Should I rent my flats to the Govt?

[GIDDO]

HELP:fellow investors
Has anyone here ever leased a block of flats to the govt?

I have an offer on my desk that I need to look at over the next couple of days, and I am looking for feedback, info, and/opinions.

It isn't so much the lease or the yield I am asking about, as I think I have got that side covered now. And the govt covers all repairs and restoration at the end of the lease.

I am thinking about how a govt tenant will affect future capital gain.
The state govt will use it for accommodation for people who some may see as socially undesirable. People such as fleeing mothers, troubled youth.

So my flats won't exactly be lifting up the standard in the area.

Question: If having a solid govt tenant is a good thing for CG, will their less than desirable tennants cause a downside?

Anyone got some thoughts?

 

[battler]

I think you need to weigh it up against the length of the lease. As far as saleability is concerened if it is renjunivated by the govt before sale I don't think it would have a great effect that it has had the previous use. The danger is if the govt rents many units in the same area, it could gain a "name" detrimental to your CG.

 

[craigb]

Do you have tennant issues now? are they vacant? if not i would'nt do it, as some areas in canberra have gov flats, you should be expecting, police visits, ambulance late night calls, and dead car bodies in and around the area.

I spoke to a home owner that lived accross the road from one such complex, and in passing asked if he had ever been robbed. His reply, OH! 7 times this year it was september?

 

[GIDDO]

Hi Craig, Thanks for your input.

In this instance it will be the state govt responsible for all upkeep, repairs, lawnmowing etc. It won't be like housing comm where each indiv tenant looks after his own rented flat.

It would be a temporary fix type of accomm. (which brings it's own problems too eh)

Yep I am also concerned about bringing the neighbourhood down; but then I think to myself - it is an investment, not a PPOR.
When the lease is done, the govt rejuvenates the place back to pre- lease condition.(according to the lease)

 

[moyjos]

Yep I am also concerned about bringing the neighbourhood down; but then I think to myself - it is an investment, not a PPOR.

If you don't rent your block to the Gov't, are there others in the immediate area which they will rent and so will (potentialy) pull the neighbourhood down anyway?

If the govt' rents another block close by, how would that affect YOUR vacancy rate and yield?

I spoke to a home owner that lived accross the road from one such complex, and in passing asked if he had ever been robbed. His reply, OH! 7 times this year it was september?

Do you really want YOUR block to be "the one across the road"??

My 2c...tough call though.

 

[craigb]

Hi Craig, Thanks for your input.

In this instance it will be the state govt responsible for all upkeep, repairs, lawnmowing etc. It won't be like housing comm where each indiv tenant looks after his own rented flat.

It would be a temporary fix type of accomm. (which brings it's own problems too eh)

Yep I am also concerned about bringing the neighbourhood down; but then I think to myself - it is an investment, not a PPOR.
When the lease is done, the govt rejuvenates the place back to pre- lease condition.(according to the lease)

And you trust them in doing these things?

 

[craigb]

Giddo pal , buddy this is what i would do if "IHAD THE OPPS' i had a small complex, i would purchase front security gates, a s,pool even if it was small, have those central locks in the stair wells, render it , place a small well manicured lawn and plants, and rent it as a safe/secure upperclass accommadation.that swhat i would do! other would "talk" and the chit chat would be good for business, cheers craigb

 

[Dazz]

When the lease is done, the govt rejuvenates the place back to pre- lease condition.(according to the lease)

Who wrote the Lease - the Landlord or the Tenant ??

 

[Propertunity]

Question: If having a solid govt tenant is a good thing for CG, will their less than desirable tennants cause a downside?

Answer: No effect. Your flats will move inline with the rest of the suburb in relation to CG.

TPFKAD is right - get your own lawyer to write up the lease in your favour. Or ask / pay Dazz for his lease conditions. He's got them as tight as the proverbial fish's rectum

As a LL you are not the moral defender of your tenant's lifestyles or backgrounds. It is a business and you are in it for the money (any other reason is the wrong one).

Guranateed rent and a financially stable tenant (govt) who repairs is somewhat like the DHA. If it all pans out financially I'd do it.

Cheers.

 

[craigb]

You know giddo, PROP is right, its all about capital gains ,at the end of the day. you could get comercial rates, for the complex, and a cheque up front , and every month after that........
With no maintenance issues, no tennant crap, so realy its money for jam.lease it to them and in ten years you might get it back but your turning a whole bunch of maybe payers to for sure payers,

 

[Jas]

This one boils down to me to two questions. The first is: will you get a better yeild via the govt or via private rents? The second is: will you get less heartache via the govt or via private rents (where heartache equals tenant change over, repairs to the property, trips to the tribunal).

Possibly there's a third - can I get the govt to make good should its tenants go bad (make repairs ect)?

The answer to those questions is the answer to your main issue.

 

[BayView]

We have a house that was until very recently leased to GEHA - since the first day we owned it in 2003.

Great payers, no vacancies. Sounds unreal, right?

But, the tenant turnover within their organisation meant lots of tenants who couldn't care less about lodgings, so numerous little pain-in-the-@rse repairs that I kept shelling out for.

They recently broke their lease citing a breach by me for not re-carpeting and re-painting.
How naughty.

I'd had enough, and wasn't going to spend another cent on the swines.

Good riddance, and we now have a new tenant on higher rent who is looking after the place a bit.

Now, if you were starting from scratch with a mob like this, you could stipulate a number of provisions in the lease to protect yourself a bit more such as more regular rent reviews, shorter lease terms, get them to restore the condition to the same as beginning of lease at the end of the lease and so on.

They may say no to all the above, and try to screw you down, so you need to weigh up the pros and cons of all that.

For me; never again, unless I have a comm property and they want to lease that. Then I've got 'em.

 

[Highlygeared]

I rent a house to DoH. Tenants are a bit bogus from what my PM tells me but so far so good in terms of repairs - no more than usual.

They pay their rent on time everytime, will supposedly pay for rectification work (not gone thru that seeing they're still there) and to top it all off, they're paying me a premium for the place, a premium I could't get from the market unless I extensively renovated the place.

Horses for courses but the way things have been going, I'm very happy to keep them there and will next yr, increase the rent again after a very hefty, unwarranted increase this yr with a minimum 5% increase for the next 3 yrs. Hopefully, they'll go for it.