Are you really up to the job? What’s really involved in managing a rental property – and the true costs of a badly managed property. Is self-managing your rental property a good idea?
It can be tempting to self-manage your rental property. Common reasons you might decide to DIY include:
- Extra dollars in your pocket, saving you from paying the agent’s management fee
- Keep tabs on your tenant and your rental property
- You have time to spare
- Paperwork organisation is your strength
- Control of your property knowing details are important.
And importantly, who will really care about your property as much as you?
But do you really know what’s involved?
To give you the real picture of what’s involved in managing your rental property, we spoke to Carmen Littley, Director of Wyndham Property Management.
Carmen has been involved in the property management industry for 3 decades and has seen almost everything during this time including:
- Tenants dying in the property
- Houses burning down
- Illegal activities taking place
Carmen has had to sort out a lot of issues which most often stem from landlords managing the property themselves – or having poor property management.
The real cost of self-managing rental property
Looking after an investment property is not as easy and straightforward as it may seem, there is a lot more involved than just collecting the rent. And even though you think you may be saving $1’s each week it could potentially cost you $1000’s if things go wrong.
If you think it’s the fee percentage the agent charges, think again. The real risk is the tens of thousands of dollars an inexperienced or unethical agent can potentially cost.
What commonly happens with DIY landlords
Carmen explains discounters inevitably take shortcuts at some stage of the process:
- Failing to complete paperwork properly
- Missing routine inspections
- Ignoring maintenance requests
- Compromising tenant selection processes
This dramatically increases your risk of losing thousands (or tens of thousands) of dollars in unpaid rent, damages, or both.
Example of a badly managed property
This property was being managed by an agent who reported 2 months before the photo that the tenants were maintaining the property well. ‘Neat, tidy, and very clean’, were the words used…
This clearly was not the case.
Another concern were the 8 cars continually parked on the front lawn.
Clearly, an inspection had not happened.
After Carmen took over the property, they found the tenant was also 5 weeks behind. Since the former agent hadn’t given any notice to the tenant, the owner suffered a loss of rental income – on top of a massive clean-up bill (which is not covered by insurance).
So much rubbish was stored inside the bedrooms that carpets needed to be replaced.
Windows had not been opened for ventilation.
A water leak in the bathroom turned into a serious mould problem.
Finally, the tenant had changed some electrical wiring in the house so it was no longer safe.
The landlord was well and truly out of pocket.
10 Questions to ask yourself before deciding to self-manage your property
- How will you advertise property properly without access to real estate portals?
- Can you be available when potential tenants want to view a property?
- Can you do proper tenant checks, ie. find the best tenant with a good record without having access to the national tenancy database?
- Do you have an emergency maintenance plan (including a list of certified tradespeople on hand)?
- Do you keep excellent accounts/records? (you will need this if something goes wrong and you end up in VCAT)
- Do you have a good understanding of the Residential Tenancies Act – in case you end up in VCAT?
- What is your debt collection process if your tenants stop paying their rent?
- Are you registered with the RTBA (Residential Tenancies Bond Authority)?
- Can you conduct regular routine inspections & condition report with photos & final inspections?
- Will you make sure property is always safe for tenants? (eg. installation of smoke alarms, regular gas heater checks to monitor carbon monoxide leaks)
Is self-managing your own rental property a good idea?
If you can confidently say ‘Yes’ to the 10 questions – and can regularly keep up with:
- Tenant demands
- Property maintenance
- Ongoing communication
For the whole time you hold the property (this might be 7 or more years to make the investment worthwhile).
When purchasing an investment property it is always a good idea to factor in the cost of property management with a good property management company. This is tax deductible.
Benefits of a good property manager
The benefits of a reputable, professional property manager can help you achieve those same goals you had for wanting to self-manage your own property – without the stress, responsibility, and potential cost.
- Keep tabs on your tenant and your rental property within regulatory and legal guidelines
- Spend time with your family or on your hobbies
- Ensure paperwork is accurate, complete, and timely
- Give you ultimate control of your property with regular updates and consultations
Good property managers are experienced with:
- Guidelines and regulatory changes
- Streamlining processes to keep paperwork in order
- Dealing with all the not-so-pleasant tenant and property situations
They give you the benefit of the experience and knowledge they’ve gained from looking after many other properties.
What may be stressful, unknown, or inconvenient to you, will be easily handled by them. They’ll minimise your responsibility, and give you the right professional advice and support when things go wrong.
Thank you Carmen for these important considerations and as I always say, ‘A good property manager is worth their weight in gold‘. Carmen can be found at www.wpm.com.au