PROPERTY

The true cost of managing your own investment property

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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.

the risks of managing your property yourself

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.

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David Thornton is a journalist at Money magazine. He previously worked at Your Money, covering market news as producer of Trading Day Live. Before that, he covered business and finance news at The Constant Investor. David holds a Masters of International Relations from the University of Melbourne.
Comments
Ali Alavi
November 7, 2020 3.39pm

Lots of wrong and misleading information in this article. I sold my property myself 5% higher than valuation done by real estate agent.

Michael Knight
November 7, 2020 7.57pm

Hi

I think you need to do your homework a bit as I run a number of property's and you can do a tenancy checks through companies like rent better and you can also get history and information off the tenant they last rented through eh: Raine and Horne.

Also to run a property is easy only need to spend 4mins every 6 weeks to ensure the rent gas come in or setup notifications on bank account (app)

Also repairs through a realestate is much higher (cost wise) than if you you a tradie that you get to know, because the tradie know he will get regular work from you.

If you get a bad tenant there is a process to follow (consumer affairs website) and in regards to finding a tenant, this process is very rare if you get a good one as you only need to find a new tenant every 6 to 10 years from what I have found but I did have one move out after 3years if you keep them happy they will stay. Note: units are different tenant turnover is higher.

I've had to put one insurance claim in didn't seem like a nightmare it was very simple and easy as the insurance agency helps you through it, so not sure where the nightmare comes from

Also selling a house is alot more easier than running a property as I have done this a couple times already.

Note: I have been running my rental properties by myself for roughly 20years and never had any training as the process is very simple and easy.

Thanks

Mike

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