When it comes to the question of property management, property investors should take a long, hard look at the facts before deciding whether to go down the DIY route or whether to appoint a professional.
If you’re thinking about renting out your investment property and cutting out the middleman (i.e. the property manager) in order to ‘save’ some money, here are seven risks you should consider:
1. Not understanding the full legal implications of being a landlord
A landlord who doesn’t keep up-to-date with the complex and often fluid legislative framework around residential tenancy or who doesn’t have a sufficient understanding of their rights and of those of their tenants may find themselves in breach of the law. Breaches (by either party) can be costly, plus tenants often seek compensation or flout the laws because they know the landlords aren’t legal experts and that they are likely to get away with it.
2. Sourcing tenants
Professional property managers benefit from a strong marketing strategy and database, which gives them instant access to a pool of potential tenants. At Aitken Real Estate, most of our enquiries come from realestate.com.au, our website or from people coming into our office. As a DIY landlord, outside of placing a newspaper ad or uploading a private rental listing online, there are a limited number of places you can find prospective tenants.
3. Inadequate screening of tenants
Once you’ve sourced potential tenants, you have to make sure you select the right one. Choosing the wrong tenant can lead to costly problems down the track. Most private landlords aren’t privy to crucial selection criteria such as rental history (which a property manager can access using industry databases) and they often don’t have the time and the processes to do the requisite background checks.
4. Insufficient documentation
Many private landlords put themselves in risky situations by not having sufficient documentation to support the tenancy. Despite the fact that an investment property is such a major financial undertaking, many landlords don’t even have a legally enforceable contract to protect their investment or they use an incorrect lease document which isn’t relevant for their state or territory.
5. Not insisting on a bond
A bond is a security deposit which the landlord holds in case the tenant defaults on their obligations, causes damage to the property, etc. Many private landlords fail to do this and have no recourse at the end of the tenancy when things have gone wrong.
6. Failing to fill out a condition report
7. Not conducting regular inspections
Procedures for property inspections are set out by law for each state and territory and failure to implement these can lead to legal action and costly penalties. Many DIY property managers don’t adhere to a schedule of regular inspections because they don’t have the time to organise these with tenants, they want to avoid confrontation or they want to avoid any maintenance costs. There are many excuses for not conducting regular inspections, but the risks are huge.
Being a landlord can be a full time job, requiring time, knowledge and expertise, so to avoid costly disputes, lawsuits and other risks, we urge you to engage the services of a professional property manager.