Managing your own property may seem like a great idea in the beginning: No real-estate fees, which means more money in your pocket and the chance to connect with your tenant directly.
Theoretically, this sounds like a win-win situation – but is it really?
“Going DIY can often turn into an outright disaster, costing you time, stress and money in the long run,” said Peggy Willcox, founder of Penrith-based Mooney Real Estate.
Willcox listed the five traps landlords need to watch out for should they decide to go solo:
1. Choosing the wrong tenant
Ever met someone who made a great first impression, then slowly revealed their true colours? It’s hard to make judgement calls based on what is often a brief meeting, and choosing the wrong tenant can lead to huge complications.
“While paying a real estate agency may seem wasteful if you are happy to do the tenant screening yourself, consider the additional checks they carry out,” Willcox said. “Agents can do background checks on your tenants, looking into financial history, [as well as] personal and work references. They also have a whole database of excellent potential tenants with great histories. Real estate agencies have the tools to screen prospective tenants and gather information that the average person cannot do.”
2. Forgetting to collect the bond
A lot of private landlords forget that the bond is an essential part of the landlord-tenant agreement. It’s there for a reason, and if the worst should happen – such as property damage or non-payment of rent – it ensures that you have some money to cover your financial losses.
“A real estate agent usually handles all aspects of the bond collection, but if you are leasing your property privately, don’t forget to collect the bond before your new tenants move in to avoid any issues,” Willcox said.
3. No regular inspections
Inspections are vital to ensuring that tenants are happy and complying with the leasing arrangement.
“As a landlord, regular inspections give you peace of mind about your property being appropriately cared for. While property managers generally complete quarterly inspections on behalf of a landlord, many DIY landlords let this slip by. This can create huge issues down the track – after all, no matter how much you trust your tenants, you never know what kind of damage could be happening behind closed doors.”
4. Sloppy lease enforcement
Tenancy laws are complex and exist to protect both parties in case circumstances take a turn for the worse.
“Proper leasing documentation needs to be in place, to not only protect the property but the landlord as well,” Willcox said. “Common complications can arise without the right documentation, such as failure to pay rent, tenants bringing pets into the home without approval, or sub-leasing to unapproved tenants. As a DIY property manager, if the lease terms are violated, then you are responsible for enforcing the lease, which can get messy and stressful.”
5. Not understanding your legal rights and responsibilities
A landlord needs to understand their legal rights and responsibilities, as well as the legal rights of their tenants.
“These rights and laws cover a broad range of activities and obligations, from security, repairs, service notices, through to eviction. DIY landlords don’t have the benefit of a legal team on hand, so you need to be completely aware of all your rights and responsibilities upfront. This means ensuring your leasing documentation is correct and current, and ensuring that all parties are adhering to the rental agreement.”
Benefits of hiring a professional property manager
To minimise the aforementioned risks, investors should consider hiring a reputable property manager, regardless of how many investment properties they own.
Willcox identified some of the key benefits:
1. Proper tenant screening
Getting the right tenant is crucial to maximising the returns on your investment property. Property managers make all applicants undergo a thorough background screening process to ensure the right tenant is selected. This will save you time and money in the long run.
2. Tenant retention
Good property management companies know how to keep their renters happy. “They are responsive and keep lines of communication open. They take care of problems as they arise. Happy renters are long-term renters. They’re also more willing to accept a reasonable rent increase,” Willcox said.
3. Increased flexibility
Instead of spending time chasing up late rent payments or juggling calls with tradespeople to schedule repairs and maintenance, relying on a property manager frees you up to spend time on the things you enjoy.
“By leaving property management to the professionals, you’re free to spend time with your family or focusing on your day job. Life is short, and the fewer headaches you have, the more content you’ll be,” Willcox said.
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