What is DIY Property Management?
DIY property management is the personal management of your rental property. That means, instead of handing off the responsibilities to a property manager - you choose instead to manage your property yourself.
The Benefits of Self-Managing Your Rental Property
There are many benefits to DIY property management. These include:
No property management fees
In Australia, property owners can pay anywhere from 5-12% in property management fees. The amount varies from state to state. If you DIY your rental property management, however, you save yourself significant funds that you would ultimately lose to managers.
Finding and screening your own tenants
While property managers typically find, screen and sign tenants for your properties, if you handle the property management this becomes your task. The upside is you get to meet all of the applicants and ultimately choose the individual(s) yourself. That means you can choose tenants that you think you will have a good relationship with, and have open and direct communication lines with them right from the beginning.
Less likelihood of miscommunication
With a third party communicating between two separate individuals (the landlord and the tenant), miscommunication can happen. For example, a third party might make promises to close a lease deal that you may not know about or agree to. Getting left out of the loop can lead to a sour relationship between all parties.
More efficient rent collection
When a property management firm collects rent, you will face waiting periods while they process payments. This means, your pay gets delayed. As a landlord that deals with tenants directly, you are able to collect your rent much faster. There are even apps and platforms that send out payment reminders to tenants, or allow tenants to pay directly on their platforms to help you get that rent in the bank faster and with less fees deducted.
Long term tenants
Because you develop a relationship with your tenants, they are likelier to stay and extend their lease. Having direct communication while being responsive and direct allows both parties to feel the lease is on solid ground. When it comes time for renewal, you’re more likely to find your tenant ready to re-sign on the dotted line.
Lower repair and maintenance costs
Property managers usually hire their own tradies. Some may even have contracts with specific companies. This means, whatever their fees are, as the property owner you need to foot the bill. By handling property management yourself, you can find your own tradespeople, negotiate costs, and develop direct relationships with professionals you trust. And, if you are a professional tradesperson yourself, it means you can also handle certain repairs to help you save even more money.
Is DIY Property Management Right for Me?
Before diving into DIY property management, ask yourself a few questions first:
Do I have the time?
Ultimately, managing a property yourself will take some time and effort. You’ll have to keep up on maintenance and tenant requests, as well as rent collection and taxes. If your tenant leaves, you’ll have to find a replacement, and that requires creating ads and interviewing potential applicants.
Am I familiar with tenancy laws and do I have the time to keep up with changes?
As a landlord, it is your responsibility to ensure you are adhering to local laws and by-laws, which can and do change. You will have to immerse yourself in tenancy laws to ensure you understand what your rights and responsibilities are and to adjust to changes accordingly.
Can I maintain a professional relationship with my tenants?
DIY property management means you will have direct communication with your tenants. This can be good, as it cuts down on misunderstandings. But it also means you must maintain a certain level of professionalism too. Becoming too friendly with a tenant could make things difficult when there’s a dispute.
Can I fulfill my obligations as a landlord?
Being a landlord isn’t just about collecting a monthly rent cheque. You will need to ensure you can keep up with maintenance, and, in the case of emergencies, have funds on hand to deal with sudden repairs.
Your Obligations as a Landlord
As the property owner, you will be responsible to provide certain documents to your tenant. Those generally required include:
- A ‘renting guide’ that needs to be provided to tenants before they sign the lease agreement. This guide outlines the rights of the tenants as required by your state legislation.
- A lease agreement to be signed by both parties
- A report of property conditions
- A bond application form
These documents are easily obtained at various outlets including:
- Real estate institutes
- News agencies
- Departments of consumer affairs
- The relevant state rental authority
Basic Actions and Conditions
Landlords must perform certain acts and conditions for the tenant during the term of the tenancy and at the beginning of the lease period. These include:
- Ensuring a signed copy of the lease and Property Conditions Report are given to the tenant
- A bond lodgement form has been signed and submitted to the rental board or trust on your behalf
- Ensuring each tenant has been provided with one set of keys
- Ensuring the property is safe, secure, clean, and ready for immediate occupancy
- Ensuring all fixed appliances (including water and gas heaters) are regularly serviced and maintained
- Ensuring water and sewage rates are paid
- Ensuring the finances and resources are in place to deal with necessary and urgent repairs as needed
- Ensuring receipts for rental payments to the tenants are provided
- Respecting the tenant’s right to peaceful and quiet enjoyment of the property and observing rules for notices for access and inspections
As a landlord, you will be expected to file your taxes properly and on time. As property management involves keeping track of bills and receipts, it’s good to set up a system that will help keep you organised.
Use a tax diary or filing system to keep receipts in one central location. There are also apps, like Instarent, that help automate some of the billing process, or provide you with a place to digitally record all of your receipts that make things easier come tax time.
Don’t forget to claim depreciation on your investment property. This needs to be done before June 30 to ensure you’re using an accurate depreciation schedule. Landlords who neglect to do so may be missing out on reducing their taxable income. Make sure to also claim your full depreciation entitlements. Carpets and blinds are depreciating assets, but so is property owned by the body corporate that landlords might have a part-share in.
Differentiate between depreciable assets and capital assets as well. While a dishwasher or stove is depreciable, cupboards or sinks are not.
Tips for Choosing/Finding Tenants
Make sure, before you place your property up for lease, that you have done the research into pricing your property appropriately. If the amount is too high, you will have your premises sitting vacant. Even if you have just spent a large amount of money on renovations, overcharging on rent to cover your debt isn’t going to find you any applicants. Instead, focus on looking for a long-term tenant that will allow you to maintain a reasonable passive income over time.
To find out what is reasonable, look at local and online classifieds for other similar properties in your area. You can even call around to local real estate agents and ask them for their pricing on similar units. You’ll quickly have a fair ballpark figure that you can use that reflects the surrounding market.
Craft the Perfect Property Listing
Finding the perfect tenant starts with crafting a listing that will entice the right people to your property. The first step is to ensure your premises is clean and well-maintained. By presenting your property in the manner you expect it to be kept, you will be attracting tenants that will appreciate the level of quality of the dwelling and that will work to maintain it.
That means fixing broken items, mowing lawns, and maybe even putting up a new coat of paint, if necessary, so that your property looks and feels clean.
Then, take clear pictures of every room and selling point of the property.
Once you have pictures, craft an ad that’s not overselling the premises, but outlines all of its qualities and selling points. Make sure, as you are selling the highlights, that you also make clear the type of tenant you are looking for. Mention items in your ad that are requirements for the new tenant, such as:
- No pets
- Credit above 650+
This will help lessen the pool of applicants to those most desirable.
If you expect to get a lot of applicants, you may want to consider pre-screening so that you are only showing the property to the candidates most likely to fulfil your requirements. If you are posting online, you can create a Google Form and add the link into your ad. That way, applicants can answer questions to make sure they check all the boxes before you agree to show the property and meet in person.
Ask the Right Questions
Once you’ve started showing your property, you should have quite a few tenants to choose from. Make sure you are asking the right questions and requiring proof of statements. You may want to ask for:
- Proof of identity in the form of a government issued ID
- Proof of employment
- Proof a tenant can afford the rent (in the form of a pay stub or letter from an employer)
- Employment history
- References (past landlords or employers)
Asking questions and requesting proof will help put you at ease with your new tenant. However, listen to your gut instinct as well. If a person doesn’t feel right, there’s no reason you should feel obligated to offer them a lease.
Ensuring Your Property is Protected
While some landlords may be comfortable handling repairs themselves - they may be in a trade such as home repairs or plumbing - others may not have this level of expertise. It’s worth considering insuring your property to keep yourself covered.
Look for policies that include both malicious and accidental damage. You should also take on a policy that can cover you for loss of rental income. This will protect you if your tenant absconds or leaves your premises damaged in a way that prohibits your from leasing for a while.
There is a difference between accidental damage and expected wear-and-tear. Your insurance policy won’t cover items like foot traffic on carpets or minor scratches and scuffs. It will cover accidental window breakage, cracked floors from dropped saucepans, or holes in walls caused by tenants moving.
Lease Agreements and Documentation
It’s important to document the condition of your property before your tenant moves in. You should take photos or videos of the entirety of the unit, including walls, floors, windows and ceilings. Check appliances and lighting fixtures. Do a walk-through with the tenant and have them note any issues they see as well.
When a tenant moves out, repeat the process, recording especially any damages. Documentation is very important, in case there are ever any disputes in regards to the premises.
Having a rock-solid lease agreement will also protect you should any disputes arise. Do not rely on a verbal agreement. It’s important to have a legally binding document that will protect you and your property.
For maximum security, contact an attorney to help you draft a lease. While it may be an up-front expense, the document will essentially be evergreen, with the main components available for use in future lease agreements.
As a landlord, it would be a good idea to request a rental bond. This is basically a security deposit that is paid at the start of the tenancy. The bond is paid back to the tenant at the end of the lease, once the property is vacated. This is provided that no money is owed to the landlord. Rental bonds may cover damages, outstanding rent or other costs.
If you do take a bond, you must provide a receipt to the tenant and lodge it with the Residential Tenancies Authority within ten days.
The maximum bond amount is 4 weeks rent. However, if the weekly rent is higher than $700, the bond amount should be negotiated with the tenant.
Regular Inspections and Maintenance
Inspecting the property regularly - and especially before a tenant moves in or out - will help you ensure problems don’t get ignored or compounded. Before your tenant moves in, an inspection should be done, and issues should be noted to be fixed immediately. An inspection should be done before a tenant leaves as well, to establish if there was damage done to the property, and if the bond paid at the beginning of the lease will cover the amount.
Even when you have a tenant, however, you should be keeping an eye on the property, and ensuring regular maintenance happens.
As a landlord, if you aren’t performing regular maintenance tasks, or deferring maintenance, you’re going to lose your tenants and run the risk of having your property lying empty, which will ultimately cost more money than fixing that leaky tap.
Keeping your tenants happy, within reason, should be your primary goal. That means responding promptly to requests. Small jobs can be done yourself, but keep a list of trusted contractors handy for when jobs become too big for you to handle.
Benefits of Self-Managed Software
DIY property management can mean a lot of admin - especially if you are trying to juggle multiple properties. Technology, however, is stepping in to help streamline and automate many property management processes. Apps and online property management software, such as Instarent, can centralise your paperwork, and help keep you organised.
Self-managed software has the ability to:
- Connect landlords to tradies
- Offer simple communication lines between tenants and landlords
- Create and list ads for available properties
- Digitally create and sign tenant agreements
- Receive payments from and send receipts to tenants
- Centralise paperwork and documentation
- Pay invoices
- Create financial statements for tax purposes
All of these features come with a minimal cost to the landlord. Acting as your own property manager, you can better track and maintain your properties. With the assistance of self-managed software, you can also handle your admin expediently, and keep clear, organised documentation for each rental property. Because everything is digital, the information is always at your fingertips, and easily shared with your accountant come tax time.
Managing your own rental property doesn’t have to be a daunting task. Instarent has all the tools, tips and support you need for DIY property management. Contact us today to speak to our specialist team.