Buying property has been one of the best things in Julian Lance’s life, but 18 months since he has built an impressive six-property portfolio, he found himself face-to-face with the worst problem he could ever imagine—unknowingly renting one of his investment properties to ice addicts.
Only a year and a half ago, there came a point in his property investment journey when Julian was just desperate to get a tenant in because, he was afraid that the vacancy will start to hurt his investment.
Being a self-managing investor, he only had his guts to tell him whether or not an applicant will be a good tenant.
“I didn't know what a junkie really kind of looked like and I rented out my properties myself. I was kind of desperate to get someone in. I didn't want the vacancy factor, so I had a couple of people come through, [I said], ‘Sure you can have it,’” he shared.
“They said, ‘Oh, we'll give the bond to you on Monday.’ The bond never came. The rent never came in. They knew all the legal side. They were like… ‘Legally, we can stay here for this and that and we want to go to the tribunal.’ [Then], suddenly, before I knew it, I was speaking to solicitors and booking in tribunals and it ended with the sheriff.”
The 'ice junkies' were evicted from Julian’s property in Pott’s Point. As he was waiting outside—very nervous—one of the police officers “brought in a couple of jerry cans of petrol.”
“I'm thinking ‘My God, he's going to bomb the apartment block… They contacted the police or the King's Cross bomb squad… A couple of minutes later, there were at least eight coppers there, all in black with the bulletproof [vests]. They burst in,” according to him.
“It turns out, in the jerry can there was petrol, but I think if you're addicted to ice… you don't think rationally and you think, ‘Oh, I've got to put this in the car or take it upstairs to my apartment…’ I [really] don't know.”
It was obviously a horrible experience for Julian and he admits that it took an emotional toll on him at one point. Thankfully, he learned a couple of lessons from the unfortunate ordeal and came out a better man and a smarter investor.
“I know if I can get through that, then I can get through anything,” he said.
After the incident, Julian realized that the rush to fill the vacancy was probably what lead to his misjudgment of the tenants’ applications.
“I thought of it as in if I don't have someone in there for one week, it's $400, so I just took the first person that walked in… [I should not have been] in a rush and find the right person,” he said.
Moreover, he believes that the current physical state of his property also attracted the wrong type of applicants. Julian actually described the unit as “a dive… horrible,” which, he now realized, was a perfect place for ice junkies. Since the eviction, he has spent money for a simple cosmetic renovation. From $360 a week, the place is now renting at around $450 a week.
Julian said: “[I did] paint, a few tiles, ripped the kitchen out, a bit of fancy furniture.”
Fortunately for Julian, he had landlord insurance, so he was really no worse off financially after having rented his place to a couple of ice junkies.
His advice to fellow property investors: “Get insurance before people move in… Get it now.”
Aside from this incident, he has also taken advantage of the insurance for other issues, such as when he hasn’t received rental repayments and when there has been damage inflicted to his property.
“It's [a] nice peace of mind… [Most insurance firms], they're pretty good, to be honest with you… They'll challenge it—that's what insurance companies do—but stay firm,” he said, “Time [will] grow your portfolio, [and there will be] a couple of headaches, [but you will] learn a lot.”
Tune in to Julian Lancey’s episode on The Smart Property Investment Show to know more about the challenges of the market dynamics that he faced, how he tried to overcome the restrictions placed on him by renovations and refinancing, and why he thinks “property is the best."