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The business of property investing

Friday, September 26th 2008, 10:31AM 4 Comments

by Philip Macalister

One of the reasons we call our property investment website is to remind people that buying a property isn’t just an investment.

People who become property investors are in reality setting up a business providing a service to customers. The service is providing accommodation.

Often these “customers” are the more needy people.

How well this service is provided by New Zealand’s quarter of a million landlords is a moot point. It’s also one I will candidly say I have no idea how they are doing. Looking at the Tenancy Tribunal there are plenty of disputes and there are just as many bad landlords as there are bad tenants.

Keeping this idea of service in mind it is pleasing to see the NZ Property Investors’ Federation (NZPIF) has developed a Code of Practice for its members. I’m all for raising the bar and making sure that the service provided is excellent.

What I do wonder though is why it is made voluntary? Surely if you have a code then all members should abide by it?

A while back there was a proposal that suggested all landlords should belong to a professional body like the NZPIF. This is, after all, no different to what other professions/vocations do, so why not do it with this group of business people?

I understand there is quite a bit of discussion amongst card-carrying NZPIF members about the code.

What would be really good is if they could develop this into some sort of brand so good tenants seek good landlords – these would be NZPIF members which abide by the code.

That would be a win-win situation and one which would encourage people to join associations.

An interesting thought to ponder.
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Comments from our readers

On 26 September 2008 at 4:28 pm John said:
First the NZPIF would need to become a professional body with the interest of the stakeholders in mind rather than that of the “self promoters”.

250,000 landlord’s vs a couple of thousand NPIF members. Why’s that?

Job vs Business
If you got a job you’ve got to do it. If you got a business why wouldn’t you get a property manager to manage the tenants and the properties.
On 26 September 2008 at 5:05 pm John said:
The was a similar situation with franchising. The Franchise Association in NZ was set up in 1997 and one of the questions asked was whether or not to create a code. It was decided to do so and for members to agree to it. Those who did not would leave the association. Some did leave. In Australia the code was compulsory by legislation. NZ considered that by creating a code within the membership legislation could be avoided. Since then there has been a swing towards a compulsory code, mainly to 'get rid of cowboys' - especially with some of the franchise fiascos in the last few years.
What has this to do with Property? Well there are lots of parallels between the associations. However there is one major difference. There are far more landlords and it is far more likely that 'accidental' landlords will enter and leave the industry. There are many fine lines between a straight investment, renting ones property for a few months while away, renting out the bach or second home and so on.
It is likely that any code would be impractical to enforce.
Even if I as an investor say that I would adhere to it, it is likely that at times due to the circumstances that I fail to meet the standards of maintenance etc as I wait for the funds and time to undertake a task (or as in over the winter wait for the weather to improve so I could get on the roof to inspect a problem and make the repair).
On 26 September 2008 at 6:09 pm Rajesh said:
I think it is an excellent idea. Firstly, Code of Practice itself is a very big step forward. I am sure there are many many landlords who have gone into being a landlord by default i.e. they upgraded froma house in which they were living and rented it instead of selling it. Therer will be many more who are just one investment property landlords. Since Property investing for them is more of a part time passive investment they may not care much in educating themselves. These could be mum & dad type investors. However, point here is, as rightly pointed out, Property investment is a business and tenants are clients.It does not matter whether the renting is for few weeks or few months. Would we, as a customer, expect a store not to give us good service just because it was in operation for a small time OR the store is a SMALL SHOP or a PART TIME TRADER? I am very pro to the idea.
On 5 October 2008 at 3:42 pm Hamish said:
I think the laws in this country favour the tenants, there is no need for a tenant to seek a certain type of landlord.

Why would you duplicate what the government is already doing well?

Do you really think that there are people looking to rent who place a well educated and professional land lord high on their list of priorities?
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