Managing your own investment properties exposes your financial future to potential risks. Hiring a property manager can help eliminate these threats.
Blogger: Shane Kempton, CEO, Professionals Real Estate Group
Despite the fact that the average price of a home in most capital cities in Australia is now more than $500,000, a large number of property investors still choose to manage their own investment properties.
Such a strategy is full of potential traps, and investors put their own financial future at risk by trying to manage their own properties.
The reality is that bad tenants tend to target private landlords, and having a bad tenant could prove a financial disaster both in terms of loss of rental income and damage to the investment property.
Many first-time investors overlook the benefits of using a property management company, which include:
1. Market appraisal: A property manager will be able to give an independent assessment of the correct rent for a rental property. Many first-time investors tend to over-estimate the weekly rent they should charge, resulting in lost income through a high vacancy rate.
2. Tenant selection: Landlords need to make careful background checks on tenants to ensure that they will take a responsible approach to their tenancy. Selecting the right tenant is critical for a landlord because a good tenant will pay their rent on time and look after the property. A property management company will have access to information on people with a history of being bad tenants and also undertake a thorough background check on all applications.
3. Marketing: A property manager will also have a list of tenants who may like to rent the property. Many prospective tenants contact local property managers directly for information about properties for lease. In addition, a property manager will also have access to internet marketing, which is becoming more important in the rental market.
4. Viewing the property: Showing prospective tenants the property takes time because people wanting to lease a home generally want to view the property during after work hours such as the evenings or weekends. Private landlords are more restricted in their time and therefore may not be able to find the best tenant for the property in the fastest time.
5. Contracts: Having the tenant complete and sign their contact of agreement is very important as it protects the investor. A well-written contract should clearly state the responsibilities of the tenant and the owner. Some investors overlook this key part of renting a property with the result that problems are created between the tenant and owner.
6. Tenant retention: Keeping a good tenant is also critical for the investor. One of the most common reasons why good tenants leave a rental property is that the landlord does not provide a high level of service, ie it may takes weeks to fix an air conditioner because the landlord is too busy with personal issues. By employing a property manager, landlords can be assured that all of their tenants' requirements are dealt with promptly and this will in turn reduce vacancy rates.
7. Maintenance issues: A property manager will conduct regular property inspections to make sure the investment property is properly maintained and take action if it's not. Maintaining the value of the asset should be a key consideration for investors and that is why regular property inspection reports are necessary.
8. Legal issues: Because of the growing trend towards litigation, people who privately lease their properties can open themselves to litigation if they fail to discharge their legal responsibilities in relation to the investment property, ie fixing items in the investment property that could cause personal injury. A property manager is fully briefed on these legal responsibilities and this offers additional peace of mind for the investor.
9. Termination of contract: Problems can often arise when the tenant wants to terminate the contract, ie lack of notice or failure to leave the property in the same condition it was first leased. A property manager will ensure that the contract is properly terminated and that a new tenant can be sourced quickly, reducing vacancy rates.
10. A professional relationship: Finally, the relationship between the tenant and the owner should be on a professional basis. Investors who manage their investment properties tend to develop friendships with their tenants, which means that problems can arise when the tenant fails to pay their rent or maintain the property. By using the services of a property manager, the relationship is kept on a business footing, which will be financially beneficial for the investor.