One in four Australian property investors manage their investment properties, recent research shows.
After house loan repayments, property management fees to real-estate agents are generally the largest expense of owning an investment property. Investors who manage their rental properties can save thousands of dollars in fees every year.
You can be your own property manager for your investment properties as long as you follow the law and fulfil the responsibilities on time.
We have the information you need to know before you step into the role of do-it-yourself landlord.
Should I Manage My Own Investment Property?
It all comes down to your abilities and circumstances when self-managing your rental property. Many property investors make the mistake of underestimating how much time and attention their rental or tenants will require.
You might be very successful at managing your property if you can ensure these favourable conditions:
- You have a flexible schedule and can attend to urgent maintenance needs within 24-48 hours.
- You have a keen eye for detail.
- You are a prompt and respectful communicator.
- You know the ins and outs of the real estate market even though you don’t have access to big-scale data like a property manager does.
- You stay up to date with what people are charging to rent similar properties in your area.
If your situation doesn’t allow for these conditions, you may find it challenging to fulfil the responsibilities of managing your own property. In that case, self-management could end up costing you more than hiring a real-estate agent would have.
|Pros Of Being A DIY Landlord||Cons Of Being A DIY Landlord|
|Managing your property yourself allows you to know what’s going on.||You need to find a network of reliable, trustworthy tradespeople you can call on to handle maintenance for a fair price.|
|You get to save on property management fees. These often cost 5-12% of weekly rent, an enormous expense.||You need a combination of time, skill and experience, plus an understanding of state residential tenancy laws and your legal obligations. You risk being fined if you don’t quickly look after essential services and other urgent repairs.|
|You can get tax deductions on renovation costs.||You won’t have access to the tenancy databases property managers use to reduce risk while screening tenants.|
|You get to make decisions about property maintenance and tenants.||
You need to deal with difficult situations such as disputes, issuing breach notices,
making rent demands, evicting tenants and claiming bond money.
Roles And Responsibilities
Listing Your Property
You should first create a marketing strategy that includes advertising to attract the type of renter you want. Make sure you know how much it costs to rent similar properties in your area. Consider attending open houses to see what else is available in your neighbourhood and learn how to show people around the area. Then get ready to show the property.
If you expect a large number of individuals to be interested in renting your property, host an open house and make these preparations before potential tenants arrive:
- Make sure the property is clean and tidy.
- Before the inspection, open the windows and doors to air out the property.
- Get the carpets steam cleaned and the trash hauled away.
- Clean up the garden and make sure the house looks its best.
- Make sure the letterbox is clean and numbered.
- Ask for fair market rent.
- Ensure any damage and maintenance issues are addressed.
- Personalise the space with flowers, couches and ornaments etc.
- Prepare the necessary papers, such as a formal application and a tenancy agreement.
- Prepare an initial Property Condition Report.
Once the preparations are made, you are ready to place your ad. Remember it’s all about creating competition for your home. You want as many people to desire to live there as possible. The more applications you have, the easier it will be to find your ideal tenant!
Look at what others are doing on the internet to get some terrific ideas for organising and wording your ad. Make sure to add as many images of the property as possible.
You can use the following methods to promote your property:
- Websites that can take direct listings
- Major and minor newspapers listings
- Placement of signage onsite
- Casual letting for free or for a relatively low fee; see a real-estate agent about it
- In the ad, highlight key features, such as furnishings, facilities and proximity to amenities
Keep a written log and manage the enquiries professionally once you start receiving responses.
The next step is the rigorous process of finding dependable renters who can be trusted to reside in the house and pay the rent on time. Your property will become unoccupied from time to time, and you’ll need to locate a new renter. Remember that it is simple to get a tenant for your property, but it can be far more difficult to get rid of a terrible tenant.
Make a list of questions to ask ahead of time, and don’t be afraid to ask them more than once. Before interviewing potential tenants in person, you should screen them over the phone; this is critical because your gut instincts can help in your decision.
If possible, verify their:
- Reason for leaving their last rental property
- Number of family members
- Agency reference (if they previously rented through an agency)
- Income/employment details
- Credit history
- References from employers or previous landlords
Once you’ve decided on a tenant, approve them and let them know your contact information, as well as your preferred method of communication. Establishing some ground rules for what to do if something breaks on the property is also a smart idea.
Paperwork And Finance
Once you find a suitable tenant and agree to rent your property, you will need to get all the paperwork organised. You and the tenant will need to sign a tenancy agreement. The exact form varies by state but most government websites have a free form you can download and use.
An agreement should specify:
- The maximum number of occupants allowed in the property
- The size of the rental bond
- The bank account in which the rental payments will be deposited
- All necessary contact details
- Any other conditions specific to the property
You must be comfortable with numbers and paperwork. You’ll have to keep track of rental payment receipts and other receipts, costs and payments. For your record-keeping, you’ll need access to the internet, email, a mobile phone, a financial reporting system and electronic files.
Throughout the year, stay up to date on all you’ll need to know for tax purposes. Use a depreciation schedule from a competent quantity surveyor to claim depreciation on your property. When in doubt, always seek advice from your accountant.
Knowing The Legal Procedures
Both tenants and landlords are protected by numerous laws. Each state has its own set of rules. If you’re a do-it-yourself landlord, you’ll need to brush up on the relevant acts and legislation.
For example, if you want to evict a tenant, you’ll need to show that you’ve sent out all of the relevant reminders, notices, and applications at the appropriate times to receive the demand you need. You must give 60 days notice for periodic leases. If you are unable to do so, the judge may refuse to issue the order you seek, allowing the tenant to remain on the premises.
A short course in property management offered or approved by the Real Estate Institute in the state where your property is located is advised.
You will need to obtain access to standard agreements and documentation, such as lease agreements and bond lodgement forms. Disputes over rental payments, lease conditions and bond claims are not unusual and often wind up at a tribunal.
- Tenants should be signed up using a standard residential tenancy agreement.
- When you receive a bond, make sure to lodge it with the local authority.
- Collect receipts for all rent payments.
- If the tenant does not vacate the premises at the end of their lease, you will need a tribunal order terminating the tenancy agreement and a warrant from the State sheriff to evict them.
- For situations like unpaid rent, abandoned rentals, domestic violence or uninhabitable property, consult the Residential Tenancies Authority (RTA).
Deciding On Rent And Collecting It
One of the most significant tasks a property manager performs is setting the rent for the property. The market can be stronger at some times than others, it can also vary among different property types. Stay informed about what is going on in your community. You should also make sure that you raise the rent only per the lease’s conditions and local laws.
Rent collection is also critical. Make sure that the full rent amount is paid by the specified date.
Things to consider:
- You have to be clear that rent must be paid in full and on time
- Avoid payments in instalments
- Ensure the tenant is responsible for communicating any issues with rent payments
Professional property managers now manage rent payments using direct debit. This is the best method of payment because you get to retain full control as a property manager. The tenant signs an authority so that the rent can be debited from their account on the due date.
If your tenant fails to pay their rent in full by the due date, you must begin sending written notices that payment is due. For example, in some states, the number of reminders you have to send is limited. Depending on the state, you can begin more formal steps once rent is about 0-14 days past due.
It’s critical to ensure that your property is well maintained. Each state has its own set of regulations on how many times you can inspect a property per year and how the inspection procedure should be carried out. The RTA allows you to inspect up to four times a year, with at least seven days written notice for your tenant.
An inspection is usually performed three months after the initial occupancy and then every six to 12 months after that. It is the tenant’s responsibility to maintain the home day to day and report any damage to you so you can fix it.
Follow your state’s inspection laws, especially when it comes to inspection frequency, notice and entry procedures. Keeping thorough records and photographs is strongly recommended.
Repairing And Maintaining Your Property
One of the pitfalls for landlords who manage their own property is a lack of understanding of tenants’ rights in terms of repairs and maintenance, particularly urgent repairs, as defined by applicable legislation.
For example, if there is no hot water or working toilets, the renters have the right to have these items repaired as soon as possible. In most situations, they have the right to pay for the repairs and receive a refund from the landlord.
You must ensure that you have a range of tradespeople who can respond to your calls swiftly and efficiently. One of the benefits of working as a property manager is that you have better access to cost-competitive tradespeople, as you frequently work with them. These connections can save you hundreds of dollars, if not thousands.
Landlord insurance is a good idea because it protects you from damages to your property and belongings that you provided to the tenants. You should also remind tenants to get renters insurance and protect their belongings, as you will not be covering their stolen or damaged goods.
Frequently Asked Questions
Can I Pay A Family Member To Manage My Property?
A family member who is inexperienced and/or unqualified to manage your rental may not perform to the standards the law requires. You could face fines and legal action if they fail to promptly provide tenants with the necessary repairs, paperwork, records and receipts.
In addition, you may find it tough to voice any issues because you have a personal relationship with your family member. Hence, you might be better off letting an unbiased professional help you make selections unless you can set clear expectations from the start.
Let Home Loan Experts Help You!
We can help you to get a competitive home loan so that you will be able to use it to own an investment property sooner. Our mortgage brokers can also help you if you need advice regarding property management.
Call us on 1300 889 743 or complete the no-obligation form and we’ll connect you to our expert mortgage brokers, who will make sure you get the best deal possible.