While most investors will say that property managers are one of the most vital parts of their investment journey, some still prefer to "self-manage" their properties for different reasons—one of which is to save some cash for future purchases.
Lisa Indge of the property management agency Let's Rent believe that, as in all aspects of property investment, managing one's own property can lead to success with the right preparations.
She shares some of her tips on property management with Smart Property Investment, highlighting the importance of education, negotiations, and experience:
1. Educate yourself about the market
According to Lisa, self-managing landlords must make themselves familiar with the market to be able to move forward.
"If you are a landlord who wants to manage a property yourself, you have to educate yourself. The best way to do that is [to] go and look at other properties that you consider to be comparable and try to look at it objectively as to what your property offers in comparison to those properties," she said.
2. Establish a reasonable rent
Being educated on the market means being able to establish a good rent, Lisa said. While it is important to avoid underpricing, putting the property's rent price slightly below market can help maintain tenancy.
"In terms of... keeping tenants longer term, if you do price that property slightly below market, you are more likely to keep that tenant for the long term, and it's much cheaper to do that as well, particularly if you find a good tenant," Lisa said.
"You do have to take into consideration the market conditions in each area... In our case, contacting the tenant early is key so that you can actually manage that process—encouraging the tenant that if they sign the lease, then they're securing that same rent for the next 12 months."
As always, aim to make negotiations professional and do away with any "emotional factor." If a tenant insist[s] that the rent price is too high, don't hesitate to apply to [a] tribunal to settle the case.
"It's about perception, and the more that you create that professional barrier, the easier it is for you to negotiate rent increases because when you're running as a business, [you just say], 'Well, these are the market comparables...'," she advises.
"The only way of winning a case [where the tenant says the price is unreasonable] would be to take it to tribunal and prove that the increase is beyond the market."
3. Know your rights and responsibilities as landlord
If you decide to manage your own investments, you have to deal with all the processes involved—from the application of tenants to the regular inspection of the properties and communication with the tenants.
"If you are self-managing, I think [the timing of inspections] depends on your contact with the tenant. For example, if your tenant is reporting a lot of repairs to you, that's a good reason to inspect the property," Lisa said.
"If the tenant is saying nothing at all, it's even more reason to inspect the property because if the tenant is saying nothing, there's a number of different reasons why they might be saying nothing.
"A lot of tenants don't even notice, for example, when there's a stain on the ceiling or if the tap is dripping, so it's important that you do check in on those tenants and make sure that your property is in good order. The other reason for tenants not contacting is perhaps there's more people living in the property than is permitted."
Self-managing landlords must also make sure to get insurance to avoid extra costs in case of unexpected incidents. In one particularly shocking case, Lisa and her team found a dead body in one of the properties they are managing and the landlord insurance ultimately helped them minimize the concerns they have to deal with back then.
According to her: "We encourage all of our clients to have landlord insurance... This can happen now—what does it mean in terms of cost? If you're not insured and you're having to pay all of those cost[s] yourself, it's thousands and thousands of dollars. In this case, it was a one-bedroom apartment, and the total cost was about $7,000—all covered by insurance. It's madness not to have insurance because you never know when something out of the ordinary might happen."
Landlord insurance can also help investors avoid vacancy, which can also result in major costs.
"The landlord has a right to have the tenant on a lease. There are actually insurance policies out there that don't cover the landlord if the tenant is on a rolling lease. We often mention that as being a reason for the landlord wanting the tenant [to] be on a lease... We actually push for that because, clearly, in terms of the risk factor, we really don't want a tenant giving 21 days notice as we come up to Christmas," Lisa explained.
Tune in to Lisa Indge's episode on The Smart Property Investment Show to find out why pet owners can make great tenants, as well as when to be lenient in the leasing process and what to do when it all goes wrong.