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Hiring a property manager costs money. You have an ongoing commission to pay and other fees come into the picture as well. It’s tempting to decide to manage your own investment property and save on the cost of a property management service. Is DIY property management really a good idea, though? Let’s look at the pros and cons of self management versus professional property management.
Benefits of DIY property management
The most obvious perceived benefit of self management is the money you will save by managing your property. Let’s say a property manager charges a 5 percent commission. Your property rental is $350 a week or around $1400 a month. At 5 percent, your monthly property management fee is around $70. That’s not a lot of money, but you have other fees to think about.
When property management comes at a lower rate, read the fine print, as you will often be charged for additional fees for additional services. They may charge for:
- Emergency repairs
- General repairs
- Dealing with tenants who have not paid their rent
Other charges may include:
- An initial letting fee (charged at the beginning of your contract)
- Annual financial reports
- Advertising costs after a tenant vacates
- Tribunal costs if a tenant is in arrears or damages your property
At the end of the year, you will be up for more than the $840 in fees you pay over the course of the year.
Now you have to ask yourself if a property management service is worth its cost.
Benefits of choosing a property manager
Let’s say your yearly fees come to $1500 or more. Why would you want to shell out that kind of money when you can manage your property yourself? You may ask that question if you’re not aware of the many responsibilities that come with property management.
Full service property management can include:
- Finding suitable tenants
- Ensuring the tenancy agreement is complete and signed
- Marketing and advertising your property
- Finding suitable tenants
- Lodgement of the rental bond
- Managing the day-to-day needs of the property, including inspections and repairs
- Paying the rent to you, minus the property manager’s monthly fees
Finding suitable tenants includes doing background checks to make sure the tenant can be trusted to pay their rent. You can download a standard tenancy agreement, but does it include everything you need for your property? Lodgement of the rental bond doesn’t take much time and if you live nearby, you can handle rent collection – however many landlords would prefer to keep all of this at arm’s length.
What about the day-to-day management of your property? How often will repairs be needed? What about emergency repairs? Do you have time to regularly inspect your property? What should you do if a dispute arises or a tenant refuses to pay rent?
Self management may not be a full time job, but it will take time out of your month. If you’re working, you may not have time to handle repairs on time. An emergency may come up at an inopportune moment. If a tenant refuses to pay the rent, how will you handle it? If a tenant does not maintain your property or damages it, what can you do?
Property management companies know their business
Property management companies deal with ordinary responsibilities every day. They also have experience dealing with extraordinary occurrences. As a DIY property manager, you have to learn as you go.
Things may go smoothly if you’ve chosen a good long-term tenant. They will look after the property, pay their rent on time and contact you when repairs are needed. If your property is in good condition, you may have to face only occasional repairs and less frequent emergency repairs.
This is the scenario you hope for when you choose to self manage your property. In the real world, things rarely go smoothly. Property management takes more time than you imagine it would. When things go wrong, you won’t have the experience needed to handle them quickly.
Real world property management
It can take months to get rid of a tenant who doesn’t pay their rent. You have legal channels you have to go through. That alone costs money, but if a tenant is behind in their rent, you will wish you were paying a professional property management service. As the months drag on, the cost of not collecting rent will be far more than the cost of a property management service.
Unfortunately, if worse comes to worst, you also won’t have landlord insurance to fall back on. Most insurance companies won’t insure self-managed properties because they know from experience self-management doesn’t work.
A property manager has the edge over self management. Aside from experience, they are a buffer between you and your tenant or tenants. They can deal with the tough issues such as rental arrears or property damage. As the property owner, you won’t know the procedure to follow or may not be able to deal with a situation dispassionately.
You also have to ask yourself if you have the time or experience to deal with major problems. Going before a tribunal takes both time and experience, but may be the only way to deal with a tenant who is in arrears or damages your property.
How to save on property management fees
Do your research. Some property management companies will charge more than others – just make sure you find out what’s included in any proposed fees. Paying less doesn’t always mean you’re getting a bargain, and paying more doesn’t always mean you’re getting a better level of service. Just make sure you always read the fine print.
Remember that the most important thing is the property manager’s expertise. Choose an experienced property manager who will look after your interests and your investment will pay off in the long run. If you’re lucky, you’ll come across a company who offers a high end service for an affordable price.