Every landlord – especially those brave ones with time on their hands – has thought about it. Some have tried it and failed. A few have been successful. In this article, I will try and paint the picture of what it takes for landlords to be successful in managing your own property.
Self managing as a young investor!
I bought my first investment in April of 1998, 4 years out of university and 2 years before the looming Y2K disaster that never was! That was the start of my property investing career and long time before I became a property manager. That property was – and still is – a great investment, right in the middle of Hurstville in Sydney. In case you are wondering, I am pleased to report that I still own it, it has never been vacant, and I won’t even mentioned what has happened to it price-wise since then. A great little investment and one of the best in my portfolio.
With keys in hand, but terrified of the future and worrying about every dollar, I decided that self management was the way to go. At the time of the purchase, the property was being tenanted by a lovely young couple – who no doubt had found the property advertised on the local paper – The Leader. How much have things changed since then? My first order of business was of course to fire the real estate agent who didn’t seem to be “doing much” for all the money they were keeping from my rent. How hard could it be to manage my property myself after all?
Once notice to the real estate manager had been provided, the second order of business was to make contact with the tenant, letting them know that I would be taking over the management, and providing my bank account details and my personal phone number “in case they needed anything”… I remember them telling me how happy they were “given that they would have access to the owner directly”.
And so my life as a self managing landlord began. The first rent came in with no incidents, then approximately 3 weeks later, just as I was leaving for work, I received the first call. The oven top had stopped working. No dramas! 3 or 4 phone calls later, and a few visits to the property with my dad in hand, the problem was finally fixed and everyone was happy!
Then it got really quiet, until the next phone call came late one afternoon about some sort of plumbing issue. This time, I had learned my lesson and organised a plumber first thing in the morning!
Two months later, I started noticing that the tenants began missing the rent payment dates. First it was by a day, then a couple. Then it got worse. It happened once, then again and again and again. By the end I became tired of having to constantly chase the tenants, but what were my options?
That was about the time I decided to never again build a direct relationship with my tenant. The next day, I walked into the first Real Estate agency I could find and signed an agreement – promising myself to never manage my own property again! A week later, the tenants gave us 3 weeks notice and out they went! Go figure!
The bottom line is this… I was unprepared. Managing my own property was a headache I didn’t need.
Landlords fail at self managing their property because they are not prepared.
Preparing yourself to self manage
So how does one prepare for the journey? Below I have listed the basic 15 tips that every aspiring landlord need to be aware of before making the decision. The first few relate to the logistics of the job in hand. The remaining, talk about how one needs to prepare themselves mentally. The list is not exhaustive, but it is a good start. The rest will come with experience.
1. Your first and most important requirement is to familiarise yourself with your State’s Tenancy Act. The best way to do this is by utilising the resources of your State’s Department of Fair Trading. Their website and helpline are a wonderful support. The reality is that it is a highly regulated industry, so the more you know, the better. You should for example know all the notification periods, you need to be able to identify “fair wear and tear”, and you need to know how to deal with mould, the requirements if you have a pool, and smoke alarm compliance. You will also want to be keeping an eye on amendments to legislation, which happen from time to time.
2. You will need to source and become familiar with the basic set of forms such as the Residential Tenancy Agreement and/or Condition Reports. Once again, all the basic forms you will need, can be found on your State’s Department of Fair Trading. There are also private organisations out there who would be happy to sell you their forms for a fee. Just be aware that each State has its own Tenancy Act so forms are State specific and can change. Once you find your forms, download them and make sure you go through them line by line and you understand them. In fact, I would suggest filling a copy of each out, as it will give you a better sense of the process and requirements.
3. You will need to set yourself up with your State’s Rental Bond Authority. This is much easier these days as most of the Rental Bond Authorities in Australia have now moved online, which makes it easier to set yourself up and manage the Bonds.
4. You will need to be ready for and know how and where you can advertise your property should it become vacant, and the tenant selection process. At the beginning as you are learning the ropes, you will most probably have longer vacancy periods and you need to be able to deal with that. Leasing properties – especially in a saturated market – requires all the tricks of the trade including access to realestate.com.au and domain.com.au (or the sister websites such as allhomes). Those sites is where you want your ad to appear as they are the most trafficked. They are normally restricted to licensed property managers, but there are options to buy yourself an ad there as an individual. I am also aware of a number of intermediary businesses these days that allow you – for a fee – to place a more prominent ad there. A simple google search will give you a few options. You’d also need to find a photographer (assuming you need better photos that you can take with your smartphone). Then you will need to think about your strategy on filling the vacancy, such as whether you prefer open for inspections or private viewings, you applicant assessment process and the completion of the reference checks – including checking some of the tenancy databases. There is a lot involved in the process but there is no doubt that the tenant will have a direct correlation to how enjoyable or troublesome the experience will be. The more effort you put into this and the more patient you are, the better off you will be down the track.
5. You will need to notify all authorities and relevant parties to forward all bills and notifications to you going forward and you will need to pay for them. Furthermore you will need to be keeping a vigilant record of all your expenses (excel will do), so that at the end of the year, you can easily produce a report for your accountant. This may become easier in the future, as I have no doubt simpler and cheaper property management softwares become available, but at the time of writing this article, they don’t exist.
6. You will need to become proficient at determining upcoming maintenance needs and decide how and when you will address wear and tear, ensuring your property is maintained in a good state and can attract the best tenant and rent possible.
7. You will need to become an expert at conducting routine, incoming and outgoing inspections. Your routine inspections need to be completed every 3 or 6 months – depending on your tenant, but you will need to be disciplined so as to not miss those dates and that includes giving the right notification to the tenant. The more of an eye for detail you naturally have, the better your knowledge of construction standards/methods and building fault causes, and the clearer you are on what constitutes “fair wear and tear” versus damage, the better off you will be. My suggestion is to take as many photos and video during visits as possible as you will need them. It is also important to think about how you will deal with the aftermath of an inspection, especially if there as issues that the tenant caused.
8. You will need to be prepared to deal with regular repairs and maintenance requests from the tenant. The amount of requests you receive, depends on your tenant (some are easy going, others can be particular) and the age of your property. I would suggest, if you don’t have any tradespeople you trust already, to at least ring around to find a plumber and an electrician you can reach out to. You will need those anyway for your tenancy agreement as it requires you to nominate them for emergencies at the time of signing a tenancy agreement. Of course, for small tasks you can always get away with airtasker, whereas for larger jobs (such as removing a large fallen tree) you could use hipages. A word of warning though is that you will not be able to enjoy the prices and responsiveness that a property manager would generally have from tradespeople, who receive constant and regular work from them.
9. You will need to set reminders and be vigilant on the days that your rent is due. Your best option is to ask your tenant to set up a direct debit directly into your account. That way, payment of rent happens automatically and you know when to expect it. If a payment is missed, you will need to text them or email them. If that doesn’t work, you need to be prepared to be calling them immediately and constantly until the rent is paid. Remember that every day counts.
10. You will need to start keeping an eye on what is happening with the rental market, and at regular intervals – whatever is allowed in your State – decide what to do with the rent on your property. A good strategy is to increase it regularly and slowly. That way the risk of losing a good tenant is minimised and the process is fair for everyone. Be aware of the following:
- Sometimes, for the right tenant and conditions, you may be better off not increasing your rent,
- Make sure to remove all emotion from the process. Treat is as a business. Keep in mind that you too have a mortgage to pay and the cost of living is increasing every year, and
- Always follow the right protocols as required in your State.
11. You should familiarise yourself with the processes of your State’s Tribunal system as one day you may need to attend. There is a wealth of information online these days that will give you a good sense of what takes place there, the processes and costs involved including if you need to use a Sheriff. My suggestion would be to read up on case studies – which appear on the relevant websites – as that will help you familiarise with what the small courts look for. I would also suggest you look at the hearing dates at your local tribunals, and actually visiting on a couple of occasions so that you can hear and see the proceedings first hand.
12. You will need to ensure that you have ample time on your hands and some flexibility. It may be weeks when nothing happens, but when an issue arises, you will need to be available on short notice. Just packing up your bags and going to Hawaii for a few weeks is no longer an option. It can be done, but in your absence, someone would need to be available and have access to the spare keys (which you need to be keeping in a safe place). Internet and mobile phones are wonderful as they allow you to be contactable and accessible at all times regardless of where you are, but someone will need to be on the ground that can be trusted to make decisions.
13. You will need to always act with fairness and remind yourself to look at the big picture (even when you don’t think it is fair). Your ability to look after your tenants’ needs and you willingness to be keeping them happy and be responsive to their needs is critical. My recommendation is to treat the relationship as a partnership – whereby everyone is clear on each others’ obligations and rights, there is mutual respect and trust, but without allowing personal feelings to develop.
14. You will need to be comfortable with the tenant having all your details and that includes your full name, your home address, and your phone number. If you don’t want your tenant to have your home address, you may consider leasing a PO Box.
15. Last but not least, you need to be prepared for conflict and sharpen your negotiation skills. It is inevitable: managing a property and conflict come hand in hand. You will need to be firm at times and hold your ground armed with the facts. Other times you need to negotiate. The important thing is to remember that whilst for you it is a investment, for the tenant it is their home. Never lose your temper. It is a business…. sometimes you win, sometimes you have to concede but there is no other way. The important thing is to never take things personally.
Self managing your property is an involved process. Landlords will need to educate themselves, to have the right systems in place, but most importantly to be mentally ready for the job.
So can it be done effectively?
With the benefit of my own experiences, I believe that it is possible to self manage your own property effectively but it is not for everyone. It is not necessarily a matter of knowing the legislation. The most important aspect of the job is one’s willingness to put in the required effort and do so for years!
It is also a matter of experience. As is the case with everything new, it takes time to master the skills. That’s experience that a property manager has because they manage properties for a living. A good way to get help is via subscribing to any of the many property forums where landlords that self manage frequent. Your advantage of course as a self manager, is that you will only have one or two properties to manage, so your tenants and properties will have your full attention.
As with everything else, your success will also depend on having luck by your side. Tenants’ circumstances can change in an instance. It is not uncommon for fantastic tenants to lose their job and fall behind in their rent. That is something that you will have to deal with personally. Property investing and landlords in particular are always a hot topic so elections bring in new governments who introduce new and amend existing policies. New policies will most likely create more work for you as they rarely go to the landlord’s favour. That is just a fact of life. You also need luck with how your property ages. Buildings deteriorate with the passage of time and require more and more attention – others more than others. The less of these you encounter, the easier your life as a self manager will be. If disaster strikes, and they often do, you will need to be able to deal with it on your own. That’s just the nature of looking after an asset worth hundreds of thousands of dollars and you have to be OK with that.
Self managing your investment is risky, but quite possible for those that are willing to put in the required effort. Whilst the cost of a property manager is tax deductible, self managing your property will save you a fair bit of money in the long run. As you gain more experience, it will become easier. The question you have to answer for yourself is “am I ready and am I willing to put in the effort to make it work”?
Who we are:
NextGen Property Mgmt (www.nextgenpm.com.au) is a boutique Real Estate licensed agency that specialises in property management. NextGen Property Mgmt does NOT has a sales team unlike most other agencies that specialise in Sales and have Property Management as a side business.
Our area of focus is residential property and we operate in Inner and South West Sydney, as well as St George.
NextGen was created from its infancy to cater for investors as it was founded by investors who quickly realised that in a highly regulated industry like Real Estate – competence, expertise, care and service by property managers varies greatly.
As an investor, you need to have trust for and feel valued by your property manager. You need to know that your property is being looked after with minimal disruption and you are getting maximum return for your investment. At NextGen we understand that because we are investors living busy lives ourselves, so our promise to you is that you will no longer have to worry about your most valued asset because we will make sure to take care of it as if it is our own.
If you want to learn more about us just click here to organise a time for a chat. Or call us on 0414 494 840. We would love to hear from you and to share our story.