Saving a dollar: The pros and cons of professional vs. DIY property management
The first thing you need to do when you buy an investment property is decide who’s going to manage it. Most investors like to use professional property managers but some choose to manage the property themselves.
It’s an option that will save you money but there is a lot involved and poor management of your asset could seriously compromise the viability of your investment.
Below we examine some of the pros and cons of each approach.
The Real Estate Institute of Australia reports that 22.7 per cent of occupied rental properties are self-managed by landlords (2014).
Sarah* is one such DIY manager, who decided to take control of her property in Randwick after a negative experience with a professional property manager.
“I wasn’t made aware that the current tenant had not renewed their lease which I felt left me in a financially precarious position; the tenants could now choose to vacate the property with only three weeks’ notice.”
Further to this, Sarah was deprived of the opportunity to review the rental amount when the lease expired.
“The tenants had been able to reside in my property for almost two years without a rental review or increase. As such, I felt I had also lost out on potential rental income.”
Sarah says she now enjoys full control and transparency but has learned not to treat being a landlord like a hobby, “I need to be organised and treat my tenants like a client, not a friend.”
- Save money on fees
- Screen and choose your own tenants
- Build a relationship with your tenants
- Technology, software and apps are available to help you
- You must know the relevant Acts and legislation and do everything by the book
- You need to act professionally and unemotionally with difficult issues
- You are responsible for marketing, maintenance and repairs, inspections, documentation, accounting and chasing rent
- You need to be easily contactable and have the ability to act promptly
Investment property expert and CEO of Empire, Chris Gray, prefers a professional approach. He advises landlords not to always go for the cheapest option and that a good property manger is worth every cent.
“They have their finger on the pulse, know the market and can re-let your property for your benefit. A more expensive property manger can actually get you more return.”
- Property managers are engaged professionally, not emotionally
- They have professional, efficient systems for managing tasks and a pool of professional tradespeople
- They have access to a tenant database with a pool of tenants for re-letting
- Their fees can be tax deductible.
- Fees range from 6-9 per cent of your weekly rental income
- They manage multiple properties so yours may not always be the priority
- Some real estate agents leave property management to an inexperienced junior.
Both professional and DIY property management are viable options. The key to getting either right is to do your homework – either by finding an experienced, dedicated professional, or by scrubbing up on your knowledge and investing in the right tools and advice to manage it yourself.