Has the lease expired on the traditional property management model??
The question of whether investors should self-manage their property portfolio has been debated for some time now. You’re led to believe when you sign up with your local property manager that they are looking after your investment and best interests; like it was their own. They came across as both thoughtful and attentive and on face value, appear to be competent. Surely, they must be if they work for the local Real-estate agent. Right? But did they tell you that they also have another hundred or so properties to manage? And that you're not their number one priority...Maybe even the most simple of tasks can be delayed or even worse. Missed! Do you get a discount if this happens? I think not!
Thankfully the development of new technologies is empowering Investors by way of smart alternatives to the traditional property management model. Let’s investigate the pros and cons of self-managing and see if it’s worth your while to consider a change.
Saving Money – This is an obvious one and works out to approx. savings of up to $1200 or more per year per property. Additional costs may include letting fees, paid each time new tenants are found around the equivalent of one week’s rent, plus advertising costs, which vary widely.
Choosing Tenants/Relationships with Tenants – Whilst there is some control in choosing the ultimate tenant, going through the screening process provides an opportunity for a face to face meeting. It also means that there is a potential to create a relationship with the tenant, hopefully, one built on trust and respect!
Knowledge – Home maintenance is not for the faint-hearted and DIY is not as easy as people make it out to be on TV; however being hands-on can provide a wealth of knowledge in the long run. Learning how much things should cost and how much time is involved is invaluable. When it comes time to get tradespeople in to do work on your investment property, this knowledge will no doubt save money.
Best Interests of the Property – No one is going to care more about the investment property than the person who owns it. Maintenance issues won’t go unattended, rent will not go unpaid. Control is a wonderfully reassuring feeling.
Rental Rate – Property Managers aren’t always going to get the best price. By doing research and understanding the local clientele and potential market value of the property, the rental income can be
maximised. Property owners are also going to be
cognisant of any special features and may highlight these better than the property manager.
New Technologies–Low cost and easy to use websites such as realrenta.com.au empower the property owner and make it simple to self-manage and be your own agent! For example; Tenants can pay rent to you via automatic direct debit,
authorised direct debit and BPay. Auto-generate and populate invoices/receipts, rental ledgers. Send SMS prompts and alerts, breach notices, collection notices and many recurring tasks are also automated, such as; notification of inspections, reminders, and notices, including Breach Notices.
Utilise the high level of automation to release self-managed investment property owners from the burden of compliance with accounting and legal procedures and to save on hours of tedious paperwork. Just like your agent you also can advertise your properties on a lot of advertising portals including realestate.com.au quickly and easily.
Negatives:(Not using realrenta.com)
Time – Just as saving money is obvious, saving time by having someone else manage an investment property is a given. This is obviously subject to many variables such as maintenance of the property, how diligent the tenant is and how many properties there are in the portfolio etc. Many people may start out self-managing their property/properties but as the number grows over time it becomes far more time-consuming.
Geography – Self-managing is a lot easier when the property is in close proximity to the owner so what happens when the investment portfolio expands and properties are being purchased interstate or even internationally? Of course, there is always an opportunity to engage a team of trade’s people but there’s nothing like being local and hands on.
Landlord Insurance – It’s a must have for any investor but word on the street is it can be hard to obtain from the more "respectable” well-known companies when there is no professional property manager appointed (which is just not true). Regardless of this, for peace of mind, do the due diligence and find a company that offers insurance for self-managed properties. It’s generally not an expensive item, approx. $250 per year, and like all costs associated with an investment property, it is tax deductible.
Knowledge/Experience – Not everyone is handy with a hammer so chances are trade’s people are going to need to get involved to take care of maintenance issues etc. The property manager will have a list of go-to people they rely on to serve all their properties, and one would expect a strong relationship that goes with providing on-going work. Also, whilst earlier I mentioned DIY can be a great learning experience, on the flip side, it can also be extremely costly. If home repairs are not done correctly it could involve a trade’s person coming into to do rectification works which means double the time and money spent.
Paperwork/Tenancy Agreement – Setting up the tenancy agreement and all the paperwork that goes with it can be time-consuming. Any mistakes made during this process could end up being costly as it sets the basis for the entire agreement. A bond will also need to be obtained and issued to the Residential Tenancy Bond Authority who will hold it in trust until the term of the lease expires. If there is a claim made against the Bond it could possibly end up in dispute.
Tax Deductions – Choosing to self-manage an investment portfolio is great for saving money but remember in doing so any potential tax deductions associated with appointing a property manager are forfeited.
The Human Factor – There may be times when a tenant cannot pay their rent and
being only human this can be "ignored” and let slide…once…twice…get the picture? The advantage of having a property manager, as a middleman, is that emotions don’t come into play.
It may seem from the outset that there are more negatives than positives when it comes to self-managing property, but it ultimately comes down to the weight each of these items holds for the investor. For some, getting their hands dirty and being
organised is part and parcel of who they are and as such self-managing, an investment property is within their realm of capabilities. Unfortunately, like most things, it’s not a one-size-fits-all situation and will need to be evaluated with each person’s own circumstances in mind.
Utilising RealRent.com technology is a great way to have your cake and eat it too! You are self-managing your property while maintaining full control over it, which saves you money.
RealRenta.com.au takes the unknown out of self -managing and auto does all the tasks that take
RealRenta.com.au provides an automated solution allowing you to self-manage your rental property with complete transparency whilst still keeping the tenant at an arm’s length relationship.
For those of you who are keen to know more about the process involved with self-managing an investment property, and the step-by-step process to making it happen, contact RealRenta.com on 1300 11 RENT (7368) and start saving now!
Monday, 17 December 2018