Will you really save it in the long run?
Most people consider leasing a property privately to save the costs of a property manager. Usual prices in WA range from 7%-14% of income collected plus initial fees for items such as advertising, leasing and inspections. Although this is income still in your pocket if you choose to self-manage the following should be considered before making this decision:
- All fees paid to your property manager are tax deductible.
- Time. Take into account how much time you will need to spend doing things like chasing up late rent and utilities, inspecting the property and organising trades for repairs. If you get a problem tenant and need to go to court you will often spend a full day having to wait to attend the courtroom.
- Property managers often have a portfolio of 80-120 properties; all of which need maintenance and repair works undertaken at some stage. For this reason property managers form good relationships with tradespeople and can often refer them a lot of work – for this reason the tradespeople look after the property manager in return and will often offer them discounts and go out of their way to help them. This can be very beneficial to you as a landlord, especially in emergency situations such as the breakdown of a hot water system or toilet.
Initial Leasing of the Property
Initial leasing of the property, especially in a slow market, can be time consuming and frustrating. It may take a long time to achieve your desired price (every week the property is empty is a week without income) and you may have to show the property to prospective tenants multiple times a week including on weekends. Many property managers offer a “leasing only” service in which they find you a tenant and you manage the property from there. If you have some kind of previous experience in managing property this may be a viable option for you. If you do decide to lease a property privately you must ensure you conduct thorough checks on potential tenants – check the National Tenancy Database to ensure they aren’t blacklisted, call their employer and confirm they have a stable job and are paid what they say they are and ensure a minimum of two references are sought from where the tenants previously lived. It is a lot easier to move someone into your property than to move them out.
Don’t forget that you are paying a property manager for their knowledge. Not only their knowledge of the processes of managing property but their knowledge of their local area and the market/prices within that area. They’re constantly speaking to prospective tenants in the area and can compare prices of rental properties to accurately ensure your property is leased quickly for the best possible price. Say your property is worth $500 per week and you overpriced it by just $10 per week resulting in it taking an extra 4 weeks to lease, you will have lost $2,000 in 1 month in order to achieve an extra $5,200 over the year! A property manager’s local market knowledge should ensure your property is vacant for as little time as possible.
Legal Rights and Obligations
If the proper processes aren’t followed correctly when a property is leased you could put yourself at risk of losing hundreds or thousands of dollars. The following should be considered with regard to the legalities of leasing your property:
- It is more difficult to obtain landlord’s insurance. Any seasoned investor understands that landlord protection insurance is a must. No matter how well a property manager does their job it is inevitable that if you have a difficult tenant in your property you may need to make a claim on your landlords insurance to recoup costs relating to court, rent and damage to the property.
- Paperwork and serving the correct notices is one of the most important parts of a property manager’s job. Do you know the correct notices to serve and the timing of when they can be sent? If not it can end up costing you a lot of money should the tenant fall behind on their rent. Additionally you must consider whether you can manage the property with no emotion. If the tenant explained to you that they’d had a family tragedy, illness or had lost their job would you still be able to assert your legal rights unemotionally?
- Bear in mind that just because you are managing the property privately it does not give you any extra rights to access the property. You can get in trouble for entering the premises more than 4 times a year and you won’t be able to just “pop round” to collect the rent. Ensure you know the tenant’s rights and your obligations as an owner or you be subject to a fine from the Department of Commerce.
So as you can see there is plenty to consider before you make the decision to lease a property privately. If you get a dream tenant everything can go great but as soon as you have some form of conflict with a tenant you can lose control very fast. Additionally the whole process can be very time-consuming – ensure you know the value of your time and whether you’re willing to give that up before you decide to go private. In my opinion the value of the amount of time I would spend managing a property would be much higher than what I pay a property manager but that is a decision you must make personally.
Cap-It-All Building Inspections Perth