Have you been considering self-managing your investment properties for a while?
Maybe after a bad experience with your past or current property managers? Do you feel like banging your head against a brick wall due to the frustration of feeling like nothing ever gets done unless you nag your property manager? Are there things you haven’t even been made aware of? Do you feel like they rushed and stuck in the first tenant they found and it’s caused you nothing but problems?
It can be difficult to find property mangers who care for your home like it was their own. I have heard horror stories of tenants complaining of leaking roofs or clogged toilets for months without any action taken – and these urgent repairs can cause thousands of extra dollars of damage if they are left unattended to! This issue is often left unresolved due to poor communication between the tenant to the landlord with the inefficiency of the property manager being the middle man.
The good news is that it doesn’t take that much time to self-manage your own properties – especially if you live nearby and is convenient to check in from time to time.
You can minimise the time required in self-managing by each year picking a week or two in advance that you know you can be home and not away on holidays so you can keep your schedule clear. This time that is scheduled in your calendar each year and your new leases can be set up on 12 month time periods so that they expire around this time in the following year so you are planned and organised well in advance. This tenant on-boarding process is the hardest part of self-managing but is the one that will make or break the tenancy if you get right person, compared to getting in the wrong person. Once you get the right tenant in, then the rest is smooth sailing!
The time involved each year to seek new tenants include the following:
- Make Property Presentable and Take Photos (0.5 hours)
Inspect the house/room and make sure you have it thoroughly cleaned and presentable. It’s important to get this right from the start as any defect on the condition report for any damage or anything that is not clean, will basically give permission for the tenant to leave the property like this or worse at the end of the tenancy. If there is a little ding in the wall in the hallway, it means that you can’t check the yes box for undamaged walls in the hallway. This means that other damage is very very difficult to prove that it wasn’t there at the end of the tenancy. If a tenant moves out, then I make sure they clean it to the standard it was in before moving in – which in my properties is immaculate. There is no question if you have set a policy for the standard of presentation before each move in. If you can’t get or it’s not reasonable to get the previous tenant to clean or repair damage – i.e. if it is wear and tear, then it’s a good idea to renovate or do simple maintenance work to get it back to ‘as new’ condition.
- Get Advertising Live (0.5 hours)
It’s important to spend some time to get great photos of your property before tenants move in to be able to attract great tenants. Spend some time to paint a nice picture of the property by thinking of the benefits to your ideal target tenant. There are a number of great places to advertise – however, the good ones are all paid advertising. Gumtree just doesn’t attract the best tenants unfortunately.
- Corresponding with tenants (0.25 hours)
Corresponding with prospective tenants to arrange inspections – maybe 10-15 minutes per prospective tenants. As soon as they inquire, I always ask for at least their mobile number so we can contact each other more easily and quickly and if running late or if they get lost on way to the inspection. I also like to ask for email address to send them the application form to bring along with them filled in – this can reduce the time of each inspection significantly. I am currently working on an online system so you can send your prospective tenant a link to an online form where their details get sent to you – so you can save on the data entry when you decide to go ahead and complete the background checks through TICA and National Tenancy Database, and even can be inputted directly into their leases.
- Attending Open Homes/ Inspections (1 hour)
I like to allow 15 minutes per tenant and like to have a few lined up on the same afternoon or weekend day to save time driving to and from places.
- Background Checks (0.25 hours)
It’s vitally important to always complete a background check on any new prospective tenants before handing over the keys or signing any lease documents. The main tenancy databases are TICA and VEDA. Both are great databases which blacklist any negligent tenants who either owe money to the landlord or have caused malicious damage to the property. VEDA’s National Tenancy Database (NTD) also goes so far as to look up court records for bankruptcy or criminal events over the last 10 years. DIY Property Investor can conduct a check in just VEDA’s NTD which is the bare minimum recommended, or do a comprehensive check in both VEDA’s NTD & TICA databases.
- Preparing Lease Documents (0.5 hours)
It is vitally important to get your legal documentation right. If you have filled out one conflicting item or not signed in all the right places, the whole lease could be void. This means that if you are ever dragged along to tribunal or court, you could be in trouble and lose your case if the legal document does not stand. There are also new changes to legislation always coming in, and new court cases which set new presidents. This effects how the wording should be written, and new terms are created and added in to the lease for extra legal protection. For this reason, it is always recommended that you have a qualified person help prepare your lease and check over it to make sure it is filled out and signed correctly. It may take an hour or so the first time to make sure you cover what is included and what is expected of the tenant in different scenarios. This tenant on-boarding process is vitally important to set your tenant up for success rather than failure, by making sure your expectations are crystal clear from the beginning.
- Tenant Correspondence (0.25 hours)
I then send an email which has a draft copy of the residential tenancy agreement, any house rules, and the tenancy information sheet (which you are required by law in NSW to present to the tenant). I always allow at least a day or two for the tenant to have the opportunity to read over at home and ask them to correct any mistakes on the front page where their details are written. I also request bond to be paid to rental bonds online and request this through my bonds online account, and request 2 weeks rent in advance also be paid prior to signing leases.
NOTE: THERE IS NO EXCEPTION! NEVER SIGN LEASES UNTIL YOU HAVE BOND AND RENT!
There are just too many squatters out there who go from home to home, never paying a cent and just waiting until the court kicks them out at each house. Even if the background checks come back clear, it’s just not worth putting yourself through this – as nice as the person seems! I always ask for the tenant to please bring a print out of the payment receipt for the two weeks rent just in case the money hasn’t come through in time, OR bring cash with them and I provide a receipt.
- Prepare Condition Report & Taking Photos (1 hour)
The condition report the first time will take at least an hour to do it right! The second time only takes 5-10 minutes to update any changes. The condition report is essentially a room by room account of the conditions and features of the fixtures of your property. The first time you complete your condition report, make sure you spend the time to go into detail for every room in the house and state specifically when it was updated, what condition it is in, what type of blinds/light fitting, insect or security screen, is it undamaged, is it clean etc. This is very important as if you don’t fill this out in detail – if the place is damaged you may not have enough evidence. I also take date stamped photos of everything on the date of move in as well for evidence – which is the best thing to hold up in tribunal if it ever comes to that (I have never had to go to tribunal so far after 10 years of managing my own property – touch wood!). I look at this as a business and do this as my risk reduction policy, as I’m sure the tenant seems nice and won’t damage anything and it’s easy to fall for that trap and become lax. Trust me it’s worth doing in detail as if the tenant stays for a number of years – neither of you will remember what was already there or belongs to them, nor will you remember if that ding in the wall or carpet stain was there. It has come in handy many times to save arguments!I also attach a list of any furniture or non-fixtures, and some rules for the home to keep the house well maintained. There may be other attachments like information about a pet that you have allowed them to bring.
Signing Leases (0.5 hours)
Signing leases allow an half to an hour – Signing leases can be done prior or on the date that the tenant intends to move in. Make sure you have a witness present. You will need two copies printed of everything to be included in the contract including the condition report, except bring a third copy of the condition report too. Make sure you go through the contract with the tenant to make sure they understand what they are signing and that this is a legally binding agreement. Initial every page – yes every page especially attachments. Sign both copies of the condition report and explain that they have 7 days to make amendments to the condition report and can hand the 3rd copy back to you via email or mail within this time, and after this 7 days it is assumed that the tenant agrees to the condition report ‘as is’.If the move in date is on the same date as the day you are singing the agreement – then you hand over the keys and welcome them to their new home. If you are pre-signing to help secure the room or home early – then hold off on handing over the keys until move in date. I like to then suggest a date to start paying rent to keep their rent ledger looking healthy for a good rental record for them, and also so I can stress less with a bit of a buffer in place. I suggest to start paying straight away from that week – first Thursday coming either weekly or fortnightly so they always maintain 2 weeks in advance as a buffer. It’s a good idea to keep a spare set of keys for the place stored in a safe place just in case your tenant loses them – and charge them a fee for this as agreed to in the lease.
This on-boarding process takes a total of 5 hours per year. Do you have enough time to spend 5 hours each year on making sure you find the best possible tenant for your property?
When you look at self management as a whole there are 4 things which I have broken up which crop up over the year and takes a very small amount of your time to deal with:
- Tenant On-boarding (5 hours) – As broken down above.
- Maintenance Inspections (4 hours)
Routine inspections can take between 15 minutes to 2 hours depending on the age of the property and the maintenance work required. I like to inspect my properties every 3 months, which in NSW you are only allowed a maximum of 4 inspections per year, so this is the maximum. The bare minimum that I would recommend is for the landlord to physically visit and inspect their own properties at least once per year and if you don’t have any building or maintenance experience – make sure you engage or bring along someone who does. You can save thousands of dollars in escalated costs if some maintenance items get left unattended to. Even better is to have a preventative maintenance schedule so that you have work that is done in routine each year to keep the property well maintained.
- Tenant Arrears Management (1 hour)
Arrears management is pretty easy now with online software and apps which track rent payments and notify both you and your tenant when they fall behind via email or text. This can take you no time at all once you have this account set up on the app/software, if you have great tenants who pay on time.
- Tenant Exiting (1 hour)
Tenant exiting is an important process which requires making sure you have received adequate notice, checking how much rent is due or to be returned at the end of the tenancy, making sure the premises is left in the adequate condition and cleanliness and finally – returning or claiming the bond. Often tenants may ask you for a rental reference. I email them their rent ledger with a few kind words in the email if there are nice things to say about them, which saves you time in writing a written recommendation for each tenant that moves out. The main thing the property manager wants to see is the rent ledger to see the tenant is paying rent on time, and I leave my phone number on the rent ledger so that if the property manager really cares, they will call me and speak to me if they would like to know about the tenant.
The good news is, if you have a second rooms or properties in the same location, it will not take you double the time. You can combine of both premises and get them done at the same time, so you get the benefits of dealing on an economy of scale and the efficiencies and time savings that come along with this.
For 11 hours on average of work each year, do you think you could spare the time to manage your own property? Once you have the systems and processes in place, it is really easy. And once you have the primary decision maker in charge of the property, it means you don’t have to wait for permission or to relay messages to and from other parties. The efficiencies of self-management really do speak to themselves, and you can even ask my tenants who are so happy that they are actually listened to. Having happy tenants who feel listened to, means that they are much more likely to stay for a lot longer, and the whole need to complete tenant on-boarding regularly just magically goes away!
If you have any questions make sure you comment below.