COVID-19: Tenants & Landlords (Residential)

Armin65 on 17/04/2020 - 10:19
Last edited 21/04/2020 - 10:02

Good morning fellows

I'm renting an apartment and with current situation, my and my partner's working hours have been reduced :(
I tried to negotiate with property manager to reduce rent for 3 months, but they rejected and said you should pay in full; go and seek financial support from Centrelink, etc etc.

I am just curious why government is not stepping in to help out. I've got a few friends who have got their loan suspended (by just paying interest only) and they reduced their asking rent from their tenants accordingly. If that is the case for my landlord too, yet still forcing me to pay the rent in full, they are simply making a good profit while their tenants and other people are in financial challenges.

Let me do some calculations: The apartment I am living in worth around $400k. Even if 95% of it is on loan ($380k), below is the outcome from CBA calculator:

Interest Rate: 2.79%
Principal and Interest repayment: $1560
Interest only repayment: $1061
Original rent: $2100

So, as landlords are paying around ([$1560-$1061]/$1560=) 30% less, some leniency from landlord is expected.

My simple suggestion to Government is:
If a landlord ask their bank to put their investment loan on hold, they have to reduce their asking rent for their tenants accordingly.

This way, we are all sharing the pain together on this by helping each other; otherwise, it will end up with many broke people, and an unsafe/unhealthy community.

I am not working today, probably like many of you, so I thought it is good to share this with you. What's your opinion?

update1:

Thanks for those giving valuable insight on this thread…
To give everyone an update:
I finally found another nice place…well, smaller but much cheaper [apparently LL are desperate to find a tenant and I had enough room to negotiate for the rent ^-^] which is more than enough for us now. I gave my current property manager a notice that I'm vacating in 4 weeks. He called me straight away that LL is happy to offer 30% rent reduction for 3 months if you withdraw your notice.
And I said:

NAH MATE, TOO LATE … THANK YOU!!!

p.s. I also mentioned that due to current situation, I won't be comfortable to let other people in for inspection while I am still here :)))

Financial

Comments

            • Jumpup on 21/04/2020 - 10:34

              @[Deactivated]: I understand a commercial lease being reduced but not residential. The government has put in generous support for low income earners but not much support for landlords or businesses.

              I’ve purchased my investment property around 6 years ago. I picked the area with a high rental return on price and I’m still doing it hard to be honest. Landtax, insurance, rates, water service, agent fees, repairs and mortgage. I’ve made $0 and all the headaches and time dealing with this rubbish. I’m tempted to sell but then again more tax CTG on any gains which isn’t much anyway.
              I can’t imagine how hard it would be for anyone else that bought after me in any other area.

              The government is under reporting on foreign investment. Half the properties sit empty on my street and these investors pay $0 tax in the country. This is the reason why prices are high and also the increase in population and one CBD in Victoria.

              • [Deactivated] on 21/04/2020 - 11:20

                @Jumpup:

                I picked the area with a high rental return on price and I’m still doing it hard to be honest

                You don't think this is having an impact on house prices? That's just what I'm asking.

                Landtax, insurance, rates, water service, agent fees, repairs and mortgage. I’ve made $0 and all the headaches and time dealing with this rubbish. I’m tempted to sell but then again more tax CTG on any gains which isn’t much anyway.
                I can’t imagine how hard it would be for anyone else that bought after me in any other area.

                Oh wow thanks for your insight, so why are you still doing it hard? If someone said to you I'm looking at buying as much property as I can, what would your advice be to them? I think people have just seen how rich people have become under property, they want the same and it just keeps pushing it higher. I feel like everyone I know looks at property this way now rather than just trying to have a roof over your head. I just imagine how bad it would be if something like water had the same perception. At an auction, don't you think those looking to invest in that housing generally can pay more than someone looking to just buy their first home? Dependent on income obviously.

                The government is under reporting on foreign investment. Half the properties sit empty on my street and these investors pay $0 tax in the country. This is the reason why prices are high and also the increase in population and one CBD in Victoria.

                Yes that's a good point, I read that were one of the worst when it comes to people trying to clean their money through property.

                • Jumpup on 21/04/2020 - 13:43
                  +1

                  @[Deactivated]: I’m sure it is impacting prices but it’s required. People need to rent during times of their life. An 18 yo moving out of home wouldn’t have enough saved for a deposit etc. Moving to other area short term 1-2 years etc for work. So these Landlords are required.
                  When we were looking at buying in our area we would lose at auctions to this couple every time. No joke they bought at least 8 houses within a year in my area, they were going 200k over market price. I don’t think they were local buyers, as the houses are sitting empty now. They obviously wanted to place their money somewhere. Yes that really pissed me off but I still didn’t hate your general Landlords that pay tax in this country.

                  I personally would never buy property again as an investment as I feel they are overvalued and after all the expenses and headaches you don’t get enough back.
                  My family friends that bought 20 years ago are not doing it hard I’ll admit as the mortgage is paid off but they still need to pay high land tax each year in Vic, rates, insurance, repairs and agent fees so consider half the rent gone, then they need to pay tax on the rent they receive. They don’t want to sell because of CGT.

                  In saying that I believe everyone should try and own a house at some point in their life even if it’s far away from the CBD. It’s a good way to be forced to save and at the end of the day it’s nice to have a secured roof over your head.

                  • [Deactivated] on 21/04/2020 - 15:28

                    @Jumpup:

                    I’m sure it is impacting prices but it’s required. People need to rent during times of their life. An 18 yo moving out of home wouldn’t have enough saved for a deposit etc. Moving to other area short term 1-2 years etc for work. So these Landlords are required.

                    yeah you're right, definitely landlords are required for those who need to rent. But I feel that where we are right now, is that more people are forced to rent than those that just have to or want to.

                    When we were looking at buying in our area we would lose at auctions to this couple every time. No joke they bought at least 8 houses within a year in my area, they were going 200k over market price. I don’t think they were local buyers, as the houses are sitting empty now. They obviously wanted to place their money somewhere. Yes that really pissed me off but I still didn’t hate your general Landlords that pay tax in this country.

                    It's definitely a problem that needs to be fixed, I just doubt whether this has influenced it more than your Australian owning 5+ properties for negative gearing or 'mum and dad investors' who believe that if they buy a $800,000 house now, it will be 1.6million when they're older.

                    I personally would never buy property again as an investment as I feel they are overvalued and after all the expenses and headaches you don’t get enough back.
                    My family friends that bought 20 years ago are not doing it hard I’ll admit as the mortgage is paid off but they still need to pay high land tax each year in Vic, rates, insurance, repairs and agent fees so consider half the rent gone, then they need to pay tax on the rent they receive. They don’t want to sell because of CGT.

                    Thanks, I had no idea some people felt this way. CGT is only like what, 15-20% on profit though? But i guess it depends on how much you've invested when deducting rent. So you're saying that with the rent money you receive, only about half of it goes to the mortgage of the house? Not as much as I expected but still better than nothing. By the end of it all, you still own a house.

            • mun4 on 21/04/2020 - 10:59
              +2

              @[Deactivated]:

              but those who buy houses and hold onto them for a 'portfolio' because they believe it will increase indefinitely

              Property prices don't need to increase indefinitely for owners to profit. Plus ROI on rental is comparatively higher than term deposits these days.

              Landlords NEED tenants right now just as much as tenants needs landlords

              What gives you that idea? Tenants that move out from one property will still move into another rental property. They're just shifting down the rental ladder. Just look at OP.

              I feel sorry for OP's new landlord for taking him on though. Unstable income and a sense of entitlement aren't favourable characteristics of a good tenant.

              A word of advice to all landlords: screen your new tenants very very carefully and don't scramble to sign them up.

              • [Deactivated] on 21/04/2020 - 11:22

                @mun4:

                What gives you that idea? Tenants that move out from one property will still move into another rental property. They're just shifting down the rental ladder. Just look at OP.

                OP said they immediately offered a 30% discount. If it wasn't for this or if OP was lying then sure, everyone is probably just shifting down.

                • mun4 on 21/04/2020 - 11:36
                  +1

                  @[Deactivated]:

                  OP said they immediately offered a 30% discount. If it wasn't for this or if OP was lying then sure, everyone is probably just shifting down.

                  It'd clearly be a knee jerk reaction. There could be heaps of reasons why some landlords blink first. My point still stands and landlords in general should not feel a need to give 30% reduction. The tenant pool is larger now than before, but affordability is lower. If the weekly rent is around the median mark, then there's completely no need to negotiate. OP's old property is valued at just 400k. My feeling is that it's an amateur landlord.

                  • [Deactivated] on 21/04/2020 - 12:00

                    @mun4: Hmm interesting, why do you say the tenant pool is larger? Even if it is larger, if the amount they can pay is lower, what options do landlords really have then to decrease rent. It could be a knee jerk reaction or it could be that the LL is worried he won't be able to find someone in this condition

                    • mun4 on 22/04/2020 - 00:42

                      @[Deactivated]: Tenant pool is larger because rate of home ownership can only be lower when people are out of work or have reduced work hours.

                      Affordability may be lower, but landlords near the median price need not worry as long as the stimulus packages are still in place. Those paying 8xx may prefer 7xx due to reduced income. But those paying 4xx have less incentive to shift thanks to the Job Seeker/Keeper packages. 450pw is equivalent to $1,500 weekly income (30% spent on rent). Two working parents on Job Keeper account for that exactly.

                      • [Deactivated] on 22/04/2020 - 08:53

                        @mun4:

                        Those paying 8xx may prefer 7xx due to reduced income. But those paying 4xx have less incentive to shift thanks to the Job Seeker/Keeper packages. 450pw is equivalent to $1,500 weekly income (30% spent on rent). Two working parents on Job Keeper account for that exactly

                        yeah exactly why I was against job keeper being so much. Prior to coronavirus people were expected to survive on $550, obviously not doable now but I think the same rate as the job seeker would have been better

          • mun4 on 23/04/2020 - 17:38

            @Jumpup:

            Not sure how you think that’s right. Roof or no roof that’s their life decisions they have made, why should landlords be a charity.

            Did the agent find a copy of Chairman Mao's little red book by the bedside?

  • mun4 on 21/04/2020 - 10:14
    +3

    Once the rent is reduced, the landlord insurance will likely be void.

    • Jumpup on 21/04/2020 - 10:19
      +1

      Spot on we called up to ask

    • Levathian on 21/04/2020 - 11:59

      Don't you need to issue an eviction notice to get LL insurance payouts?

      • Jumpup on 21/04/2020 - 15:00
        +3

        Yes you do and you can’t drop rent. They make stupid rules to make it hard for people to claim.

    • bobbie34567 on 21/04/2020 - 13:16

      ? why is this so?

      • mun4 on 22/04/2020 - 00:44

        That's the policy in general.

  • arkie0 on 21/04/2020 - 16:46
    +4

    I finally found another nice place…well, smaller but much cheaper

    As soon as you move in, ask for another 30% off!

    • Armin65 on 22/04/2020 - 08:55
      +1

      No need, have already got it for a bargain ;)

      • dizzle on 22/04/2020 - 09:11
        -1

        And for the next several years there will be rent increases to bring it back to what it was worth.

        So be prepared to move again next year if you don't agree with the new price

  • cloudy on 21/04/2020 - 21:58

    Great to hear you found a new place, and your stupid landlord only offered discount when you say you wanna leave. Lets hope its a lesson learnt for that LL.

    • Armin65 on 22/04/2020 - 08:56
      +3

      Thanks :)

  • Choc83 on 22/04/2020 - 00:01
    +3

    Not all properties are equal. Some will sit vacant for months, others will get 80 people come to the inspection and create secret little bidding wars on weekly rent because they want it so badly.

    As a landlord, they should have some idea what category the property falls in to. Judging by the LL's haphazard response, the place isn't as attractive as they thought. Or they didn't want go to the trouble.

  • Baghern on 22/04/2020 - 11:16
    +5

    Great that you got new accommodation…

    What I hope you take from this is you calculations was ignorant and based on false premise that Landlords get a interest reduction.

    you found a cheaper place, and the landlord backed down (too late) because of the current situation, not your silly calculation

  • tomfool on 22/04/2020 - 12:45
    +6

    I went to Coles today, I told them my hours were down and my take home was less. I told them their funding costs are less now and that the volume of sales are up. I told them I expect they should charge me less because their margins had changed.Funny they didn't seem to care, the government should really do something about this.

    • ongrudy on 22/04/2020 - 13:03
      +3

      Go to woolies.

  • parsimonious one on 22/04/2020 - 15:48
    +3

    Good on you OP.

    Sounds like your LL is like so many of the posters here; had no interest in your situation until it impacted his hip pocket.

    I’m sure many of the little landlord here will face the same predicament ie reduce the rent or have the property sit vacant.

    Let’s see how all their “pay the rent or get out” chest thumping goes when they are staring down the barrel of a vacant property.

    The concept of negotiating reduced rent for tenants impacted by covid was designed to protect both tenants and landlords.

    Yours is a great case study and will hopefully be a lesson for those on here who don’t seem to realise that 70% of their usual rent is better than 0%

    • mun4 on 22/04/2020 - 16:57
      +2

      70% of their usual rent is better than 0%

      What makes you think that tenants can continue to afford the reduced rent until the end of the lease? Once the rent is reduced, the landlord insurance becomes void and any rent arrears will become unprotected. Way better for landlords to refuse reduction requests and still have the insurance cover.

      • parsimonious one on 22/04/2020 - 17:01

        If you say so. Clearly the OP’s land lord didn’t see it that way.

        • mun4 on 23/04/2020 - 11:49

          Some can only learn from their own mistakes. But it's certainly easier to learn from mistakes others make. Forfeiting insurance is definitely not in the landlord's interest.

    • ozhunter on 22/04/2020 - 18:11
      +3

      The concept of negotiating reduced rent for tenants impacted by covid was designed to protect both tenants and landlords.

      The contract they signed does that. It has pros and cons for each of them

      Breaking the contract without any fees is the most the government should allow.

      And yes, not having tenants is a risk of being a LL. And they still have to pay for the house, the bank doesn't care if they have tenants or not. Now hopefully you can see why LL try to get reliable paying tenants.

    • ongrudy on 22/04/2020 - 19:24

      Would OP have stayed if his landlord offered 50% off (price beat)?

      • Armin65 on 22/04/2020 - 19:58
        -1

        If I was offered 50% reduction, I guess that was a win-win for both parties, as my workload reduction will soon be back to normal and our salary would bounce back to pay the full rent.

        But their offer was too late, LL thought I am bluffing during negotiation, as I mentioned I may need to consider moving out.

        Anyhow, if it was 50%, I wish I could….but too late for me, as I signed another contract before giving notice to vacate.

        • surm on 22/04/2020 - 20:03

          Suppose you were mortgaging your apartment (instead of being a renter). What would you have done in this situation? The bank wouldn't give anyone any loan reductions. Any unpaid loan premiums would be clawed back with interest. So what would you have done?

          • Armin65 on 22/04/2020 - 23:27
            -1

            @surm: If no government package was released, obviously no one can expect others (LLs) for leniency.

            • surm on 23/04/2020 - 11:04
              +1

              @Armin65: No government package was released that reduced LL's loan amount. All that the banks are offering is to delay /freeze the repayments and claw them back with interest.

              If the LL were to pass that offer to you, you would have had to repay the unpaid rental portion (30%) with interest after 3 months. Would you have asked that of the LL?

              As I have pointed out in my earlier comment, if you were owner occupier of this property with a mortgage what would you have done?

              Secondly, you have answered a question about why LL's have to charge higher rents. As you said, you expect your landlord will have 4 weeks vaccancy! Which means someday the LL has to earn that back from tenants :-)

              .

        • ozhunter on 22/04/2020 - 20:11
          +7

          I doubt he would see it as win. Who knows, he could have a tenant moving in like a week after you leave.

          as my workload reduction will soon be back to normal and our salary would bounce back to pay the full rent.

          It's like you expect your rent to go up and down depending on how much you choose/are able to work.

          • Armin65 on 22/04/2020 - 23:35

            @ozhunter:

            I doubt he would see it as win

            Do you reckon he sees it as win now?!

            depending on how much you choose/are able to work.

            There is a reason that government steps in mate, this is an unprecedented situation!

            • ozhunter on 22/04/2020 - 23:44
              +1

              @Armin65:

              Do you reckon he sees it as win now?!

              Dunno nothing about him, but he probably thinks it's better than if he were to offer you 50%. Who knows, he could have someone ready to move in when you move out.

              There is a reason that government steps in mate, this is an unprecedented situation!

              They stepped in to help out those who need it the most, not the ones who just don't want to pay.

              • Armin65 on 22/04/2020 - 23:50

                @ozhunter:

                he could have someone ready to move in when you move out

                If he had, there was no need to offer reduction after receiving notice.
                He will have to keep his fingers crossed for minimum 4 weeks for the best scenario as you imagined!

                As a tenant, I always find a new place first and then give notice.
                Leaving his unit vacant for 4 weeks is equal to 33% reduction for 3 months keeping me on board (less lease costs) to pay off his loan.

      • mun4 on 23/04/2020 - 17:49
        +1

        Would OP have stayed if his landlord offered 50% off (price beat)?

        That'd be a disaster for the landlord. Vacancy rate isn't even high right now. Better find a reliable paying tenant sooner rather than later.

  • mun4 on 23/04/2020 - 12:03

    Leaving his unit vacant for 4 weeks is equal to 33% reduction for 3 months keeping me on board (less lease costs) to pay off his loan

    Took me 6 business days to get someone in. Got 3 applications. One had hours reduced and was in a vulnerable sector. No way would we consider it. Then we got ourselves a full-time nurse. In general tenant mobility is very high.

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