I finally did it. I bit the bullet and decided that it was time to take over the management of my investment property.
As some of you would remember, last month I wrote an entry entitled “Should you manage your investment property?” which outlined some of the issues I was having with my property manager at the time and subsequently resulted in a list of pros and cons associated with self-management. There have been a lot of comments via mypropertyjourney.com, facebook and twitter with people keen to share their wisdom and experiences and I have taken all of these into consideration when making my final decision.
Why did I ultimately decide to take control of the manasgement of my investment property? The main reasons are as follows:
1) The relationship with my tenant – Over the last 6-8 weeks my tenant and I have formed a really great relationship, he contacts me whenever there is an issue with the property and I endeavour to deal with the issue as soon as possible. He always pays his rent on time and has kept the property in a great condition.
2) The Middle Man – I’ve come to realise that the property manager is just a middle man, a conduit of sorts, who feeds information from my tenant to me. If my tenant is already contacting me directly then why should I pay for this service?
3) Saving money – The obvious one. I actually gave my property manager the opportunity to negotiate their fee, which may or may not have had any effect on the outcome of my decision to self-manage the property, but I wanted to see if there was any flexibility. There wasn’t. The property manager was adamant that the fee I was paying was the lowest they could go because of the quality of their service – HA.
4) Control – I’m a control freak, especially when it comes to my hard earned money. Having said that, I have realised that over time I am going to have to lessen the grip I have on my property portfolio as it grows mainly because the whole point is to enjoy PASSIVE income. While my portfolio is still small and manageable, however, I will be as hands on and learn as much as I can to be able to take a back seat in the future.
The aforementioned are a few of the reasons I decided to self-manage my property. The decision has not been an easy one, I’ve had to evaluate and assess the risks involved with taking this step but I believe for me, right now, this is the best option.
With the decision made I decided to write an action list of things I needed to check off to ensure a smooth transition for both myself and my tenant.
These are the steps I took:
1) Discussed and agreed with the tenant that self-managing the property would be the best option for both of us moving forward. I also negotiated a 24mth lease with rental increases every 12 months (including a rental increase in December 2012 when his original lease would have expired).
2) Visited the RTBA website and printed off an Agent/Landlord transfer form. You will need the bond number and the tenant’s details to have access to this document. The property manager will be able to provide the necessary information. Don’t explain why it is needed just ask for it, they don’t tend to ask questions.
3) Printed off the tenancy agreement form from the Consumer Affairs Website and filled it out. Added some additional clauses (pertaining to rental increases every 12mths over the 24mth lease period – including a rental increase at the end of the year when his initial lease would have been ready to expire) and emailed it to my tenant so that he could have a few days to look over it before I visited him with the paper work for signing. I also included a copy of Renting a home: a guide for tenants which legally the landlord/property manager must provide.
4) Visited my tenant, signed the tenancy agreement, signed the additional clauses and agreed that the current property condition report as per his initial lease would stand as the foundation for inspections during the tenancy but mainly for the final inspection upon vacating the property – we both signed and dated this.
5) Filled out the RTBA Agent/Landlord Transfer Form and emailed it to my property manager to sign. We agreed a date for the transfer to become official and final payments outstanding to be paid into my account – I also requested a full ledger of every payment made over the course of my tenants lease to date for my records. Once she completed the form and sent it back to me, I mailed it to the RTBA.
6) Called my insurance company to let me them know that I would be self-managing the property. They advised me of an additional payment of $2 per month – much better than what I thought it was going to be given some of the information I had received in the past!
7) Set up my property management spreadsheet for the new financial year. As I will be taking care of the money side of things from now on I am going to have to be more on top of the property finances than ever before.
There you have it, my 7 steps to self-managing your own investment property.
Please keep in mind that everyone’s circumstances are different and need to be taken into consideration. Just because the above is working for me does not mean it will work for you. There are risks involved in self-managing property and readers need to be aware of this prior to any action.
P.S For those of wondering who the winners are from our “Get a Financial Grip” Promo – I will be announcing them this week. Stay tuned!