Manage my own investment property?

What about putting the rent up?

When you try they may come to you with a sob story about how their cat needs a heart transplant and they can't afford to pay the rent. Are you tough enough to say stuff the cat, or would you reduce the rent?

As long as you are tough enough.

I self manage 10 properties: I cannot and would never use a managing agent. Several reasons include:

1. Selectivity of tenants. I know better than anyone, the type of person or family that would be suitable for my properties. i.e. I know a large family would not be suitable for a particular property due to the small bathroom etc. This stops the constant change of tenants. I also like to have a chat with the perspective tenants. From this I learn plenty.

2. Open communication, this is in fact a positive. When my kitchen sink is leaking into the walls, I want to know today not in one week, when the weekend has passed and John is back from sick leave.

3. The reduced cost can be given to the tenant. You than have the best looked after tenant in the neighbourhood.

4. While you are not paying for the first two weeks rent on change of tenants etc you have extra money to add towards the property. I call these gifts to the tenant.

5. Property inspections are completed by me as is required. I find that the tenants I select no longer require a property inspection. It is more of a respect thing that builds up over time. From the tenant’s point of view, they do not want big brother over-seeing. I often find it strange that you can say I trust that you can live in my house, but I have to check up four times a year for the rest of your life. This is an insult to any adult. I am not saying do not inspect. But there comes a point, where you feel comfortable with your tenants.

6. While you have a good relationship with your tenants it is easier and more efficient to complete repairs. e.g. let’s go with the worst case scenario. I receive a phone call on a Sunday afternoon while I am at a BBQ. The tenant says "Leigh I have a toilet that while not turn off". When you do not have a relationship. An afterhour’s plumber enters the building and fixes the problem at Sunday rates for $400. When you do have a relationship. I ask how much damage is it causing, can they turn of the tap behind the toilet while they are not using. And when is the best time to send a plumber? As they are happy to help me out with dollars they suggest Tuesday around 10:30, I organise and it was a washer and a call out rate of $80.00 = $95 in total. While people tight for $10 extra rent, I just made $305. Further, I often find it something that it completed by the tenant or I can fix in minutes. It all comes down to communication, openness and honesty. What goes around comes around! I once had a complete picket fence built for me by a tenant (Free- They want to live there for life). This relationship is generally not built with managing agents.

7. Increasing rent is easily resolved; it is a simple letter and can be mirrored with the CPI or like for any uncertainty (This can all be outlined at the start of the agreement).

I am not suggesting this is for everyone, but for those positive, open minded people, it is definitely a very sound concept that I have built my fortune on. You could also throw in this mix Pro-active.

Oh that's right one further. It may allow you to become a property partnership (a real business)! What another nice little perk!

Self managing properties are highly recommended by me, although not essential.

http://www.birchcorp.com.au

I prefer self managing and agree with much of what Number8 said above.

When our properties were being professionally managed, we generally organised the maintenance and had to remind the property managers about inspections, leases expiring, rent increases, etc. Now we're in control – we select the tenants, carry out routine inspections and quickly respond to any problems as they occur. The savings each month is also a bonus.

I you are prepared deal with the tenants, maintenance and rent increases. Then the only reason you could not be as successful as your local estate agent will be when it comes to finding a new tenant. If it takes you two more weeks than an agent then the saving will be lost. This is where my business could help you. It is critical to advertise on all the top industry portals to make sure you find the best tenant who will pay the highest price in the quickest time. 

Hi Manic,

I think you should at least give it a go. My sister and I have managed 2 IP's for years and never had problems. Ultimately when there's big problems, you have to deal with them anyway even when you have a property manager.

You can get a residential tenancy kit from most newsagents, which has the lease agreement, property condition form and the bond form. It costs ten dollars and is pretty easy to follow.

My advice is also do your due diligence. Call peoples references and be thorough. With residential leases, they tend to favour the tenant.

Oh and one other tip, once a lease lapses, and becomes periodical, you must give 60 days notice to the tenant to vacate. There's little things like that that can catch you out.

Good luck!

It is not about the $1440 in saving. It is about the respect and relationship that is built with your tenant. While they are looking after your investment ($500k property returns $50k p.a. on historical records). You should not worry about the small expense. My reasons for self managing is not dollars, they are for the listed reasons:  flexibility, peace of mind, confidence and the ability to ensure my tenants are provided with the care and attention they deserve.

I am concerned when I read comments as shown below…… 

"If you are prepared to deal with the tenants, maintenance and rent increases. Then the only reason you could not be as successful as your local estate agent will be when it comes to finding a new tenant. If it takes you two more weeks than an agent then the saving will be lost. This is where my business could help you. It is critical to advertise on all the top industry portals to make sure you find the best tenant who will pay the highest price in the quickest time"

Given this is a plug for the industry portals as mentioned, this comment has value, but if your margins are only two weeks and you require the highest price than purchasing an investment property may not be the right decision for you. Becoming a Property investor is a mindset that is developed over many years. It is not about screwing the tenant for a dollar, or positive gearing, or receiving the most rent etc. It is simply doing the math and applying common sense to your strategy, allowing for expenses such as vacancy, being selective and being the best landlord in town. 

Further, I am never tight on cash when it comes to my tenants (read the numbers for what they are – refer below). My tenants are and always will be looked after in at great lengths. I always look at costs of my rental properties in the following way:

Investment Property value : $500K     growth in 10yrs  and new value : $1M (assumptions past performance since 1926 is similar to future performances) – Profit  = $50K p.a.

Buy the tenant new fly screens for windows and a letter box- Do not pay from your wallet: Borrow this and your cost is only 7% x $550 = 74c per week less tax deduction at the Marginal tax rate of 31.5% (includes medicare levy) Total Cost = 51c per week . In fact, if you buy items that have depreciation allowance in the first year (i.e. As a small business I receive 100% depreciation allowance for items under $1000) than you will receive $173.25 back in your pocket. This will cover your $550 for six and half years, not that, 51c a week is much to worry about. Note: I do not have a problem spending $2-4K p.a. on gifts for my tenants. $50k- $4k = $46k. Not bad for a years work (well several hours per week anyway). I call this not being greedy or giving some of your $50k back to the people who make you wealthy.

I appreciate there are other costs, but when you look at the numbers and you look at this property game as a business I would say it is not a bad result?  Outlay an extra 51c to help provide a stable $50k p.a. income.

When doing property investments the margins are not that fine, yet as most investors are Mums and Dads they fail to see the real DOLLARS and SENSE. Think like a business. Look after your tenants…………

http://www.birchcorp.com.au