Self-managing your property: The pros and cons
For many property owners, the natural step after purchasing an investment property is deciding how they plan to manage it. Hiring a property manager is one option, but if you’re looking to save on management fees, you might choose to manage the property yourself. But is forgoing the management costs worth handling the ongoing maintenance and administration yourself?
When considering whether to DIY this landlording business or hire the services of an agent, think about property management fees and the role they play. Property management fees are typically based on a percentage of the gross weekly rent, as well as extra costs (i.e. advertising the property and preparing the tenancy agreement). Fees will vary depending on your property’s location. They’re also dictated by the supply and demand of the free market.
If fees aren’t the biggest issue for you when it comes to this decision, it’s worth considering the work that come with managing your own property. Do you know your responsibilities as a self-managing landlord? Some key tasks will include the collection and and lodging of a rental bond and asking for rent in advance.
You will also need to provide a standard residential property agreement. This must include the term of the lease, the terms for future rental increases and the number of property inspections your tenant should expect each year. You’ll also need to provide your tenant with a condition report, detailing the condition of the property prior to the commencement of their tenancy.
Know your legal rights and obligations as a self-managing landlord
If you’re considering managing your own investment property, it’s crucial that you’re familiar with the specific legal rights and your obligations as a self-managing landlord in your state. These regulations can and will change frequently, so make sure staying up-to-date is a regular part of your routine.
Prior to occupancy, it will be your responsibility to make sure the property is clean, safe and secure and that all included appliances and facilities are in good working order. Once a tenant has moved into the property, you will need to ensure all repairs and maintenance tasks are carried out quickly and satisfactorily.
Set the rent to meet market expectations and know how you’ll chase up arrears
While you’re deciding what to charge for rent, it’s crucial that you find the right balance between what you’d like to receive on a weekly, fortnightly or monthly basis and what your local market will deliver. Purchasing a RentReport through Rent.com.au can help you get a feel for the market conditions, and compare other property qualities, sizes and locations to get a feel for what everyone is charging in your local area. Once you’ve established your asking rent, you should settle on a good payment method and make the necessary arrangements with your tenants to make sure this is a smooth process. Don’t forget to establish strict control measures for any instance of rent arrears.
How will you find out if a prospective tenant has been previously evicted or has a poor rental history?
With easy access to tenancy databases such as TICA or the National Tenancy Database, a professional property manager has a step-up on the self-managing landlord when it comes to warding off problem tenants. An easy way to get around this is by purchasing a RentCheck through Rent.com.au to make sure you really know who’ll be renting your property. RentCheck is a report you can use to assess a tenant’s suitability before you offer them the lease. As a landlord, you can access the RentCheck tool to thoroughly screen your potential (or existing) tenants.
Your RentCheck covers:
– Past tenant history: Have your potential tenants ever been evicted, broken leases early, abandoned a premises, had disputes or other issues? RentCheck will tell you about any reported breaches.
– Identity verification: RentCheck verifies the identity documents of your prospective tenants. Their identity will be checked across a range of national databases to give you a comprehensive report.
– Court and bankruptcy information: Have your tenants ever had any judgments, court summons or financial troubles in the past? RentCheck shows you any listings that may be of concern.
How will you manage the property?
Issues can arise at your property at any time of the day (or night). As a self-managing landlord, you will need to be able to ensure the safety of the tenants and minimise any potential damage to your property. Ongoing tasks will include responding quickly to repairs and any problems with utility connections, plumbing, appliances, fittings or fixtures in the house. For the protection of your investment, you’ll need to conduct regular inspections of the property and keep detailed records of your observations. The feedback will also need to be passed onto the tenant, along with clear instructions of any actions required following the inspection.
Do you know how to lodge a bond?
It’s common for self-managing landlords not to lodge rental bonds with their respective state’s bond authority. In NSW, landlords must lodge bond money with Fair Trading, in WA to the Bond Administrator and in VIC with the Residential Tenancies Bond Authority (RTBA). In QLD, landlords must lodge the bond to the Residential Tenancy Authority (RTA) and in SA to Consumer and Business Services (CBS). Some landlords keep rental bonds in their own personal bank account. This can make it difficult for tenants vacating a property to recoup their bond – and it’s also not allowed.
For residential properties you can collect between four and six weeks bond depending on the Australian state your property is situated in. It’s a one-off payment only and it cannot be added to.
Put everything in writing
Owning a rental property is much the same as running a business. You need to have things in writing – it protects you (as the self-managing landlord) and your tenant should any issues arise. While it’s not always a requirement to provide a written tenancy agreement, it’s a very good idea to have one. Without a tenancy agreement, it’s very difficult to prove that someone is a tenant and not a guest.
Your tenancy agreement should also show what is included under the lease agreement. Not only that, it needs to include a condition report that documents any flaws or damage in the property when your tenant moves in and out. Remember – this is your investment. You want to keep track of the condition your property was in at the beginning of the lease.
Don’t forget to take photos for evidence. When your tenant moves out, you should agree a time to inspect the property. If there’s any damage to the property, you can get works done and show receipts to your state tribunal to have the repairs paid for out of the tenant’s bond money. If you don’t do this, it will be difficult to prove who caused the damage.
Finally, with rental payments, it’s wise to provide your tenant with a receipt or keep a tenant ledger. Keeping a tenant ledger is good for the self-managing landlord. It will show if your tenant is up to date with their payments. It’s also good for the tenant because they’ll be able to use it for future rental applications to show they are reliable and pay their rent on time.
If you’re not sure of what to do, you can contact the Department of Fair Trading or Consumer Affairs in your state or territory for advice. These departments often have fact sheets on their websites that can assist you with common enquiries. In some instances, Fair Trading can also negotiate with a tenant on your behalf, free of charge. Mediation is generally conducted over the phone but can be face-to-face if required.
Note: Processes and rules vary from state to state in Australia. Know what to look for – and if you choose to hire a professional property manager – educate yourself on how to negotiate a good contract. The good news is that the cost of professional property management can sometimes be offset as a cost of owning a property, which will help if you’re negatively gearing your property. If you do choose to go the DIY route, be aware of your rights and responsibilities before leasing the property to your first tenants – and be prepared to dedicate some time to the job.
If self-managing isn’t for you, an excellent way to find the best person to manage your property is to compare them directly with Rent.com.au’s tool RentQuotes. Find property managers servicing your suburb and contact them with one simple form. RentQuotes takes the hassle out of finding the person who best suits you. It’s no obligation, simple and free.
What’s your story? Do you self-manage, or do you hire someone to manage your properties? Share your experiences in the comments section below.