Those small initial savings could create a large impact on your return on investment later
Understandably, many property investors are enticed by the idea of managing their own investment properties. We wouldn’t be surprised if the thought had crossed your mind on at least one occasion.
Buying a property is a costly investment and it’s only natural to want to maintain as much control over that investment as possible. It also makes sense to think that you could save some money by looking after your properties on your own, rather than hiring professional property management services.
But those small initial savings could create a large impact on your return on investment – and have you pulling your hair out from the stress of juggling property management duties with your existing job, family life, and other commitments.
Here are just a few of the difficulties faced with a DIY approach to property management:
Handling the additional responsibility
It’s important to be aware of the extensive workload that’s involved in property management and the potential legal liability that property management duties could leave you exposed to.
Usually, acquiring more investment properties is a positive experience that should leave you feeling excited and proud of your achievement. But, if you’re managing your own properties, as your property portfolio grows, so will your responsibilities and stress levels.
Maintaining professional and amicable relationships with tenants
Property management professionals carefully balance your interests with those of the tenants. Their impartiality removes a lot of the confusion and confrontation that can be involved in property management.
Try as you may, it’s much more difficult for you to negotiate a balanced and fair outcome when you are directly involved in any dispute or conflict.
Sometimes property managers need to be stern to ensure a desirable outcome. Are you the personality type that is more comfortable avoiding confrontation? You need to ask yourself if you can be firm when a tenant is late on their rent, or when damages are found during an inspection.
If your tenant wants to break their lease without the required notice, will you be able to assert your legal rights calmly?
Understanding relevant legislation
If you’re going to manage your own investment properties, you’ll need to be up to speed with the complex and numerous laws that exist to protect you and your tenants.
There are study courses that can help you with this, and it’s recommended that you find the time and funds to undertake some training. This might help prevent any future issues that could emerge as the result of a lack of understanding your legal obligations.
You’ll need to acquire standard agreements and documents, such as lease agreements and bond lodgement forms – and you’ll need to understand the complex nature of these documents to ensure you’re conducting your business correctly.
Disputes involving rental payments, lease conditions and bond claims can also wind up in a tribunal where a tribunal member will consider whether you have taken the appropriate measures and provided the relevant documentation. Failing to do so could result in an unfavourable ruling for you.
Professional property managers are accustomed to these formal environments and are trained to confidently argue for a positive outcome. As your own property manager, you may need to appear in a tribunal and the setting can be intimidating for many people.
Managing availability and time pressures
DIY landlords need to be readily available and prepared to take the time to deal with situations as they arise. Whether this is arranging a new lease, or getting a phone call about a burst water pipe at 3am, you can’t clock off from managing your own properties.
It can be frustrating if you are working, or on holiday and need to make time to handle your tenant’s needs, or lease your property. Property management duties can be very time-consuming, with problems like urgent maintenance repairs it’s important that you’re available to deal with them immediately.
The time-consuming duties can pile up and begin eating away at your free time. Just some of the usual tasks include advertising properties, vetting tenants, chasing rent payments and deposit bonds, coordinating repairs, conducting property inspections and more. Fulfilling these responsibilities after work could cut into your precious free time, or limit your availability to spend time with your family.
If you want to manage your own property, you’ll need the appropriate technology and systems to support you. You’ll need access to the internet, email, mobile phone, a financial reporting system and electronic files for keeping records.
A property managers use these tools daily and can navigate technology intuitively. For some, learning to utilise new platforms can be daunting.
Struggling with the leasing phase
Sometimes, your property will be vacant. This will be stressful for you, so it’s in your best interest to obtain a tenant as quickly as possible.
Professional property managers benefit from a comprehensive marketing strategy and a mature database, helping them to access thousands of potential tenants.
You’ll need to generate interest in your property from scratch and this starts with advertising your property. You want as many people as possible to want to live there, so that you maximise the number of applications you receive – and have your pick of potential tenants.
You’ll need to develop a marketing plan, including the advertising you’re going to utilise, an assessment of the cost associations and an analysis of your target audience.
Once you’ve developed your plan, you’ll need to implement it. That starts with creating your advertising content.
The way you present your advertisement is very important. You’ll need great photos that showcase your property in the best light, although they must be authentic.
You’ll also want your advertisement to be well-written and describe all the best features of the property to entice future tenants. Then you need to advertise it in the proper digital locations, for the right price.
The right price is particularly difficult to gauge, it needs to both reflect and compete with current trends in the area.
You need to price it competitively so that tenants can see the value, but you need to price it well so that you get the best return on your investment. After all, if you under-price it by only $30 per week – that may be your entire savings from not hiring a property manager wasted on one wrong move.
If you feel you have the market understanding, and the necessary photography, technology, and writing skills – this may not be problematic. But it can present a difficult process for many people.
Then you need to manage your advertisements. You need to be available to respond to enquiries that filter through about the property, and you need to do so in a professional manner so that tenants want you as their landlord.
After this, you’ll have to filter through all the applications and determine the best candidate. It can be very difficult to get a bad tenant out of your property, so screening your applicants meticulously in the beginning can save you a world of pain later.
Take the time to carefully analyse applications to make sure you pick the best applicant. Gain a strong understanding of their past tenancy history, ability to serve the rental payments, if they have any pets and several other important factors.
You’ll need to conduct a thorough condition report to keep track of the state of your property, and protect yourself from needing to pay to repair any damages that are your tenant’s fault. It’s important to take lots of photos.
Once you’ve approved the tenant, meet with them as quickly as possible to sign the lease and collect the appropriate bond.
Crunching all the numbers
If you’re comfortable with accounting, managing your own property may not present as large an issue. You’ll need to keep track of rental payments, fill out receipts and keep a record of other receipts, costs and payments.
Weighing it all up, you need to decide whether the savings of embarking on DIY property management is worth it. You may see some cost savings initially, but it’s likely the decision will end up costing you in the long run.
These costs could be financial, or they could come in terms of your time – or simply relate to your ability to enjoy your spare time without stressing. At the end of the day, hiring a professional property manager will provide you with access to their experience and expertise – and secure your peace of mind.