One of the most important decisions to make when you buy an investment property is whether to appoint a professional property manager or manage the property yourself.
More than three quarters (77%) of landlords have their properties professionally managed by an agent, or have done so in the past, according to The Australian Landlords Panel 2012.
Both options needed to be carefully considered before making a final decision that is right for you.
Do-it-yourself property management can appeal to some investors, who may see it as an easy way to save money. However, managing an investment property involves a time commitment that can significantly outweigh the cost.
Self-managing landlords will need to find the time to screen tenants, conduct regular property inspections, ensure rent is being paid on time and be ‘on call’ to attend to maintenance issues. Landlords who fall behind in these tasks may find themselves in hot water.
For example, if a tenant is damaging the property and regular inspections are not held, the landlord could be faced with mounting repair bills. Likewise, if maintenance issues aren’t attended to promptly and the tenant injures themselves as a result, the landlord could find themselves exposed to a costly legal liability claim.
The Australian Landlords Panel 2012 study revealed that landlords received higher rental yields and profits when a property manager was used, and that they generally had better investment experiences.
Property managers can provide landlords with risk management benefits and potentially minimise loss for the landlord if an issue arose.
Property managers are able to conduct regular property inspections to identify maintenance issues, ensure the tenant is looking after the property and, if required, liaise with appropriate tradespeople as soon as possible to address any problems. They also have systems and processes in place to find and screen prospective tenants, and have access to databases that list tenants with a history of defaulting on rental payments, damaging property and eviction.
Property managers can ensure the correct paperwork is in place, collect the rent, monitor arrears, form a professional relationship with the tenant and regularly liaise with them. If a dispute arises with the tenant, they will be familiar with the relevant legislation and are therefore able to follow the correct procedures to help resolve the problem as quickly as possible.
For example, if a tenant falls behind in their rent, a property manager can ensure the proper notices are issued to the tenant within the required timeframes. This is helpful if the dispute ends up in court and, if the landlord has landlord insurance in place, can also assist with the payment of loss of rent claims.
Regardless of what option property investors chose, a specialised form of landlord insurance was a must. “Landlord insurance is designed to help protect investors from many of the risks associated with owning a rental property. These include malicious damage by tenants, accidental damage, legal liability and loss of rental income if a tenant absconds or leaves a property unable to be re-let while damage is repaired.
It can also provide peace of mind if the unforeseen should occur, as well as ease a landlord’s concerns about receiving regular rental payments. Even the most fastidious tenant is able to damage a property, whether accidental or otherwise. This can be extremely costly for the landlord in terms of repairs and the loss of rental income.
The Australian Landlords Panel 2012 study found that 81% of landlords who employ a professional property manager had landlord insurance cover. However, only 54% of landlords who self manage their properties had a landlord insurance policy. Uninsured landlords really need to think about how they would manage financially if they were faced with thousands of dollars worth of damage to their rental property, or were unable to re-let their property while repairs were being made.
Article by Carolyn Majda, propertyobserver.com.au