When it comes to managing a residential investment property, like many aspects of modern living, you have the option to pay for a professional to do the work for you, or roll up your sleeves and do-it-yourself, with property management, this is known as a private rental.
For the right person, getting hands on through a private rental may be exactly what they need.
Traditionally, property managers and real estate agents looked after a number of aspects around a property lease including:
• Advertising a vacancy
• Hosting open inspections
• Checking potential tenant paperworks
• Running tenant background checks
• Looking after the lease agreement
• Overseeing the signing of the lease
• Reconnecting amenities
• Property condition reports
• Ensuring timely monthly lease payments
• Conducting regular property inspections
• Sending required legal paperwork and communications
• Handling complaints
• Working with suppliers and tradespeople for maintenance and fixes
That meant that all the landlord had to do was sit back and relax. For many, this is still the preferred way to go, especially for those who do not live near their investment property or who have multiple investments.
For a growing number of landlords, however, the option to do-it-yourself is a winning one. According to data from the Australian Bureau of Statistics, 33% of residential investment properties in Australia are self managed. That’s one third of investors in the private rental market.
For a property to be considered as a private rental there is no real estate agent or property manager.
The property owner is responsible for communicating directly with their tenants and handling everything from sourcing applicants, organising paperwork and the day to day operations.
To decide if private rental is the right choice for you, it’s important to weigh up the pros and cons of managing your own property. Of course you can also choose to try it out yourself for a while then hand it over to a property manager if your circumstances change down the track. The big benefit that will give you is you will fully understand what the property needs are so you can give your manager the instructions and support required to get the job done smoothly.
Every property, and every tenant is different. When you factor in the building structure (single story, multi story etc), garden or pool maintenance, body corporate regulations, building age and the number of tenets you have, you’ll find that every situation is unique and will require a slightly different approach for smooth running.
Some tenants require lots of attention while others you will rarely hear from.
Here are some of the pros and cons to private rental that can help you decide which property management solution is right for you.
For many landlords the decision to take on a private rental comes down to costs. By saving on the expense of hiring a property manager a landlord can save thousands of dollars in fees every year
It’s not unusual for real estate agents to take between five to 12 percent of the weekly rent to cover their time.
Depending on your personal situation you can also save money by taking on the gardening work, handy repairs, pool cleaning, gutter cleaning, putting the bins out, depending on the property type and what the terms are around job allocations.
Always be sure to stick to all privacy laws and give your tenants written notification before entering the property. Some landlords state upfront, before the contracts are prepared what their involvement will be, which although can be a deal breaker for certain tenants, it does insure that you only get the best suited people for your situation signing on.
Part of the reason third party property managers were heavily used in times gone was their ability to reach more potential tenants.
Private landlords had limited advertising access, meaning that tenant choices were low and vacancies were potentially higher. Now online rental services conducted through reputable and dedicated rental sites, in some cases even real estate sites, make it easier for private rental owners to attract a wider public interest, giving them access to better tenants and higher rental prices.
A private landlord can run an online property vacancy advert for as little as $220 on real estate sites, giving them a rental listing until the property is leased.
If you are looking to get into investment property as a business, rather than just passive income and financial security, then a private rental will give you hands-on business insights into what makes everything tick.
Sink or swim learning environments can sometimes be the best motivators to learn new skills rapidly.
You’ll quickly get to know the specific areas of your investment that require attention and what your legal responsibilities and restrictions are. You’ll develop knowledge and experience in property and confidence in a management role.
When you self manage a rental property you know about issues as soon as they occur. You can decide how they are attended and control the costs a little more than a third party manager, who will inform the owner of an issue only during business opening hours. In some cases it can be some days before an owner is informed of work being carried out on a property.
For some property owners, keeping a close eye on the property is important. This is especially the case where the rental property is on the same land as the landlord’s residence.
By conducting your own property inspections you can know exactly how the property is maintained and take up the opportunity to address minor fixes that a real estate agent might overlook as regular wear and tear.
Real estate agents will screen prospective tenants on your behalf, but some landlords prefer to screen themselves to hand pick the right people for the lease.
There are a number of criteria you can request to compare your applicants.
Just keep in mind it is illegal to reject an application that has children. Parents can’t be penalised for having a family.
While modern technology has come a long way in assisting landlords in managing their own properties, there are still some sides of a private rental that need to be considered.
Managing a property carries critical legal responsibilities. Tenancy legislation differs from state to state, and is jammed with complexities that you need to abide by. As well as the tenants legal rights to consider there are property laws and body corporate laws to take into account.
It can be all too easy for novice property managers to make a legal blunder and not even know it.
Real estate agents and property managers are trained in rental laws and generally understand residential laws, tenant rights and lease contracts inside out. They are also notified of any recent or upcoming changes to residential laws and put steps in place to meet any obligations before deadlines.
It’s not always going to be roses and sunshine. You need to be comfortable with the more unsettling side of things and continue to act in a professional manner, no matter what.
There are a number of tense and emotional situations a private rental landlord may have to face
• Rental increases
• Lease agreement issues
• Payments in arrears
These can be confronting situations that can be drawn out over along period of time.
It can be even more difficult to put your foot down if you have created friendly relationships with your tenants. When the lines between business and personal are crossed, asking for money or turning someone out can be a difficult task.
Even without friendships being formed some people find the idea of confronting tenants very alarming.
When you hire a property manager you remain detached from any tenant issues and can trust your appointed staff to follow through with professionalism, even when the going gets tough.
Managing a property takes a serious amount of work. It's a job that requires multiple hats including multi-tasking, negotiating and communication.
If you work full time then the extra time it takes to manage an investment property might not suit you. While some months you might only need a handful of hours, other months you might find strenuous.
Keep in mind that you need to be flexible enough to fit around your tenant and be on call in case of emergency.
No matter how carefully you screen your tenant, there is no way to know how much time they are going to need from you, especially if you encounter unforeseen circumstances, like noisy neighbours, natural disasters or testing situations like multiple enforced home lockdowns.
Make no mistake, in times of crisis, be that late payments or perhaps a burst water main, self managed properties can be stressful and time consuming. Be sure you are not spreading your personal resources too thin by taking on a project of this size.
In some cases you might need to rely on an expert and it;s important to know where to draw the line on do-it-yourself and when to call in the professionals.
Be sure to hire the right service providers for any work order that requires a licensed professional, like a plumber or electrician, even though they can be expensive, especially after hours or public holidays.
Make sure your fire safety and electrical safety checks are carried out frequently, and get the help of a professional tax return specialist if book keeping is not in your wheelhouse.
A private rental property can be a rewarding and educational experience for many landlords. The type of property you have can influence how easy or complex a private rental direction will be for you so be sure to look over all the terms and conditions before you purchase an investment property to know if it will suit your future expectations.
If you need any help in understanding or defining any of the property contract terms please let us know and see how our friendly team can assist you.
Contact us today if you would like one of the best NSW conveyancers to walk you through your property transaction.
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