Self-Managing Vs. Hiring a Property Manager

There are two main options to consider in regards to the management of your rental property — managing your own property vs. hiring a property manager. If you’ve stumbled upon this blog, there’s a high chance you fall into one of these two categories:

If you fall into the first category, and you live a busy life like most people, then look for a new property manager! If you don’t see value in your property manager, then they’re doing something wrong. Far too many landlords put up with substandard service which results in stress, lost time, or even worse, it loses them money. If you’re utilising a property manager then owning an investment property should be effortless and your agent should be doing all the legwork for you – you should be able to trust that they’re doing the right thing by you and your property.

If you fall into the second category and you have the time to self-manage your rental, then there’s certainly no reason why you can’t do it successfully. There are plenty of investors that manage their own properties without issues – just keep in mind that it can be time intensive and you need to have a good understanding of the legislation as well as your obligations as a landlord to avoid getting yourself into trouble.

You may find this list of questions to ask a property manager useful in vetting a quality agent.

Before we delve into the pros and cons of self-managing vs. hiring a property manager, let’s take a look at the main tasks that managing a rental property entails:

• Taking marketing photos
• Listing the property online
• Conducting open homes
• Determining weekly rent
• Tenant screening (rental history, employment and financial checks etc)
• Preparing leases
• Conducting entry condition reports
• Conducting exit condition reports
• Lodging/releasing bonds with RTA
• Collecting rent
• Providing statements for rental payments
• Doing preventative maintenance
• Booking repairs as needed
• Inspecting completed repairs
• Fielding complaints
• Moderating issues between tenants
• Routine inspections of the property
• Dealing with tenancy issues and rent arrears
• Following legislative requirements
• Keeping appropriate records for insurance or legal disputes
• Booking smoke alarm inspections
• Booking swimming pool compliance
• Invoicing tenants (e.g., water usage)
• Issuing appropriate notices
• Evicting tenants when necessary
• Claiming bond
• Attending Tribunal hearings when necessary
• Finding new tenants when vacancies occur
• Dealing with Body Corporates
• Paying bills (rates, water etc)

---

Pros of Hiring a Property Manager

There are pros and cons to both options. Let’s take a look at the pros of hiring a good property manager first.

Freedom:

Most our clients work a full-time job and simply don’t have the time that’s required to manage an investment property effectively. A property manager is your personal assistant when it comes to looking after your property. You can sleep easy and know your family time won’t be interrupted with tenancy issues or emergency maintenance – your agent will take care of everything to make your life easy.

Are you prepared to give up your weekends when your property is vacant? Do you have time to attend to maintenance issues during the week? Are you available at all hours to take care of emergency issues? What would you do if you were on an overseas holiday and one of the pipes burst?

Objectivity:

There is a good reason why lawyers don’t usually represent themselves and physicians don’t treat family members: their personal interest might bias their judgement. An independent manager is detached emotionally from property decisions, their only objective is to make the best decisions for their client.

Most people form emotional attachments to their home which can make it very difficult to deal with someone else living in that space and manage it effectively. Will you get upset when something breaks? Will you be upset if someone does not like the home?

Systems:

Good property managers have proven systems in place that ensure tenancies run smoothly and procedures are followed in a timely manner ensuring legislative requirements are met. This way, if a tenancy goes bad or issues arise, then the impact to the landlord is minimised as much as possible. Having systems in place also ensures landlords are following their obligations and protects them from legal issues.

Many self-managing owners find it difficult to handle a tenant falling in arrears. It’s human nature to be compassionate when provided with a plausible sob story, but this can also be exploited if correct procedures aren’t followed. We’ve come across many landlords that have self-managed for a number of years without a problem, then find themselves in a situation where a tenant is several months in arrears and seeking help from an agent. Strict systems must be followed to minimise the damage when things go wrong and also to ensure landlord insurance is not voided!

Expertise:

Good property managers understand the appeal and detractions of their properties as well as their competition. They know when they can safely raise rents without driving tenants away or when to maintain a happy medium in order to minimise vacancy periods – their experience helps ensure rental yields are maximised by avoiding costly vacancy periods.

The obvious mistake is pricing a property too low, but did you know that pricing a property only $10 too high can result in substantially less interest. Less interest means less applications. Less applications ultimately results in a less desirable tenant – a less desirable tenant can cost a landlord in a number of different ways. Even if you get lucky and source a quality tenant for top dollar, pricing a property too high generally results in shorter tenancies – there is a sweet spot to maximise rental yields.

Knowledge of the Law:

This one’s pretty self-explanatory. A good property manager will know the laws and this protects their clients from lost rent or potential damages.

There are too many examples to list them all, but a common one we hear of is when self-managing landlords don’t follow correct procedures during the eviction process. Eviction processes are lengthy and finding out that the process needs to start again due to a minor error is devastating (it can be an error as simple as issuing a notice 24 hours too early). To add salt to the wound, this would generally void a landlord insurance claim and result in months of lost rent.

Tools:

Being in the real estate business, a property manager will have various tools and databases to assist them to do their job effectively. Many of these tools and databases simply aren’t cost effective or available on a small scale when self-managing.

Tenants with poor rental histories often hide details on their rental applications. If a tenant lies about their previous address, will you be able to verify that the details they have provided are false? Will you be able to check a tenancy database for previous issues?

---

Cons of Hiring a Property Manager

Engaging a property manager is not without some risks, so let’s go through some negatives below:

Cost:

This one’s pretty self-explanatory. You can’t have a service provided for free and the cost of hiring a good property manager is the reason why some landlords choose to self-manage their rental property.

Landlords own rental properties to make a profit, so it stands to reason that landlords like to minimise costs where possible. However, our advice is to stay clear of cut-price agencies. As with most things, you get what you pay for!

Cheap agencies have one of two business models. They’ll either provide a poor service where the staff are overloaded with work, or they’ll build a client base and sell their rent roll to another agency in a couple of years. Both models result in poor service and cost a landlord in the end.

There’s nothing wrong with self-managing your property if you invest the time and learn to do it properly. If you’re looking to save costs, our advice is to do it yourself before going with the cheapest agency in town.

Misaligned Incentives:

Sometimes a property managers interests may not be aligned with the interests of the owner. As an example, many agencies pay their employees bonuses for meeting certain KPI’s. The intention behind these bonuses is to encourage employees to work harder which generally improves the service the company offers its clients – but this is not always the case.

If a property manager is in a situation where they need to reduce the vacancies in their portfolio in order to meet a KPI, one must ask if they might be tempted to place the wrong tenant in the property just to receive a bonus – it can be a tricky balance for the agency.

Fortunately, our agency is somewhat unique and does not face this problem. We are family-run and do not have employees. As business owners, our incentive is to keep our clients happy through good service and grow our business through word of mouth.

Unknown quality:

Like all professions, property managers can be exceptionally good or horribly bad. Without adequate research, you could end up with the latter and the problems that result.

---

Pros of Self Managing Your Rental Property

Now let’s take a look at the pros of self-managing your own rental property, but before we do so, ask yourself the following questions to determine if self-managing is an option for you:

1. Are you in a position to be on call day and night?
2. Are you prepared to evict tenants who seem to have good excuses for non-payment of rent?
3. Can you keep your cool and remain professional with tenants that are being unreasonable?
4. Are you prepared to give up your personal time and weekends when required?
5. Do you have the time to learn the legislation and how to manage a rental properly? This point is highly important and will help ensure you don’t get yourself in a difficult situation.

If you’re in a position to do all of the above, then there’s no reason why you can’t self-manage your property. Let’s read on with the pros of managing your own property below:

Financial Savings:

This is pretty self-explanatory and cost is the deciding factor for most landlords that choose to self-manage. If you’re capable of managing a property yourself, then at the end of the day, you’ll have more money in the bank by doing so.

Greater Control:

Self-management gives you a greater degree of control over daily operations. You’ll be the one making all necessary decisions. If you have trouble delegating, then you may feel more comfortable being in control of every detail of how your properties are run.

Closer Relationships with Tenants:

You can expect closer relationship with tenants since you will be their point of contact. Of course, landlord-tenant relationships can turn sour at times, so in these cases, it is a double-edge sword.

---

Cons of Self Managing Your Rental Property

Let’s take a look at the negatives of self-managing a rental property:

Less personal time:

Sacrificing your weekends to conduct open homes is just one part of the job. You’ll also need to be available during the week to arrange repairs. There are also emergencies that pop up from time to time and these can occur at the most inconvenient times. Will you have someone local that can help our when you’re away on holidays and unexpected issues arise?

Tools:

When self-managing on a small scale, it’s not feasible to pay for all the tools and subscriptions an agency has access to. This makes things like vetting tenants properly very difficult.

Constant self-education:

Property management might seem simple at first glance, but you’ll be learning legislation constantly if you’re doing it properly. As a simple example like a lease coming to an end and having to source new tenants. Do you know if you can show prospective tenants through while the old tenants are still living there? Do you know what notice to provide and he notice period required? Do you know your rights if they say no?

Then there’s more complicated issues like evictions. Landlords need to be extremely careful to follow the correct procedures and notice periods or they can risk voiding their landlord insurance claims or even worse, having to start the eviction process from scratch due to providing the wrong notice period.

It’s difficult to stay on top of legislation when property management is not your full-time job.

Poor quality applications:

Expect to get more enquiries from tenants with poor rental histories. Tenants that struggle to get approved for a property through an agency, know that they may have better luck applying for private rentals when they provide misleading information.

Providing you’re still advertising on the major platforms like RealEstate.com.au and Domain, then you will still get the quality applications, but you will need to be extra careful and have a good judge of character when vetting tenants if you don’t have all access to the same tools as an agency.

Lack of Experience:

If you’re just starting out as a landlord, you are sure to encounter issues that have to do with legal regulations or best practices that you are simply unaware of. It can take a long time to gain the experience necessary to manage a property well.

Tenants:

The people to whom you will be renting share the same messy problems in life as everyone else. They get sick, lose jobs, and have family fights. At times, they will pull on your heartstrings, at other times they’ll frustrate you. Are you ready to handle uncomfortable decisions including evictions yourself?

Source of Stress:

If a tenant has a burst pipe in the middle of the night, you’ll be the one taking that call and figuring out how to get it taken care of. If a tenant is not complying with a policy, you’ll be the one confronting them with the policies agreed upon in their lease and taking the necessary actions.

Now that you’ve read through all the pros and cons, you should be able to decide which option best suits your lifestyle. We hope you found this blog useful!