Managing your own investment property and liaising with tenants directly may save you a few bucks, but is the risk really worth the reward?
For some investors, performing the dual role of landlord and property manager seems like a good move, particularly if you live close to the rental property. You can attend to small repairs yourself and you personally know who is living in your property, and best of all, you save hundreds (if not thousands) of dollars per year in property management fees.
But Marcel Dybner, business development manager with Thomson Real Estate in Melbourne, warns that going down the DIY route can lead to trouble.
“It’s important to weigh up the costs of managing your own property versus how much an agent would charge,” Dybner says.“At the end of the day, it really isn’t a lot of money for the experience and expertise that you get – and a professional, experienced property manager can provide you with more value than what you might pay in management fees.”
For those who are considering renting their property directly and cutting out the middleman, Dybner points out the following risks:
Risk #1: Sourcing tenants
Professional property managers benefit from a strong marketing strategy and database, which gives them instant access to a pool of potential tenants. “Over 85% of our enquiries come from realestate.com.au, our company website or from people coming into our office,” explains Dybner. As a DIY landlord, outside of placing a newspaper add or uploading a private rental listing online, there are a limited number of places you can find prospective tenants.
Risk #2: Placing the right tenants
“Although this sounds like an easy task, many DIY property managers get it wrong, and it’s not really their fault,” says Dybner. “In our experience, many of the people who look for private ads generally don’t have the best rental history and know that private landlords often don’t check out their past as thoroughly as agents do.” Choosing the wrong tenant can lead to many expensive problems down the track, he adds, such as not paying rent on time or a tenant trashing your property, which can be both time consuming and expensive to fix.
Risk #3:Knowing the relevant laws
Every state has different rules on owner and tenant rights, and as a DIY property manager you need to make sure you learn the relevant legislation and ensure that you do everything ‘by the book’. The law guides everything from how much notice you give the tenant for a rent increase, to sending out a tribunal notice, to how often you can inspect your property. “Property investors engage agents because they are experts in their field. A good agent will know all of the relevant legislation and practice it,” Dybner says. “As a DIY landlord, you need to make sure you do the same.”
Risk #4: Failing to protect your asset and income
It’s not only important to know the relevant laws, but it’s also vital that you look at ways to protect yourself and your asset, Dybner says. “For example, we make sure that before any tenant moves into a property, we do a thorough written condition report and we take lots of detailed photos of each room,” he says. “This ensures that we don’t have any disputes over the condition of the property at the start and at the end of the tenancy. Many DIY landlords don’t do this and then have to pay for any damage caused, because they have no proof.”
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