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How To Become A Landlord - Articles

DIY Landlording: Questions to Consider

Date: 28/01/2016

I recently spoke to an investor who became so frustrated with the inefficiency and lack of professionalism of her property managers, she gave up on all of them and started managing her properties herself. She’s saving money and she’s in control, but at what costs?

What’s the best way to manage your rental properties? Should you do it yourself or use a rental manager?

This is a question you should not answer lightly. While there are some benefits to self-management, not everyone is cut out for it. Even those who have the skills and experience to do it well may end up slowing down the progress toward their longer-term investing goals.

Here are a few questions to consider if you’re trying to decide whether to self-manage your rental properties or to delegate the job to a professional:

1. Is your investing strategy scalable?

scalable

Every entrepreneur in a growing business quickly learns if they fail to delegate, they fail to scale. Your property business is no different.

If you keep buying properties without building a team of helpers and advisors, you will eventually find yourself unable to cope with all of your responsibilities. After all, there’s only so much that one person can do. Unless you start delegating specialised tasks to experienced professionals, the growth of your property business will eventually stagnate.

In Steve’s McKnight’s Property Apprenticeship course, one of the repeated questions throughout the training material is: “Who will you partner with?” For investors who want to build a scalable investing strategy, one of the most crucial professionals to partner with is their property manager.

2. How much time do you have available?

time

Managing your own rental properties requires a considerable investment of your time and energy. Because the workload increases with each new property you buy, you’ll want to count the cost early on in your investing journey.

Be sure you’re clear on exactly what it takes to manage a property effectively and efficiently. Your tasks will include:

  • Learning legal rights of tenants and landlords.
  • Valuing market rent.
  • Advertising and marketing your property.
  • Screening multiple tenant applications by contacting references.
  • Signing appropriate paperwork.
  • Collecting bonds.
  • Carrying out condition reports.
  • Responding to tenant questions, complaints and repair requests.
  • Organizing tradespeople.
  • Collecting rent in a timely and efficient way.
  • Keeping appropriate paperwork and documents.
  • Regularly inspecting the property.
  • Enforcing the lease before a tribunal, if necessary.
  • Maybe even evicting tenants.

Carrying out each of these tasks with excellence will carve time out of your already-busy life. Be sure you have the time, and can also give your emotional best to each of these areas of responsibility equally.

3. How much aggravation can you endure?

aggravationManaging rental properties means being available at virtually any time of the day or night. You’ll never be able to fully switch off from the responsibility.

You will be the first person your tenant calls when there is an emergency or they need you to do an urgent repair. Whether you’re out for drinks in the evening with your mates, or sleeping soundly at 3 a.m., you’ll need to be available and to respond promptly to these situations when they occur.

If you’re going to self-manage, you must be willing to open up your life and have your time inconveniently invaded from time to time by another person’s needs.

4. Do you have marketing skills?

One of your most important responsibilities as a self-managing landlord will be to advertise the property effectively in order to attract the right tenants. This may be especially difficult if you’re in a market with a higher vacancy rate.

Failing to market your property effectively will increase your vacancy rate and could end up costing you thousands of dollars per year in lost rent. If an extended vacancy due to poor marketing costs you as much as you would have paid a professional property manager, you’ll end up working for free for the remainder of the year.

5. Do you have a system for screening tenants?

screeningYou don’t just want any tenants; you want the right tenants. This will require carefully sifting through the many applications you may receive, so you can make the best choice.

Ideally, you want tenants who will make timely rental payments, but you also want tenants who will look after your property as if it were their own. Therefore, discerning the character of prospective tenants is paramount.

The first step is to have a thorough tenant application form. You’ll want to collect both personal information, and a list of references to confirm both character and income. Next, your job is to pick up the phone and ask those references the right questions about each applicant.

You can also access tenancy databases, like TICA, to confirm whether someone has blacklisted a prospective tenant. The cost of such services may range from $200 to $500 per year.

6. Are you clear on the legal requirements and documentation?

documentationManaging your own properties will require you to educate yourself thoroughly on your legal rights responsibilities as a landlord, as well as those of the tenant. You will also be required to gather and keep the proper documentation related to tenancy agreements, bonds, condition reports, maintenance requests, inspections and dispute resolutions.

One eye opening experience well worth a landlord’s time is to review the list of reasons they can ask a tenant to vacate, as well as the notice they are required to give by law. So take a moment to look up the requirements in your state, or check out the laws in Victoria.

7. Do you have the personality to be a good property manager?

good property managerI once mentored a property investor whose day job was property management. She absolutely hated her work because she was not a people-person. She didn’t enjoy being around others, and preferred to work alone. Obviously, she chose the wrong career.

The best property managers enjoy being around people and have the heart to serve others. Being a people person means you can maintain a good attitude and demeanor and be polite, no matter how difficult the situation or how trying your tenants are being.

You will need to do two things: build rapport with new acquaintances in a sales role and cultivate long-term relationships in a management role. There are few people who have the natural ability to do both of these tasks well.

8. How much is your time worth to you?

How much is your time worth to you?This is the ultimate question.

If you have a property that rents for $500 per week, you may end up paying out $2,000 per year in fees to a rental manager. That amounts to just under $40 per week or about $165 per month.

If you must spend an average of four hours per month managing a property, you’re essentially getting paid $40 per hour to self-manage. If your time is more valuable to you than that, perhaps you are better off delegating the job to someone else.

Conclusion

Smart investors recognise where they can use their time and talents best, and where they need to delegate other tasks to the experts who can deliver optimum results.

Your ultimate goal is to work smarter as an investor, not harder.

In the beginning, low value-add administrative duties may be necessary, or even beneficial for you to do yourself; however, as your property portfolio grows, you’ll eventually hit a wall unless you learn how to delegate.

Only you can decide whether self-managing a property is right for you. In our Property Apprenticeship course, Steve McKnight has written an entire session on “Self-Managing vs. Rental Managers.” He also includes a template detailing exactly how to screen tenants effectively.

Profile photo of Jason Staggers

By Jason Staggers

Jason was a personal mentor working with Steve McKnight's Property Apprentices. He helped hundreds of investors apply Steve's teachings in the real world and achieve greater results on their journey to financial freedom. Jason now lives in Perth, WA where he leads Neuma Church.

Comments

  1. Daniel Baxter

    Great article. DIY Landlording definitely isn’t for everyone, but when you’ve had a bad experience with more than one property manager, it’s nice to know you have other options.
    At Your Hot Property we actually have a lot of clients who use our service to locate their own tenant and then hand over the management to a property manager they trust. This way they know exactly who will be leasing their property and they save themselves expensive tenant finder fees. This works for those who want to be involved, but don’t have the time to manage the entire process.

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