What you need to know before privately managing your property.
15th February, 2022
I have met investors over the years that have managed their own properties without issue. This is great, but the thing that has always perplexed me though is why they would bother to do it themselves at all. Having spent years in property management in Melbourne and Perth I know firsthand the work that is involved in managing an investment property properly. While all owners have their reasons for wanting to keep a hold of the reins themselves, I do believe the expectation of the work involved is greatly underestimated.
Is it to save money?
It seems simple right, manage your own property and you will find more money in your pocket not having to pay management and leasing fees. While in the short term this is true, as we all know the more money that you earn, the more tax you pay. A lot of inexperienced investors are not aware that the bulk of property management fees are tax deductable. Either you have an agent manage your property and claim it as a tax deduction or you do all the work yourself and pay the tax man a premium for the pleasure of doing it. There are lots of expenses related to owning a property that are claimable so to get the most out of your investment you need to get your financials right.
I can just find my own tenants on Facebook and gumtree.
Well, you can….
In today’s connected online world it’s easy to reach a wide audience for free by posting on these sites. What you should think about though is what kind of tenant is looking to gumtree to find a rental property? In the current rental market, we are getting multiple applications on our properties, landlords are spoiled for choice and choosing only the best tenants. If a tenant has a less than impressive rental history then they have no choice but to resort to these types of sites to find a rental property. You need to be doing thorough checks on a tenant’s identity, employment, ability to pay rent and rental history. In my experience, it is important that you do your background checks and not just take someone at face value.
Rules, rules, and more rules
In the tenant–landlord dynamic the tenant has always been viewed as the underdog. To make sure tenants are given a fair go, states around the country regularly introduce new legislation to even the playing field. Since 2021 in Victoria, agents and landlords can now face a financial penalty for simply using the term tenant and landlord! (Now renters and rental providers). To keep yourself protected you must keep informed and up to date with tenancy legislation, if not, you will likely be breaking rules that you don’t know exist.
Examples of things you may not be aware of (to name just a few) –
At the start of the tenancy, you need to give the tenant a copy of the condition report in the prescribed format.
If not and your tenant damages your property you will have little hope of having them rectify the damage.
You need to be doing routine inspections at the correct intervals.
If there is any damage to your property and you need to make an insurance claim, you will need to provide them with copies of your recent routine inspection reports.
If you don’t have these, your claim will likely not be paid.
You need to be keeping clear accounting records with paid to and from dates.
If you and your tenant have any disputes over payments, you will have little recourse if your accounting is not done correctly.
If things go wrong and you find yourself in mediation or in front of a magistrate, they often side with the underdog, especially if you haven’t followed the rules to the letter of the law.
Have you tried turning it on and off again?
Think of a property manager as a kind of help desk, when things go wrong, they are the first person that gets the call. My neighbour is noisy, someone parked in my parking space, my power has gone out, I have locked myself out, someone has stolen my rubbish bin, these are the kinds of calls property managers get daily! These are the calls that a property manager troubleshoots so you don’t need to be bothered. If you to take the goalkeeper out of the equation you need to be prepared to deal with these types of things when they arise.
My last property manager was hopeless, I could do better myself
Yes, sadly I have heard this many times before, not everyone is great at doing their jobs. However, if this is how you feel I would recommend checking out my previous article on Top 4 tips for selecting a quality property management agency.
Good luck out there!
By Ben Broadley