Propertyscouts Dunedin

Bad tenants turn Australian investment property into drug house - 20th Aug 2015

Yet another horror story about tenants ruining a rental property has surfaced, this time from across the ditch in Australia. The tenants presented themselves as being ideal for the property, but converted the property into a elaborate drug operation - every investor's nightmare! This story highlights how using the service of a professional property manager can help to avoid this situation.

At Propertyscouts, both here in Dunedin and nationwide, we pride ourselves on finding quality tenants. Part of this means we complete thorough reference and credit checks and we also carry out an inspection one month after each tenancy starts to ensure the tenants we have selected are doing a good job of looking after the property we take care of.

When Trent Lister and his mother went to inspect their Australian investment property to find the locks changed and the outdoor bin packed with growth fertiliser and a broken lamp, they knew something was wrong.

They called police, and, just like a scene on TV unfolding, walked into the Geelong property with officers to discover that it had been destroyed and turned into a cannabis crop house.

The residence was completely trashed; the electricity rewired, holes cut in the floors and cupboards dismantled.

The nightmare spanned months. Lister, 29, said the tenants moved into the property in April and were paying rent until August.

Though the rate was higher than market value, he said he received a lot of interest for the house on websites such as Gumtree because four-bedroom rentals were scarce in the area.

"I knew the demand was quite high, so we put [the rent] up a little bit and they were happy to pay it," said Lister, who works in the maritime industry.

"These guys seemed very friendly; it was three young guys - students - well-dressed, well-spoken. They could have fooled anybody."

For two years, Lister leased the property to tenants who paid the rent on time and kept it in good condition, so the ordeal came out of left field.

"It's one of those things that you just hear about it, but I've never seen it on TV," he said.

"Occasionally you see police ... taking plants out of houses, but to actually see how a setup is done, it's really unbelievable."

Lister is not hopeful the tenants would be caught, but said police had collected some potential DNA evidence.

"The police told me that it was a very professional setup and that they do this for a living; moving from house to house," he said.

"So they knew everything to say and do, and what to give me."

Lister said he asked the tenants for all the information as a real estate agent would, including drivers' licences and previous rental history, which were later found to be forged.

Jo Boothroyd, director at Ray White Lara, who sold the property to Lister in 2013, said real estate agents performed due diligence that private landlords did not, including checking bank statements, drivers' licences, Medicare cards and previous rental history.

They also had databases to confirm that the referee for the property they had been renting at was who they said they were.

The property manager went through the tenant selection process and the fees and charges with him after he bought the investment property, Boothroyd said, but chose to manage it himself.

The agency appraised the weekly rental at AU$320 (NZ$355), and would have charged Lister AU$22.40 a week to manage the listing.

Instead, he now faces a damage bill in the thousands, and is facing bankruptcy because the incident happened before he updated his insurance policy.

Boothroyd said Australian real estate agents also had access to a bad tenant database, and that database was growing.

"All the bad tenants have to gravitate towards private landlords and they [in some cases] offer or pay more than what the market price is," she said.

"So if it's too good to be true, it's too good to be true."

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