There are obvious pros and cons to self-managing your rental property. One of the key reasons owners choose to self-manage rather than giving it to a professional property manager is to save money. Some property investors may have a substantial property portfolio and the annual savings can amount to a fair sum of money. However, the main consideration is whether one has the time, knowledge of relevant regulations and expertise to effectively self-manage. Some investors who have achieved a substantial portfolio may view their time cost as too valuable to forego and paying a professional manager is more cost effective and moreover, the expenses of the manager are tax deductible.
1. Understand the market
The DIY landlord needs to be on-the-pulse with rental rates of similar properties within the vicinity and have an idea of how future rates are trending to correctly set a competitive rental rate. Being price-sensitive is a prudent approach as it is better to forgo $10 over 52 weeks than having the property vacant for a couple of months. In a climate where rents are rising fast, testing the market by charging more may not result in securing the right kind of tenant. Some tenants may be willing to pay slightly more if they have been refused tenancy elsewhere or have a less than favourable history.
Good tenants are too good to lose. In keeping up with financial considerations of raising rents need to be balanced with keeping the good tenants.
2. Understand your own capabilities and personality
In self-managing the property, one has to have good inter-personal skills in terms of exercising courtesy, tact, firmness, understanding, compassion, objectivity and the list goes on. There are no hard and fast rules in maintaining a successful landlord-tenant relationship but it certainly calls for good people skills.
3. Legal and legislative structures
The legislative structures to protect the interests of both landlords and tenants vary in each state in Australia. One needs to be conversant with, among other legal structures, the Residential Tenancies Act 1987 No 26 and provisions of the Department of Fair Trading. One is required to be familiar with standard documents such as lease agreements and bond lodgement forms.
4. Leasing the property
This is an important part of self-management as it involves numerous tasks:
Advertising is all about creating interest and enthusiasm for your property. In this respect, having good photographs which correctly represent your property is paramount – neat and tidy living areas, clean and uncluttered bathrooms, kitchen, well-maintained garden all adds to the appeal. Most professional managers do not include floor plans in the advertisement. I have found that a well written advertisement which details all the benefits such as modern conveniences eg reverse cycle air-conditioner, European kitchen appliances, storage, gymnasium, swimming pool and public amenities such as transport and schools will always create good interest and response. I also always include a floor plan to give tenants an idea of living space and logistics.
ii) Receiving enquiries
You need to receive enquiries in a courteous and professional manner. Understanding the process of tenant screening and acceptance gives tenants the confidence that you know exactly what you are doing being a self-managing landlord.
iii) Screening and qualifying tenants
This is probably the most important process as it is easy to accept and extremely difficult to remove a “bad” tenant from the property. This process should cover questions relating to identification checks eg passport and driver’s license, tenancy and employment history, credit and reference checks and bank statements.
Interviewing tenants in person is imperative to get an impression, understanding and comparison of prospective tenants and one should not be afraid to ask probing questions in a courteous manner.
Google and checking tenant register is also a good way to try and find more information.
A good site is tradingreference.com
iv) Accepting tenancy application
Once you are happy with the tenant, accept the application quickly by signing the lease and accepting the bond and deposit monies. It is critical that bond monies are held with the appropriate authorities in each state.
v) Tenants moving in
An inspection of the property must be done and both the tenant and landlord agree and sign on the items observed.
5. Conducting inspections
The main purpose of inspections is to ensure the property is being adequately maintained by the tenant. There are relevant rules for each state as to how many times a property can be inspected within a year. As a general rule, an inspection can be carried out 3 months after initial occupancy and once every 6 – 12 months thereafter. Adhering to a consistent process in terms of frequency, notification and entry process develops a good rapport between the landlord and tenant.
Knowing the tenants’ interests helps develop a good relationship. If the tenants are taking good care of my property and are consistently paying rent on time, I like to provide them with a token or gesture of goodwill by say giving them movie / video vouchers, a box of cleaning products such as carpet and bathroom cleaners, plants for the courtyard etc.
Taking photographs of defects, wear and tear, damages and repairs are highly recommended during inspections.
6. Collecting rent
A clear and consistent process needs to be followed and the rent must be paid in full and on the specified date. It is better to get the tenant to agree to a direct debit from the tenant’s account on the day it’s due. This way, you will know straight away should there be insufficient funds.
7. Repairs and maintenance
As a self-managing landlord, legitimate repairs and maintenance needs to be carried out promptly and efficiently as this is the right of the tenant. You will need to develop strong relationships and have a good database of tradesmen such as electrician, plumber, handyman etc.
8. Record keeping
One needs maintain all proper receipts, statements, invoices and bills. Never wait until tax time where documentation is not in order.
- Department of Fair Trading – Self managing your rental property
- Residential Tenancies Act 1987 No 26
- Residential Tenancy & Condition Report in PDF format