………………… ………………………………………
(your name ) (_____________________________)

Appendix 1: Furniture List

No
Item Description
Quantity
Remarks
I verify that the above list have been received and inspected in the conditions noted under the remarks column:




Landlord: Tenant:

(your name) (_____________________)

4 comments:

Anonymous said...

i like reading your blog. its not updated frequently but can see that its your honest assessment and you do share a lot.
keep up the good work.

Helmy said...

Hi Sin Leong!Just want to say thanks for meeting up with me and sharing your valuable experience about properties investment. The things I learned from you have been useful during my recent process of purchasing the apartment. Hope my tenant won't be like the terrible one you mentioned in this article. But at current time, maybe we can't be so choosy. Sorry I couldn't treat you to more than just a cup of coffee that day :)
And thanks for the tenancy agreement too. Keep up the good work with the blog. I like your article on Verticas Residency. Maybe its high price can have ripple effect to apartments nearby and cause my apartment to increase in price too? Hehe

Sean said...

Hi there, I have read a couple of your posts some time back and indeed am back here again after I saw a link back to your site from lowyat to some pics on the pangsapuri apartment (was that your post?) Anyway, great blog you have here, I've been looking for enthusiasts like yourself as we are indeed a rare breed out there. I got some useful clauses from your tenancy, thanks!. Would love to exchange notes with you since we both have the real estate investing bug! ;) Do continue the great posts on your blog!

muhammad syahmi said...

Hi there. I'd like to seek your opinion on this one. There are many property portals particularly ones dedicated on property advertising such as iproperty or propwall. Mudah however is not dedicated. Propwall is free but to a certain extent. What's your view on portals such as http://bumbung.my/ where owners can also list? and its free ofcourse.

Cheers!