The true cost of managing your own investment property
When we think about DIY, we think about saving money. With the economic hardship dumped on us by COVID-19, it could seem like the way to go when managing or selling property.
But is it truly worth it?
The answer is either possibly, no, or not if you want to maintain your sanity.
Managing your investment property yourself
Property commissions typically run in the order of 5-15% of your monthly rent.
Say you rent your property for $500 a week and pay a professional property manager a 10% commission. That's $50 a week or $2600 a year.
It a significant amount of money, but it needs to be understood in the context of what you're avoiding if you pay for professional management.
First, there's the time commitment. You need to advertise the property, find a tenant and conduct background and credit checks. And that's before they move in.
Once they're in, you'll have to deal with repairs, late rent payment and inspections.
While property managers have access to tenancy databases, which show tenants who have been blacklisted for property damage or not paying rent, most landlords are flying blind.
And experienced agents should be familiar with rental prices in the area and know how to price and promote a certain property.
"If you want to read the residency tenancies act, and its copious amounts pages of law and how to deal with tenants who don't pay their rent, how to deal with arrears, how to deal with insurance claims - it's an absolute nightmare," says Rich Harvey, CEO of Propertybuyer.
"It's far better to use someone who's impartial, objective, and has a list of reliable tradies they can contact at the drop of a hat.
"Property managers are like the healthcare workers of the property industry.
"It's far better to use someone who's impartial, objective, and has a list of reliable tradespeople they can contact at the drop of a hat."
Selling your own property
Selling is another beast entirely, also best left to the professionals.
DIY sellers lack three things that key to selling a property for the best price possible: experience, impartiality, and connections.
Harvey says selling is all about price, promotion and position.
"The problem with selling yourself is that you have a biased position."
"A good agent will be able to attract both local and out of area buyers."
While a selling agent will collect their 2% commission, you get in return an increased chance of selling not just at the right price, but at a price that attracts buyers.
"An average person doesn't understand the true value of their property, whereas a selling agent is on the ground every day doing this," says Elite Buyer Agents managing director Kim Easterbrook.
"If you go to market and advertise something too high, you miss capturing your real buyers."
It's all about knowing the market you're trading in.
"Selling agents have access to all the recent sales data, including undisclosed results and off-the-market transactions, whereas the average person doesn't have access to that information."
"It's a false economy," adds Harvey.
"You may think you're saving a 2% commission, but a good agent creates competition."
But possibly more important than all that is the impartiality offered by selling agents, who are unencumbered of the emotion that can see the price set at the wrong level and genuine buyers excluded.