What is a private rental?
Australian Bureau of Statistics data shows about 33 per cent of property owners across the country now choose to manage their own property, bypassing the traditional agency route.
This is the private rental market, where properties are managed without a real estate agent or property manager. The property’s owner deals directly with tenants; vetting applications, getting paperwork sorted and managing issues day-to-day.
As with any property-related decision, there are pros and cons to DIY management.
Benefits of a private rental
Listing your rental property privately has a number of benefits, such as cost savings, being closer to the process and keeping an eye on your rental property.
Listing a rental privately can save owners thousands of dollars in fees every year. That’s because letting agents can take anywhere between 5-12 per cent of the weekly rent.
So leasing privately means the percentage of weekly income that would otherwise go towards management fees ends up in your own pocket instead.
Be across issues
Hassan says private landlords can also closely monitor how their property is being maintained and keep across any issues or problems as they arise, rather than waiting to learn about them from the agent.
In the private rental market, owners have the ability to screen potential renters themselves, rather than rely on someone else’s judgement. This allows you to handpick the most suitable candidates based on your personal preferences.
Downsides of a private rental
Managing a property requires a lot of work and carries serious legal responsibilities, so there’s some potential negatives to consider as well.
Having to negotiate issues like lease agreements, rental increases or evictions can be uncomfortable for private landlords, especially if you’ve developed a relationship with your tenants. This is very much an issue in tough economic times like right now.
Property managers can remain professionally detached and execute decisions without having an emotional involvement.
Tenancy legislation, which differs from state to state, is full of complexities and private landlords can run afoul of the law without realising it, Hassan says.
Property managers will generally have a better understanding of rental laws and any recent legislation changes that might affect their landlords or tenants.
How to list a private rental
Historically, private landlords have been restricted in where they can advertise their properties, relying mainly on social media, word-of-mouth and online selling platforms such as Gumtree.
Owners can pay $220 (including GST) for a standard ad, which runs until a tenant is found.
Owners can create, edit and save listings, so it’s easy to re-list later and also receive tenant enquiries by email, phone or SMS.
Why using an agent to rent out your property is a wise investment
While an increasing number of property investors are choosing to manage their own rentals, the majority across Australia still rely on an agent.
And there’s a simple explanation for that: because it’s often a wise investment.
The reasons investors should pay a property manager to handle their property, rather than go down the self-managed path, are many and varied, according to those in the know. Here are some of the top reasons:
1. It saves time & money
Not only on a day-to-day basis, in dealing with rent collection and tenancy issues, but also every now and then, something won’t go according to plan, such as a maintenance issue or tribunal matters. And in resolving these situations, it will feel like a full time job. Most people do not have spare time to handle this..
With their pricing advice, leasing skills and negotiation and maintenance contacts, a good agent can save an owner a big chunk of money and help them make a larger profit year-on-year, he added.
Typically, property managers charge a percentage of the weekly rent, from 4% to 8%, as a fee for complete property management and a separate fee, which can range from one to two weeks’ rent, for leasing the property.
2. You get an expert on-call
With complex tenancy legislation constantly evolving, outsourcing to a property manager who is across changes provides 24/7 peace of mind for investors.
With so many moving parts in owning a rental home and dealing with tenancy issues, it’s nice to have an expert ‘on call’ at all times for you to ask questions, Mr Simpson said.
3. Quality tenants are a given
It’s self-evident that owners want good tenants who will pay on time, every time, and look after their property, so tenant selection is vital and also where an agent comes into their own.
Most people wouldn’t know the difference between a bad tenant and a good one. It takes some experience to pick up on subtle clues in the limited interaction you have with the tenant before approving them.
4. The referrals are powerful
Managing a property requires the expertise of many professionals, and a good agent will refer an owner to reputable professionals who will “help them realise their property investment goals sooner.
How to pick a good agent
Like most things, the best way to find a great agent is to ask around.
Do any of your friends or relatives own an investment property? Who do they use? Do they recommend them? If you don’t know any, find the top three most active agents in your area. This is easily found by searching current for lease properties on realestate.com.au.
Look for experience and the quality of their team, which are major factors in success. He said, do not go with the cheapest option, as “they are cheap for a reason!”
Managing a rental property without an agent
While property managers handle the majority of rental properties in Australia, about 33% of owners across the country opt to do it themselves – and it’s perfectly legal.
The ins and outs of property management
Managing a property without an agent sees landlords dealing directly with tenants, vetting applications, getting paperwork sorted and managing issues day-to-day.
The benefits of managing your own property
Landlords had a lot to gain by managing their own properties, with the financial benefit being one of the biggest drivers. Commission costs for agents or property managers carry a hefty price tag.
Agent fees are usually charged as a percentage of your weekly rental income and can be anywhere between 5% and 12%, depending on your state. If you self-manage your investment property, these funds can remain in your own pocket.
Going DIY also gives landlords more control.
You can screen and vet potential tenants yourself, rather than having an agent do it. Not only does this give you total control over who lives in your property, but you’ll also be able to establish a closer relationship with your tenants.
Being more involved also means owners can keep across any issues.
You’ll be more involved with the day-to-day management of your tenants so if something goes wrong with the property, like a leaky pipe or broken toilet, you’ll be the first to know. You’ll also be the first port of call for any neighbours with complaints about your existing tenants.
Things to look out for
Although DIY management can save an owner a stack of cash, there are some things to look out for. It’s important to have a deep understanding of the work involved with property management before deciding to do it yourself,.
Booking inspections, vetting applications, keeping up with general maintenance and repairs – managing a property is time-consuming. You’ll also need to be available to deal with issues out of hours and on weekends.
Keeping across convoluted and ever-changing residential tenancy legislation – which differs between states – is also important.
There can be serious penalties if you break the law as a landlord, regardless of whether it was intentional or not. It’s crucial you’re familiar with tenancy rights in your state. These can be fairly complex and tend to change frequently, so you’ll need to keep up-to-date.
Then there’s the emotional investment. Being a private landlord means you’ll need to make some tough decisions,.
This includes managing disputes, proceeding with evictions and communicating rent increases. This can be highly stressful and end up impacting your personal life.
How to find a tenant for your rental property
Tenant selection can be the difference between an investment property being financially fruitful or a failure. That’s why knowing how to find and choose tenants is vital for property owners.
While the majority of Australian property owners engage a real estate agent to manage tasks such as finding tenants, about 33 per cent manage their own property.
Both types of landlords have the option of using realestate.com.au to either connect with an agency or list their rental property directly on the site. Let’s take a look at how to find a tenant for a rental property.
1. Present the property well
Different says the first step to getting a quality tenant is presenting the property in the right way.
She says that well-presented, decluttered properties, with no obvious maintenance or repairs outstanding, generally attract the best tenants. If the property is tenanted, landlords should incentivise tenants to present the property in the best way.
Reassure them you’ll drive as much interest to the first open inspection and price the property correctly. Some landlords elect to send a professional cleaner (at the cost of about $80) or send flowers to the tenant to assist their efforts in presenting well.
Presentation will help with the marketing of a rental property.
- Use professional photography
For the small outlay, usually about $100 – $150 you can get beautiful, professional images of your home. These expenses may be claimable against your rental property’s running costs, so be sure to check with your financial adviser or tax professional.
If you’re surfing the internet and come across an image that is dark, dingy, grainy and only showing part of the home, opposed to bright, crisp clean, vibrant and wide angles, which one do you click on to view? The answer is simple.
- Find a skilled real estate agent
Nowadays, property owners can choose to self-manage their property, via a private rental arrangement, or go down the more traditional route of paying an agent. For the latter, it’s all about finding a skilled, knowledgeable and experienced property manager.
For a small amount each week, owners can get peace of mind that their property is being looked after by a professional. And the fees may be tax-deductible.
It’s more than just collecting the rent. It’s handling maintenance requests, dealing with issues during the tenancy and negotiating for each party, routine inspections, reports, listing the property, taking prospective tenants through, processing applications and conducting entry and exit reports. But more importantly, they have to know and abide by legislation..
Different laws in different states govern residential tenancies, so you want someone who knows their craft.
4. List the property online
Next is the all-important online listing. Landlords can find tenants, by either connecting with a real estate agency or listing their rental directly on realestate.com.au, which has more than 19.7 million visits a month.
Historically, private landlords were restricted in where they could advertise their properties and had to rely mainly on social media, word-of-mouth and online selling platforms. But now, owners can pay $220 (including GST) for a standard ad on realestate.com.au, which runs until a tenant is found. They can create, edit and save listings, so it’s easy to re-list later and also receive tenant enquiries by email, phone or SMS.
5. Select the best tenant
Whether it’s a professional property manager or the owner themselves selecting tenants, there are some fundamentals to follow to pick the best ones.
Wrigley says the presentation, the prospective tenant’s ability to pay the rent, job security, and a strong rental history and references are all key.
Carry out all the necessary checks and consider any and all demographics and circumstances. Not every applicant is created equal.
A retired couple who have always owned their own properties and have significant savings in the bank are just as likely to be exceptional tenants (despite no rental history) as a professional, young couple with solid rental history.
Also, look for discrepancies in application forms versus supporting documentation. “For example, if a tenant references a property address, but a driver licence or utility bill has another listed address, make sure you dig further.
Nine unexpected costs landlords often don’t see coming
We’ve heard about tenant damage before but what can landlords actually claim on insurance and how strange can it get?
If you suddenly discover your investment property has turned into a den of your worst fears, you’ll need a game plan to get things back on track.
If you’re not sure what to account for when planning for the worst, here are a few unlucky issues landlords deal with, and some ideas on available solutions.
1. What happened to the rent?
Sometimes you have a tenant who just… disappears. Perhaps they’ve stopped paying rent, done a runner or, in the worst-case scenario, passed away.
While you should get the debt collectors onto anyone wilfully evading their rental payments, you can also chat to your insurance team to claim some of those lost payments.
2. The tenant leaves… but their stuff doesn’t
If your tenant suddenly vacates but all their stuff remains behind, you may need a hand – both physically and financially – to move the furniture.
3. Your tenants are running a drug lab
No, you haven’t just been watching too much Breaking Bad – this can actually happen! And if it does, you’re in for a hell of a logistical nightmare.
If there’s any technical cleaning or removal that needs to happen that can be quite expensive. This isn’t to mention the potential for other damage.
It doesn’t have to be a drug lab per se, but check if your policy covers damage related to the manufacturing, storage or distribution of illegal drugs.
4. Someone passes away
Nobody wants to think about this, but there are a few things you may need to consider in the event of a death. Firstly, it might be a while between tenants or payments, and if this is a problem for you, you should check if your policy covers rental default.
Also, if the circumstances of the incident are linked to your property you should check that your landlord insurance policy has liability cover. Finally, some insurers will cover cleaning up after a death or accident.
5. The dog ate my… carpet?
Dogs and cats can cause all kinds of accidental damage, and as regulations regarding pets on rental premises continue to relax, you’ll need to make sure your property is protected.
Pet damage is a going to be big one. It’s going to become harder for landlords to refuse their tenants having pets, so it’s definitely going to be a more important feature of your insurance policy.
6. When your friends bring their pets over
Speaking of pets, if your tenants’ friends bring over a pet that causes damage, you can be stuck in a bind!
- Help, I’ve been robbed!
It can be harder to account for items stolen by people within the property. Be sure to check if you’re covered in the instance your tenant takes your furniture, appliances, or even doors from the home.
8. Black mould attack
Mould can be a serious issue and, if it infects your rental property, you as the landlord are responsible. While you can’t typically insure for mould issues, there are exceptions.
9. The elements strike
Fires and floods are always a surprise. Nobody expects their property to be ravaged by flames or water, but there’s no denying it can be costly when it happens.
If you get the call that your rental property has been affected by any of the above, you’ll want to be prepared financially to fix the damages. Read up on now to get cover for the unexpected.