Purchasing a home, unit or apartment for investment purposes is a fantastic way to generate wealth and expand your portfolio. However, when figuring out how managing tenants in your property, it’s important to consider all options impartially. By weighing up the pros and cons of DIY management or using a property manager, we can put both choices under the microscope and make an informed decision. Just remember that whether you’re a canny investor or relative newcomer to the world of property management in 2017, it’s a huge commitment that requires an expansive capacity for patience plus support from industry professionals.
Property Managers Managing Tenants
Property managers throughout Australia play a vital role when it comes to managing tenants in an investment property, making it even more important to choose one that’s working in your best interests. Besides just chasing up rental payments, property managers also perform a number of other duties when it comes to handling your investment. This includes mitigating disputes and coordinating any repairs that need to be made to the property among other tasks. But how do you select a property manager for managing tenants? And what other services do they offer? By asking the following questions you should be able to arm yourself with all the information needed to make a decision:
- How much experience do you have in the property management industry?
- How many properties do you manage at any one time in the local area?
- Are you a one-person operation or part of a property management team?
- What day-to-day duties do you handle on my behalf?
- How do you determine rental value?
- How often do you intend to communicate with me?
- How do you handle any tenancy disputes that may arise?
- What is your management fee and are you negotiable?
Based on the answers you receive, you should then be able to deduce whether or not a property manager is right for you. Now it’s time to look at the pros and cons of using a property manager for managing tenants in your investment property.
Pros
- They can advertise the property to renters and vet prospective tenants
- They will ensure rent and the rental bond is paid on time and in full
- They can resolve any tenancy issues or complaints
- Your property manager will deal with difficult tenants and attend tribunal hearings
- Management fees are tax deductible
On top of these pros, one of the main reasons to hire a property manager is their ability to alleviate any stress that goes with the daily running of a rental property. This benefit alone is a huge advantage for those that don’t have the time to deal with any issues that may surface during the rental process. In addition to this property managers tend to bring a certain level of expertise to the table, and will more than likely have a better grasp on the legal ins and outs relating to tenancy disputes, failures to pay rent, eviction notices, and so on.
By engaging the services of an experienced property manger you also essentially eliminate any emotional involvement on your behalf, allowing you to deal with most situations more efficiently.
Cons
- Loss of control over the day-to-day running of your investment property
- You’ll have to pay a management fee, which will cut into your profit margin
- There’s always a risk you’ll pick a dud property manager that won’t safeguard the integrity of your home, leading to damages and possible difficulties when it comes to resale
The main setback of hiring a property manager to handle your investment is the fact that you will then have to pay a monthly management fee to the agency. This means you’ll have to account for this in your cash flow and may not earn as much as you could if you were to manage the property yourself. You’ll also have less control over any decisions that need to be made on a daily basis, and there’s a chance that they won’t meet the same standards you set for yourself when it comes to ensuring rent is paid on time, the overall cleanliness of the property, etc.
If you do choose to employ a property manager it’s important that you take your time when it comes to the selection process. Don’t be afraid to ask as many questions as you feel necessary before you make up your mind.
Managing Your Own Property
Managing your own investment property is the alternative to hiring a property manager, the difference being that you perform all the duties they would normally take care of on a day-to-day basis. By choosing to go down this road you’ll save money on management fees, however the savings will most likely be negligible when compared to the fees currently charged by real estate agencies in a highly competitive market. You’ll also forego any tax rebates you’re eligible for on professional fees. If you are considering this option then you should first deliberate on the responsibilities involved and what is expected of you:
- Having an understanding of both your own and your tenants legal rights
- Marketing the property for rent
- Organising a lease agreement
- Processing the bond
- Drawing up condition reports
- Organising repairs or general maintenance of the property
- Showing any prospective tenants through the property
- Collecting rent
- Mediating any disagreements
- Following up on arrears
Handling disagreements or conflicts professionally without letting your emotions dictate your actions is arguably the hardest task when managing tenants in your own rental property. Let’s weigh up some of the other pros and cons relating to this method.
Pros
- You have control over how you manage your property
- You’re able to make sure the property is kept to your own high standards for cleanliness
- You save money on professional fees by not engaging the services of a property manager
Whilst managing your own property is hard work, there are three advantageous reasons why you should consider doing so. The first is that by looking after your investment directly, you have the first and final say in any decisions that need to be made. The second reason is that this aspect of control will also allow you to make sure that the property is kept to your own high standards of cleanliness instead of someone else’s. However perhaps the main reason of managing tenants in your investment property personally, is that you’ll save money on agency management fees. This can be seen as a win if you’re looking to milk your investment for as much as possible.
Cons
- You will have to learn how to mitigate any disputes that arise in professional manner without getting emotional
- You’ll have to draw up your own rental agreement and condition report
- You may have to attend a tribunal hearing if a disagreement escalates
- Much of your spare time will be taken up by the tasks involved in the day-to-day management of your property
The most pervading con when it comes to managing tenants in your property directly is that you’ll have to devote a large amount of time undertaking the day-to-day tasks that a property manager would normally perform on your behalf. Rental agreements, condition reports and the handling of any disputes that arise pertaining to missed rent or damages will also fall under your umbrella of responsibility and may involve taking legal action. You’ll most likely be disadvantaged in the sense that you’ll have little to no specialised industry knowledge, such as market information or a tenant’s rental history. Maintaining a good relationship with your tenants throughout the rental period is also important, but can be quite difficult to achieve if problems consistently arise.
Whether you have an extensive portfolio of investment properties or are just getting started, the services of a property manager are invaluable, granted you choose the correct one. If you do feel that you have the emotional aptitude, time and dedication needed to manage your own investment property then it can be a rewarding experience, but it’s important to first know exactly what you’re getting yourself into.