Hi Guys & girls
My wife and i brought our first IP about 12 months ago. The place was rented out for the first 6 months and we then moved into it us our PPOR (We were first home buyers so received the grant).
We are now getting ready to move out again and my sister and her friend have shown interest in renting the place off us. Our initial thoughts were that this would be great because we have a few things we would like to do to it as well as look after some newly planted trees. We also know that she will look after the place well and we can get access to it whenever required. If she does decide to rent it we will be charging her market rates and be drawing up a contract etc.
My concerns only started when she said that she may not be able to find a third friend to rent with here so she was thinking of trying to find an unknown house mate for the third room. This is not a big issue as her and her good friend would still be there to keep an eye on this other person. My main concern is do I self manage or use a PM if they end up with an unknown person in the place?
I was originally thinking of self managing as the place is close to where we will be living and I don’t see the need for a PM if my sister was living in it because she would call me up to do the maintenance any way. My concern is with the third person and what potential issues may arise with self managing vs using a PM.Anyone have any comments or in a similar situation? Your help would be greatly appreciated.
Regards chris
Hi,
Just remember that the PM costs are tax deductible so yeah you pay but you don't really. Questions to ask yourself about PM'ing are
* Will you follow up on everything….EVERYTHING?
* What is the worst thing that will happen if they don't pay, leave all the furniture and possessions in the house, trash etc?
* How much will it cost you in man hours as opposed to paying a PM?
* How will you document everything? Legally and tax wise.
* How is your filing system?
* Do you know tradesmen who will be relatively cheap to fix stuff, be on call 24/7 etc?Just a few things to think about that a PM will do. It is a lot easier to pay and have a statement emailed/posted out that includes invoices etc than to have to muck around. (Can you tell I don't manage my own IP's?)
If you are passionate about doing it yourself and have good organizational skills then go for it. I have seen some shocking properties self managed, full of junk and no inspections done for like a year and 1/2 because "oh they're good tenants (even tho they have to be chased for the rent) I don't want to have to get anyone else etc"!
Just remember that property is a business
D
DWolfe | www.homestagers.com.au
http://www.homestagers.com.au
Email Me1 – as it is your sister, I'd be inclined to self-manage, mainly for the reasons you have already outlined.
2 – get a lease in place, this protects you and your sister and your relationship.
3 – regardless of the 3rd person, you are not just a landlord, you can visit your sister at any time (if that is the sort of relationship you have with her).Good points Scott, didn't really think of the visiting part!
DWolfe | www.homestagers.com.au
http://www.homestagers.com.au
Email MeHmm i didn't think about the visiting part. I guess that means that i can visit my sister (my property) without giving notice (she might not be happy with it) with bothe options (PM or self managed).
I am still leaning towards self managing just because i know my sister will call me direct if the place needs maintanace even if we were with a PM. I will make sure i get a lease in place though, JUST IN CASE.
Thanks guys
One potential problem is that over time you will end up dramatically under charging your sister because you will be reluctant to put up the rent. But someone looking after the property properly should outweigh this.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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