27 Nov Why you can self-manage your rental
The simple truth is that no one cares as much about your investment property as you do. It’s also true that not everyone wants to manage their own investment properties and are happy to outsource this to a Property Manager. But, like the growing number of Australians who are taking direct control of their superannuation, many residential property investors are taking control and saving money by self-managing their rental.
Australian Bureau of Statistics figures show that nearly a third of all dwellings are rented, of which just over half are managed by real estate agents. After we remove public housing and charity run properties, the data shows that just under 30% of rental properties are privately managed. This equates to about 680 000 dwellings. That is a sizeable group of people who see value in self-management.
There are very strong reasons as to why you can join the savvy group of self-managing landlords.
The resources are available
Can I access the resources I need to do the job? The short answer is yes and many of them are free. As residential tenancy law is a state concern you’ll find that every state provides some resources on the topic. Though frankly some states could do a lot more in this area. State authorities that have the requirement of ‘prescribed documents’, which means that things (such as the leases and tenant notices) must be on a particular form are provided free of charge online. Self-managing landlords can also access the bond lodgement services at no cost.
There are some key resources that are not so easy for self-managing landlords to access (namely effective internet advertising and tenancy database checks). As many of these will only deal with licenced real estate agents. There is a way around this though with eezirent. eezirent can link up self-managing landlords to mainstream internet advertising and can also facilitate a tenancy database check.
It’s not as time consuming as you think
Certainly, managing your own rental property is going to take more of your time than if you put the job in the hands of a real estate agent. But, as long as you are organised, you’d be surprised how little time it takes. The biggest drain on your time will be when you are searching for a tenant and have to show people through the property. You don’t have to drop everything when a tenant calls requesting an inspection. Holding set open homes will help considerably – say two, thirty minute sessions per week. Once you’ve got the tenant in place the demands on your time reduce considerably.
You will save money
You will save the costs of the letting fee, the management fee, administration charges, as well as any other add-ons that tend to come when you outsource to a real estate agency. You will also save GST costs. Though this is of course not an issue if the property is owned by an entity registered for GST.
Letting fees are typically the equivalent of one week’s rent. Though an increasing number of offices are charging two weeks’ rent. You can expect management fees to be between 7% and 10% of the weekly rent. Administration fees are usually between $3 and $5 per month. Typical add-ons are things such as a fee for preparing the sign-up docs, the cost of advertising, charging you to do routine inspections, a fee to give you an end of financial year statement and a lease renewal fee. You can easily do the maths and calculate that the savings of self-management are considerable.
You can get landlord insurance
A few years ago, some companies who offered landlord insurance would not cover self-managing landlords. To get insurance you had to use a property manager. Fortunately, this situation has improved dramatically. The game changer occurred when one of the largest landlord insurance companies, Terri Scheer, changed their policy. This forced other companies to do the same.
What if I don’t live in the same area as my investment?
Though not essential, self-management is most efficient when you live in the same city as the rental. Not only are inspections a lot more convenient, physical proximity allows for the occasional drive by to be sure things are in order. Having said that, a compromise would be to engage a local real estate agent on a ‘let only’ basis. This means they find the tenant and do the sign up then you take over the ongoing management (remember that travelling expenses incurred to monitor your investment can be a tax deduction).
If you’ve ever wanted to run your own business, self-managing a rental property is a good start. Your tenants are your customers, the property is your stock, and the rent is the price. So, give some consideration to self-management. If it turns out that it is not your cup of tea, you can always engage a property manager down the track. It is certainly worth a shot.