It has been a very interesting few years in the rental market and one curious thing I couldn’t help but notice is the rise in the amount of landlords choosing to privately manage their investment properties. So naturally you’re going to say, Stacey as a Property Manager aren’t you supposed to say that is a bad idea? The truth is for some it is a very bad idea but for other landlords out there with the knowledge, time and willingness to be “hands on” it can work out just fine. It does interest me that real estate, Property Management in particular, seems to be an area that many people are of the opinion they can do it just as well as a professional, but is this really the case? It is not unusual for me to receive at least two calls a week from private landlords asking for my help; Is my rent too cheap? What should I be getting? How do I increase the rent? How often can I do an inspection? I am not happy with my tenants what should I do? How do I renew the lease? And so on. Don’t get me wrong, I am actually genuinely happy to help and give advice, I have no issue in doing so, but it does make me think, if you don’t know the basics, how can you realistically believe you are effectively and competently managing your investment.
More troubling is probably in the last 12 months or so, we have been employed to step in and aid over 15 private landlords whose tenancies got to the stage they could no longer control them. I am talking extensive rent arrears, property damage, illegal occupants, the works. What made our job harder is none of these landlords had fully laid any of the correct foundations with the tenancy, some had no bonds, most had no rental payment ledgers, no idea where their tenant was paid to, some had no lease agreements, most had no PCR’s or if they did it was not in the prescribed format. One landlord, if you can believe it, actually had no idea who was living in the property. Whilst the Residential Tenancies Act is designed to protect both the owner and tenant, if you haven’t fulfilled your obligations as a landlord, the reality is you can’t rely on or expect the courts to provide relief. There is also provision for the courts to issue fines for these shortcomings, which also creates a “catch 22” if you need to go down the court system path.
For example, a private landlord gave us their tenancy to take over and the tenant was in significant rent arrears. This in normal circumstances is not an overly hard situation to navigate, we would try and mediate with the tenant, if that did not work we would start the process to terminate the lease and if necessary escalate the matter to court. To action this process, you need to have a rental paid to date, but this owner kept no records of what the tenant had paid him, which in itself is a breach of the Act. They just knew that they had not received any rent from the tenants in over five months and when they had paid prior, it was never regular. So with no rental payment history available, not a lot can be done unfortunately. Thankfully that lease was on a periodic basis, so the process took longer, but we were able to successfully move that tenant on, however it cost the owner tens of thousands in lost rent. This story is sad because it is not uncommon.
What is contributing to the decision to go it alone, I believe, is the allure of the high rents now being achieved and by the sheer volume of how many people are in need of homes. What could be simpler; put an advert up online, get multiple applications, select the person offering the most, easy peasy! Alas, that is not always a recipe for leasing success. I have seen and dealt with many private landlords who leased their properties to people they have found off Gumtree or friends of friends, with no reference or background checks and no tenancy fundamentals in place. They don’t consider any of the dangers of placing someone they don’t know in their property or the consequences of going into a tenancy without all the necessary checks and balances, their focus is just on the high rent they got without paying an agent. Secondly, lets face it, some landlords simply don’t like agents and sometimes with very good reason. They have had a bad experience, or several, and just don’t trust them anymore. It is fair to say there are some agents out there who aren’t fantastic and that puts people off. I also think this has a lot to do with how landlords select their agents, with the main focus being generally on choosing the agent with the cheapest fees, but let’s save that for another blog!
Ok with all that doom and gloom out of the way, if you want to go it alone, whatever your reason is, take the time to do your research. Make sure you have all the necessary tenancy documentation set up, prioritise background checking your tenants, don’t just go solely for the highest rent, money is great, but people who will respect and care for your investment is also important, especially when you are dealing with them directly. Keep tight records, you never know what you might need to refer back to. Check out the Consumer Protection website, they have some excellent information for private landlords, on the Act, changes to the Act, fact sheets, prescribed documents you can use etc. Investing this time to get your tenancy set up properly and inline with the Act is paramount, it means you can actually advocate for yourself in the event something does go wrong. It’s notable to remember many tenants are savvy to their rights as they should be. As much as I hate to say it, some of them know how to manipulate the system to their advantage and the last thing you want is to be caught up in that kind of situation. Another option is to consider using an agent for a let only service, they then do all the background and tenancy set up work for a nominal fee and then you take over the ongoing management. We have performed this service for many private landlords with great success.
The message I hope you to take away from this blog is not that we want to push the “you must have a Property Manager” agenda, but to ponder the bigger picture, what in reality are you saving, what are you potentially losing and are you educationally equipped to effectively manage a tenancy. Unfortunately after having to step in for these landlords and see the devastating consequences of a “she’ll be right” attitude, or in most cases, they just did not know they were doing the wrong thing. I think it is important to make an informed decision about what is the best way to manage, maximise and protect what probably may be your most valuable asset.
Written by Stacey Kouroulis – Director of Property Management
0417 926 091