Disadvantages of Self-managing Your Investment Property
Thinking about cutting out the middleman? Remember, there are dangers to self-managing your investment property.
Whilst it may appear to be relatively straightforward and an attractive way to save money, managing your own investment property is fraught with risks that may in the end cost you much more.
What risks? Don’t you just move someone in and then watch the money roll in?
Unfortunately it is not as simple as that. How do you propose to market the property? One ad on Gumtree may not cut it. And how will you know which prospective tenant will be suitable? Without a vetting process, you may end up with a tenant who has been listed on TICA for a history of non-payment.
A property must also be regularly maintained. There are trees to be trimmed, grass to be mowed and leaks to be sealed. And that is just the beginning of a growing list of tasks that ultimately have an impact not only on the attractiveness of the property to potential tenants, but its own actual value.
And the hard truth is that most tenants will not trouble themselves to do these things of their own good will. Indeed, there are some tenants who will actively make the completion of these tasks an even harder task itself.
One must therefore be frank, and ask, ‘am I prepared to chase tenants up for little things? Am I prepared to take time out of my day and focus on resolving defects raised by tenants? Am I prepared to go to court (through the Queensland Civil and Administrative Tribunal otherwise known as “QCAT”) should a dispute be unable to be resolved at first point?’
Knowing your legal responsibilities
And speaking of QCAT, you may well find yourself defending an action if you forgo something, even seemingly minor, in the discharge of your legal obligations.
There is an entire Act and Regulation that prescribes the procedural responsibilities of property managers in dealing with tenants. It is critical that you are familiar with all these provisions should you decide to manage an investment property yourself.
You must be aware of what forms to provide to the prospective tenant and when. You must be familiar with the process for collecting bond and lodging it with the Residential Tenancies Authority.
You must also know how to remedy defects or issue defect notices, and be aware of how to conduct inspections reasonably and fairly without encroaching upon the tenant’s rights.
These are only some examples of the things a property manager must know, and it is beyond the scope of this article to provide any exhaustive listing of those requirements. For this reason alone it would be prudent for anyone unfamiliar with their legal obligations as a property manager to retain the professional who is expected to know them.
Hiring a professional can, more often than not, be a better investment
Relatively speaking, the cost of retaining a property manager to look after the property, who is fully aware of the legislative requirements and also experienced in handling disputes, is not too expensive.
In Queensland, the fees are usually on a commission basis and deducted from the rent received. There is also a once-off letting fee charged once a new tenancy agreement is in place to cover the costs incurred by the property manager up to that point. Other fees may also apply, depending on the nature of the agreement between the owner and the property manager.
In the end, any decision as to whether to retain a property manager or look after it yourself should be an informed one. This above all, requires a meaningful consideration of your personal and financial circumstances, your capabilities and your weaknesses.
After all, one wouldn’t rely on themselves to handle a complex tax return, but take the matter to an accountant. In the same way, one should not rely on themselves to self-manage an investment property portfolio, but have it looked after by the professional that knows best.
The information expressed in the article above is for general information purposes only; it is not advice nor intended to be. Any person interested in making a decision as to whether to self-manage a property or retain a professional should seek proper advice.