Whether you are buying or selling real estate, it is critical that you have the property inspected and that you disclose any issues that are required by law to disclose. For example, you may be legally required to disclose lead, asbestos or other toxins in the home. Failure to do these things can result in fines or other issues. However, it isn't always easy for real estate buyers and sellers to know what they need to do. Hi, my name is Mary. I have been investing in real estate since the week after I left uni. I love it, and I have learned a lot along the way. I want to help and inform others so I decided to make this blog. I hope you find it useful.
Some 7.9% of Australians own an investment property (which is just over 1.76 million people). A significant proportion of these properties are residential and are rented to tenants. Perhaps you're considering purchasing a property to rent, or already own one and manage it yourself. Is self-managing an investment property really the best way to go? There are both positive and negative aspects of doing the job yourself and you really need to consider if you want to commit to the necessary effort of property management or pay someone else to take care of it for you.
Finding a Tenant
Finding a tenant is not particularly difficult, but finding a good tenant often can be. You will need to advertise, check references, request an appropriate bond, and then hope for the best. Real estate agencies have specialist property management divisions like PRDnationwide and often already have a waiting list of tenants who might be interested. They also have access to the National Tenancy Database, which is a list of tenants who have previously been evicted or who have had had ongoing problems with paying their rent.
Checking Financial History of a Potential Tenant
The database also accesses a potential tenant's credit report, so that any financial problems can be identified. These problems are generally when a person has defaulted on a loan or other form of credit (such as a mortgage or a credit card). These default listings are visible on a person's credit history for between five and seven years, depending on the severity of the default. A number of listed defaults can indicate ongoing financial difficulties, which might make it difficult for a potential tenant to pay their rent to you. You can apply to have access to this database even if you're not a real estate agent, but you will need to pay a hefty fee. This can be problematic if you only need to check it on an occasional basis (such as when assessing a potential tenant).
A real estate agent will change you a small one-off fee when the property is successfully rented, which is of course not an issue if you source a tenant yourself. You will then pay a small ongoing proportion of the rent to the real estate agent for the duration of the rental. Again, this does not occur when you self-manage the rental. The ongoing proportion of the rent payable to the agent varies from company to company, and from state to state. You might be able to negotiate a fee with smaller agencies, but larger agencies generally have a non-negotiable set fee.
Peace of Mind
These ongoing fees are perhaps the primary reason why many people choose to self-manage. The good news is that these fees are tax deductible (as a business expense), although you don't see these funds again until it's tax refund time. You are paying for peace of mind in that if an issue was to arise, the real estate agent would deal with it. This is what those fees cover!
While also tax deductible, a self-managed investment property requires landlord insurance. This covers damage to the property, and some policies even protect you from loss of rental income if the tenant was to stop paying for whatever reason. A self-managed property means you would need to pay for this insurance yourself, increasing your upfront costs. A real estate agent would already carry this insurance, which is covered in their ongoing fees.
It's entirely up to you as to whether you self-manage your investment property, but the benefits of using a real estate agent can quickly add up. Sometimes it's really not worth the headache to do it yourself.Share
11 December 2015