On the face of it, self-managing a rental property can seem like a money-smart strategy. After all, professional property managers charge a range of costs that will eat into rent returns – money that could be saved if you did the job yourself, right?
Well, not always. We look at the key issues to weigh up in managing a rental property yourself.
Attracting a tenant
Property managers usually charge an initial letting fee – often equal to one week’s rent, reflecting the time involved in opening the property for inspections, interviewing tenants and (hopefully) carefully screening applicants by checking references.
Landlords can certainly handle this aspect of the tenancy themselves. But there are a number of legal obligations to comply with, like lodging the rental bond on time with the appropriate statutory authority, asking the tenant to identify any faults with the property upon moving in and accurately completing the lease agreement.
If you have the time, and you’re comfortable ticking off all the legal boxes, taking a do-it-yourself approach to landing a tenant is possible.
Ongoing management – more than meets the eye
It is the ongoing management of a tenancy that has the potential to become a grind. Property managers normally charge a fee for this service, and while it varies between agents, you could pay between 5-12% of gross rent in management fees. So, if your property commands weekly rent of $500, property management fees could cost from $25 to $60 each week. It’s a decent chunk of rent, but while this fee can be open to negotiation, it’s not always money for jam.
In addition to collecting the rent (and chasing it up if late), the property manager is responsible for regularly inspecting the property in line with legal restrictions. (You can’t just pop in if you’re driving past.)
Property managers also organise minor repairs. This may not seem overly challenging – until the tenant calls late at night to say the stove isn’t working, or you’re left trying to call out a plumber on a weekend.
At that point the management fee you’re saving can seem like a small price to pay for a hassle-free investment. Property managers, on the other hand, usually have a network of tradies they can call on at a moment’s notice.
Taking the trouble out of troubleshooting
Most importantly, a property manager will represent you in all dealings with the tenant. And that can be the deal breaker for a DIY approach. The vast majority of tenants pay rent on time. But if they don’t, landlords can’t simply go knocking for their money – strict legal provisions apply.
Landlords can send tenants a breach notice when the rent is overdue, though the tenant must be behind for a specific number of days (which varies between states and territories) before such a notice can be issued. Worst case scenario you could find yourself slogging it out with the tenant in a court or tribunal – a role the managing agent would normally undertake on the landlord’s behalf.
Tax time reports
Using a property manager can also streamline investment paperwork. At tax time you’ll receive a single statement summarising the rent received and itemising outgoings associated with the property, for costs like repairs and maintenance. It’s paperwork a DIY landlord will need to handle themselves.
Is hassle-free investing worth the cost?
The nub of it is that yes, you can save money as a do-it-yourself landlord. But it’s a big responsibility with the potential to demand a fair chunk of your time. It also pays to familiarise yourself with the tenancy laws that apply in your part of Australia to avoid landing yourself in legal hot water.
Paying a decent agent to manage the property on your behalf is more likely to provide a smooth sailing investment experience. In other words, you won’t have to deal with the tenants at all, and that’s often just the way many landlords and tenants prefer it.