The downsides of DIY property management - February 2019
Many investors have been burnt by lousy service from a sub-par property manager.
Whether it’s dropping the ball on lease renewal, not being on top of maintenance issues or seriously lacking in the communication department, a dodgy rental agent can be a nightmare.
In some ways, they’re almost as bad as a really terrible tenant because their failings often come down to one of a few things: a lack of respect, a lack of accountability or a lack of experience.
And so, every investor will at some point come to a fork in the road. To the left is continuing with things as they are – paying someone to take care of your property and hoping for the best – while on the right is the go-it-alone route.
Doing your own property management is an appealing prospect. You can be hands-on and proactive, not to mention save a whole stack of cash. But in the end, it can cost you dearly. Here’s how.
Common gripes with property managers
First off, let’s explore some of the reasons why you might be considering ditching your property manager in favour of some DIY landlording.
I asked our property management arm to share the most common gripes investors have had with other property managers.
Now I can assure you, most managers are very good at their job, but when you hit a bad one the problems start compounding.
Hands up if one of the below has frustrated you.
They’re not proactive when it comes to expiring leases, keeping you in the loop on whether you should raise the rent, if the tenant is staying put or whether there are any other issues.
They’re slow at sorting out maintenance issues. They don’t arrange for more than one quote and just use the first person they come across. And when something is really wrong, you’re probably the last to hear about it.
The office is poorly staffed and resourced, is filled with young and inexperienced managers and support workers, or has an incredibly high turn-over. You’re never quite sure who’s going to pick up when you call.
You never hear from them unless something catastrophic has happened. The rent hasn’t been paid in several weeks. The plumbing or electrical's failed. The tenant has done a runner – or worse. The communication is woeful.
Conversely, they constantly bother you with every little thing because they’re green and can’t make a decision on their own. They lack the expertise to know what to do in any given scenario. They don’t guide you – they ask you to guide them.
Inspections aren’t conducted often or thoroughly enough. There’s not a huge amount of due diligence undertaken on selecting tenants.
Put simply, they don’t care. They don’t care that this is a major asset for you and that it deserves a certain level of attention and respect. It’s an address on a ledger sheet that they’ll shove just about anyone in.
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Why wouldn’t you do it yourself?
It seems logical to cut out the middle man and take on the management of an investment yourself. Why not? You’ll treat the way it should be – as an important asset in your investment plans, with care and consideration.
But even the best intentions can come unstuck – particularly if you fail to comply with the legislation that casts a long and dark shadow over investment properties and their tenants.
Trust me – there a lot rules to consider.
Legislative red tape chokes every single interaction you could possibly imagine. There are forms and information that have to be handled properly. The bond has to be taken and lodged in a certain way. You have to give varying amounts of notice – and deliver it properly – for inspections, repairs and viewings.
I once heard a story from a client who self-managed a rental property – a unit near a university in an area popular with students. There was a nightmare tenant who she eventually booted, keeping a chunk of his bond to pay for damage and mess he left behind.
But she hadn’t properly lodged the security and the student, a future lawyer, knew it. The penalty was $10,000 for not putting the cash in the hands of an independent third party. She was essentially forced to give it back and cover the cost of repairs herself. Ouch.
You have rights, obviously, but under most state’s legislation, your tenant has more. Not respecting those rights or inadvertently ignoring your obligations can have serious ramifications. And hell hath no fury like a regulator scorned.
Tenant selection is critical and unless you know what to look for, you could miss some important red flags. A bad tenant is a headache.
You want someone courteous and responsible who pays on time and is on the same page. A really good property manager can deliver this person. If you’re inexperienced in the management game, can you guarantee you can find a quality renter on your own?
Then there’s the challenge of maintenance. It’s not cheap and if you’re not delivering work in big volumes, like a property management business would, then you’re like to pay inflated retail costs for services and trades. Not to mention, finding a good tradie is a tough ask at the best of time.
And as the self-managing landlord, you’re always on call. The bathroom floods at midnight? Expect a call. The aircon unit blows up on Christmas Day? Ring, ring!
It’s not a glamorous job, nor is it respectful of your work-life balance.
How to find a good manager
You should avoid the empty restaurant down the road from a really busy one. Chances are, people are steering clear for a reason.
Ask for references. Find out who else uses the manager and see what they like and don’t like. Ask them how long on average tenants stick around. Ask them about the cost of maintenance and how quickly issues are flagged and dealt with.
Check the experience of your property manager and how long they’ve been at the company. How are they supported? Is the company properly resourced? And ask if they invest themselves. Someone who has a hand in the game will respect your investment more.
Finally – look for a property manager with broad experience in dealing with investors’ needs. These organisations understand the challenges around asset acquisition and the importance of servicing loans and improving value.
Propertybuyer has stepped up and established its own property management arm. After all these years in the business helping investors build their portfolios, we appreciate the significance of great management.
After all – good tenants make for happy landlords.
To have the best property manager caring for your property assets
call us on 1300 655 615 today.