Should you self-manage your investment property?

BEING your own landlord can save thousands of dollars in agency fees, which is a budgeting bonus but could end up costing plenty of personal time and emotional stress.

Before embarking on the do-it-yourself path as a property investor, it pays to crunch the numbers and weigh up the pros and cons of self-management.

According to realestate.com.au research, 33 per cent of Australian landlords manage their own properties.

Some landlords might use the savings to reinvest back into their property, while others figure the dollars saved just don’t make sense.

Cate Bakos, investor and president of the Real Estate Buyer’s Agents Association, warned the ‘time versus savings’ equation can be a false economy.

“It really comes down to how much you value your own time. For anyone working in a professional role, where they’re good at what they do and their pay is commensurate, then it could be a waste of their time managing a property when someone else could do it,” she said.

“The amount paid to an agent is a drop in the ocean, let alone the commercial risk you take by not having someone professional handling it. The things that can go wrong

can be way more costly than what a property manager costs,” she said.

However, for Alicia Hall and husband Tom, self-managing their investment property for more than a decade was straightforward.

“We figured that most agents were asking management fees of about 5 per cent, which 10 years ago was a lot for our first investment,” she said.

Ms Hall added that the couple was happy to bear the financial and time costs of maintaining the unit.

“My husband is pretty handy so we didn’t want to pay a fee to fix a tap. He would fix it or we’d get a tradie he works with to fix it. Of course, we’d still have to pay for it, but you’re not paying these agency fees.”

Be prepared to take control

After finding the perfect candidate, DIY landlords should be prepared to secure a bond through the correct legal channels in their state, do a condition report, chase any unpaid rent or discuss raising it when the time comes (or even deal with rental moratoriums in times of crisis), organise maintenance and deal with disputes.

“If you’re going to take it on, you need to treat it as part of your job. Make sure you log every expense, every bit of maintenance.

“There’s software available, or we had a clear Excel spreadsheet so when it is tax time you can present it all to your accountant,” Ms Hall said.

“It needs to have that same sort of attention to detail you would give your day job for it to be successful, otherwise you can really get lost in all the admin of it,” she said.

Passing on the paperwork

DIY landlords will need to get up to speed with the relevant legislation in the state where the property is located.

In addition to the tenant application, bond and lease documents, there are rules around how often a landlord can visit, put the rent up or ask someone to leave.

Ms Bakos said that the mountain of homework can be a lot to handle.

“The compliance and the paperwork can just take up so much time, when you could give it over to a property manager who does it day in, day out. They know what to do, who to call, which forms to download,” she said.

Consider the relationship

Although many investors consider the landlord-tenant relationship to be purely transactional, it doesn’t have to be according to Ms Hall.

Using professional and personal contacts, word of mouth and social media, the pair found their ideal tenant.

“If you’re choosing someone yourself, you must feel comfortable with them. We spoke to a few people who knew our tenant, it was all very social the way we went about it.

“But at the same time, I think it was important that it wasn’t someone who was directly connected to us, because that would have been a little too close to home,” she said.

Having built a bond with their tenant over the years, Ms Hall admitted they might have handled things differently with a property manager.

“We didn’t increase the rent as much as we could have. But then again, having a good long-term tenant outweighs the stress of that little bit of extra rent. We felt like we could trust him and wanted to keep him. So, we certainly weren’t forthcoming about jumping up the rent at every opportunity,” she said.

Dealing with difficulties

A property manager as a mediator means landlords can avoid awkward conversations.

“What happens when things go wrong and the tenant falls on hard times and can’t pay rent, or you need to go to tribunal? I want someone experienced going up there tackling the difficult stuff,” Ms Bakos said.

She said most landlords were happy to have distance when things got heated.

“It’s difficult when you’ve got direct conflict, or you’ve got to give notice.

“And then, what if you pick the wrong tenant?

That can create so much financial and emotional hardship. If you’ve picked them yourself you’ll be lamenting the person you chose,” she said.

Ms Hall said dealing with hard discussions can depend on the landlord’s personality.

“I figured that in our professional lives we’d both had to have these kinds of conversations over the years,” she said.

“But if you’re a personality that absolutely didn’t want to deal with these scenarios, then it’s not going to work for you.”