Rental Property

[samuely1]

I am looking for some advice regarding a property I am purchasing to rent out in the near future. I am a first home buyer, so I am looking about 6-12 months down the track. I have no experience and have a couple of questions for people who know more about it than me. Pros and Cons of renting the property out yourself vs going through an agent? What would you recommend? How much does it cost to go through an agent and what is the normal % of weekly rent that the agent takes? Any other advice would be appreciated.
Cheers

 

[Grinder]

Hey samuely1,

Iv'e done both and depending on how involved you want to get & how knowledgable you are they both have their pros & cons.

Agent managing means less work & hassle for you in exchange for a loss of approx 5% of the weekly rent. If you get problem tenants they usually know what to do, saves you running around or stuffing it up the legalities involved.

Doing it yourself means you need to take care of the rental agreement, bond, incident report etc which you can get all from the tenants union. Theres also advertising, agents can suss out the right tenants.

Overall, it's not difficult but if your fairly green then an agent might be the safest bet.

After you get some experience & some good tenants you might feel more confidant to go it alone.

 

[awg]

There is a sister site of ASF for property

http://www.aussiepropertyforums.com/

As you asked here, having done both,

it is only practical to be your own agent if the property is very close to where you live, and you have time to manage it.

otherwise, it is impractical.

agents charge 3-8%, with about 5% average, that is tax deductible.

there is a fairly long list of pros and cons to each approach, I suggest you do some googling about self-managing, it is normally not advised to self-manage.

A summary of some pros:

You get to select the tenant

Save commission money

Have certain flexibility of arrangements with tenant.

Cons:

If the sewer is blocked at 2.00am Sunday, you may be called.
You have to decide if repairs are to be authorised

You dont have access to the "bad tenant" list that RE do, (unless you have a personal contact)

(One of the hallmarks of a good conman is a smooth talking exterior)

In a worst case, where the tenant is really bad, you are the one that has to go to Tribunal, Fair Trading etc..if you work and the tenant is not working, then say goodbye to 12 weeks rent.

You nee to organise tradespersons to make repairs

If the tenant falls behind in rent, you have to take action. If you have a personal relationship with the tenant, this can be heart rending, in cases where a family may have lost employment etc.

there are many ways to get caught. A guy I know took a female tenant with good references, turns out she was the tenant from hell, so he rings the previous landlord back, who apologises profusely for the reference, saying " it was the only way I could get rid of her"

 

[pilots]

Sam, rent it your self, we have done it for years, the best thing is when they ring up, tell them you will post out the application form, this way you can see where they live, drive past the place they live in, if the place now they live in is a dump, you can be sure they will turn yours in to a dump as well. Don't worry about how much rent you make, it is the capital growth is the real money.

 

[chrislp]

I have been a property manager myself so hopefully my insight helps. I agree with the all the above comments btw.

The first thing is finding a tenant & with the rental market slowing at the moment an agent is best placed to find one. They can go out there during the week & on Saturdays saving you time having to go out yourself. The cost of advertising they pass on to you is less then if you had to do it for yourself & they can market it in more places.

If it turns out you have a bad tenant one thing I see often is that landlords, even with experience of managing their own properties struggle in dealing with the situation. The residential laws are a bit complex & the tribunal is heavily favoured towards the tenant. It's very difficult to get a tenant out of a property & if things ever go that far any mistake you make in paperwork or communication will mean the tenant can still live at the property even if they are 3 months behind in rent.

As mentioned in an other post I have also seen landlords occasionally struggle to give rent increases. Of course it depends on what type of person you are though.

With an agent expenses are usually between 4.4% to 7.7% for rent collected & other small sundry costs. For finding a tenant it is usually 1 weeks rent + GST & other advertising costs. If you just advertise on the internet it shouldn't be more than a one off fee of $70. All are tax deductible.

One of the cons of using an agent is that a lot of property managers are hopeless. Don't be surprised if you end up with a dozen property managers within a couple of years as the turnover is quite high.

A lot of agents may be good salespeople but hopeless at managing your property. If you find a property manager it's usually best to do it by word of mouth, that way you will hopefully avoid getting someone as I have described above.

If you get the perfect tenant then there is not much need to use an agent as you won't need to do much & in the meantime it will save you money.

I know personally even with my experience in the industry I would still give it to an agent as I couldn't be bothered with all the hassle of showing properties or dealing with tenants.

 

[Krusty the Klown]

Personally, I side with using an agent. Yes, there is the cost, but you really don't have to do anything. They manage the rest.

What I like best is the end of year statement you get from the agent. It is great at tax time as all the agency costs, lease preparation costs, repair costs, rent received are all summarised on the one statement. But maybe that's just me being lazy.

I couldn't be bothered with 2am phone calls saying the hot water doesn't work, or dealing with nasty tenants. For the sake of a few percent of your rent, its just peace of mind for me.

Like all service providers, you need to find a decent one however, like the previous post said, they can be dodgy or incompentent too.

 

[awg]

I will clarify my earlier response.

I always used agents for my properties when I was working full-time.

My last 2 properties have been within 5 minutes of my home.

I managed them myself.

The most recent, I took possession on Monday, had the Ad in the paper Thursday, inspection Sat arvo.

The first guy who turned up, was superkeen, ticked every box.

out of respect I considered the other applicants, but he paid rent for the Monday, 7 days after I took possession, has been in nearly 3 years.
Good tenant, as he is single, works 6 days a week, so no wear and tear

In the meantime, I have done some minor exterior repairs myself, that would have cost me heaps if Tradies did them, but cause I was local, I sourced correct matching tiles, fixed some drainage issues etc.

I get to keep a really good eye on the property, and know what maintenance issues may arise

When you do it, or arrange it yourself, you make sure the job is done properly.

As a previous post from a post from a property manager stated, the quality varies a lot

I reiterate that I would use an agent unless you have time, are local, can handle hassles if they arise, and can add value.

an agent reduces the downside risk

 

[Krusty the Klown]

awg, have you ever had any bad experiences managing yourself?

 

[Gunlom]

As a long time Property Investor I Both manage my own ones and use Property Agents.

I manage my units in Perth and have agents for the ones on the East Coast.
One thing I would say is that any agent quoting 5% is a very dubious figure. In my experience the average is 8.5% there abouts..

But in truth the real figure is about 15%, when you add in Quarterly Inspection Fee's, Admin fee, Postage and pettys, Tenant fee, New Lease fee's ect... and average it out over a year, it's about 15%

Managing it yourself is not hard, if you select your tenant well. I use Rent manager and once a month I spend about 10 mins updating my data base. I also give my tenants a $100 voucher at a local restaurant every year there are no dramas. Having a good relationship with them, things can happen faster if there are problems.

http://www.commerce.wa.gov.au/Consu...ing_and_tenancy/Landlords/Landlords_pack.html

is a wealth of knowledge, find the equivalent in your state.

Although the worst experience I've had was having to tell a long term tenant he had to move out because I was selling. I found it very tough to tell someone they had to leave there home, because I needed to sell. But that's part of it I guess.

 

[chrislp]

One thing I would say is that any agent quoting 5% is a very dubious figure. In my experience the average is 8.5% there abouts..

Unlucky in Perth, in Sydney the average is 5-6%. Though average rentals are a lot higher.

 

[Judd]

.....One of the cons of using an agent is that a lot of property managers are hopeless. Don't be surprised if you end up with a dozen property managers within a couple of years as the turnover is quite high......

Agree with a lot of the above but this one sticks out.

Keep a wary eye on your property manager and make sure you visit the property every year at the minimum provided you can do that.

One property we owned was a stand alone house. It was a few hundred k's from us. Property manger reports along the lines of everything is OK and you have good tenants. For the first time in about 4 years we inspected the property.

****

Fascia boards almost weathered bare (Cost of painting versus cost of replacement and painting.) Power lines through trees (blow your insurance if a fire starts.) Handrails on deck/veranda/stairs in need of replacement/repair/painting (blow your public liability if tenant injures themselves due to poor maintenance.)

Was able to get waiver of all commissions for one year due to lax management and on the basis that I'd move my business if I didn't get that waiver.

 

[awg]

awg, have you ever had any bad experiences managing yourself?

No, but thats because I havnt been doing it solo for long enough probably

Did have a couple of badns via RE though, where the tenant wouldnt pay rent.

The procedure/law is exactly the same with RE or self-manage to remove tenant.

Essentially takes a minimum of 12 weeks, minus bond.

I try and treat my tenants the same as i would want to be treated, this can be a hassle, as you must attend any complaints immediately...not like at my joint where I can slack off

Its funny, but I notice tenants seem to enjoy a higher standard of living than I do

the guy I have in the only IP i have now, tells me he wants to live there the rest of his life. I have negotiated several issues with him, no need for an agent

have heard plenty of bad stories, including one guy who rented to a family, only to have them refuse to pay rent, and threaten to burn the house down if he tried to evict them.

One advantage of an agent is you will save a great deal of time and angst, if things go bad, and chances are, they will at some stage.

ps When I bought the house, I introduced myself to the neighbours, a gesture they appreciated, one in particular, I got friendly with, a wise old fellow, he would let me know of any problems straight away.

another thing, and this is fairly terrible to admit, but you become a discrimination nazi when you have to select tenants, there is definitely a ranking order.

and dont get me started on carpets, just make sure you take dated digipics of the whole carpet, and make sure the tenant signs off on regular inspection reports. NEVER get a light colored carpet, try and not rent to people with kids, pets, or drunks, plan on replacing floor coverings more often than you would believe, or just get durable surfaces.

 

[Aussiest]

I would go with an agent, but you have to find a good agent. Sure, there are plenty who just want the commission and will tenant your house with anyone, but the one i had went right out of his way to find a reliable tenant. Basically, finding the right tenant to start with will save you time, money and heartache. PM me if you want to know more about him.

 

[jbocker]

Have managed my own locally (in Perth) as the fees are very high with the RE. Melbourne rental through an agent (of course) has been excellent and one of fees of 6% from weekly rent.
Had one eviction, not much fun, but while in court spoke with others who had agents and were still suffering badly.
In most cases managing the property is easy, just take you time selecting the right people (and if your gut feels things are not right then say No! - I am surprised over the years how 'accurate' this has been for me) and keep your bookwork up to date.

 

[knocker]

estate agents here in the uk are shafters. we wanted to rent out our house in ascot and the agents came up with all these weird fees, in the end we would lose about 200 pound a month going through them and also any potential renter had to pay the agents crazy fees as well!! they were double dipping so we went it alone, found a nice professioanl indian couple and family, no problems whatsover.

always pay the money on time and care for the house

 

[nunthewiser]

always pay the money on time and care for the house

NIRVANA!


go stand next to robots

thankyou

 

[J.B.Nimble]

Shop around and find a good agent. They're worth it. They will save you a lot of time and time is money, especially when you have a vacant rental...

A friend of mine amuses me - manages several properties (very) remotely. Agents too expensive apparently. So he has an expensive flight and time pressures every time he has a change of tenant and yet he happily farms out preparation of his tax return at exorbitant cost. Me, I opt to do the taxes but leave the tenants to someone else...

 

[tech/a]

Sam, rent it your self, we have done it for years, the best thing is when they ring up, tell them you will post out the application form, this way you can see where they live, drive past the place they live in, if the place now they live in is a dump, you can be sure they will turn yours in to a dump as well. Don't worry about how much rent you make, it is the capital growth is the real money.

We look after our own.
All are within 20K radius.
We have fantastic long term tennents who pay top $$
They and we like the instant response and care for our homes.
We often have un arranged meals at the local with tennents and both can put a FACE to each other.

We treat them like normal people and ask that they treat us the same.
Must work well as we have their friends often call asking if we have any rentals available.

Pay yourself a management fee particularly if you have a non working spouse.

Yes we had a bad tennet once but we removed him very quickly---no trouble.

Finally---YOU'LL LEARN a GREAT DEAL MORE about the rental market and tennents doing it yourself.
I believe its necessary to be close to the ground on these matters.

 

[Krusty the Klown]

Did have a couple of badns via RE though, where the tenant wouldnt pay rent.

have heard plenty of bad stories, including one guy who rented to a family, only to have them refuse to pay rent, and threaten to burn the house down if he tried to evict them.

One advantage of an agent is you will save a great deal of time and angst, if things go bad, and chances are, they will at some stage.

Yes, this is my main issue. I don't have the time or patience for that sort of thing.

 

[Prospector]

Check your Insurance Policy. Some require you to have a Property Manager, esp for Rental Arrears.

And this is the best forum for you:http://www.somersoft.com/forums/

It's ok Joe, I refer people on that forum to ASF too!