Managing your property investment
How involved are you in the management of your investment property?
Managing an investment property requires many tasks to be scheduled and carried out. Collection of rent, routine inspections and attending to repairs are just some. Responsibility for these tasks can vary from landlord to landlord.
There are however four basic types of involvement.
- Complete do-it-yourself
This means you handle all aspects of managing the property, from finding and screening the tenant to handling repairs, maintenance and all of the accounting.
The most useful skills in property management are common sense and a willingness to understand and compromise.
At this level you will need to understand the tenant’s rights, your obligations as a landlord and applicable documentation.
Apart from understanding the applicable legislation, you will need to have a flexible timetable to allow for problems when they arise. Repairs, particularly emergency repairs, need to be acted on quickly. Problems that come up may require many hours negotiating and possibly time at tribunal hearings.
The two main benefits of this style of involvement are having complete control over your investment and saving on agent fees.
For a closer look on managing deadlines see our blog “Failing to Plan is Planning to Fail”
- Do-it-yourself management with some outsourcing to an agent
This level of involvement is the same as the first except you outsource some tasks.
Finding a tenant and attending to the initial documentation are the most common tasks that DIY landlords hire an agent to assist with. The minimum fee for finding a tenant is usually two weeks’ rent and there are many agents that offer this service.
The benefits and problems of this level of involvement are similar to the previous level with some added agent fees for the services you prefer an agent to do.
- Professional property manager under your supervision
This is where you engage a professional property manager to do all the work and they report back to you for all approvals. You make all the decisions and they carry out all the tasks. The agent is then responsible for complying with all relevant legislation, finding a tenant and managing the property. When a problem arises, they contact you for instructions, then take care of it.
The agent, in effect, becomes fully responsible for ensuring all aspects of your investment are looked after, with clear communication before and after completion. They handle all contact with the tenant, giving you a clear buffer and access to professional advice before responding to problems or tenant requests.
The agents fee is an added expense but it is fully tax deductible. However, keep in mind that not all agents are the same and you may still need to manage the agent.
- Professional property manager with clear written parameters
Sometimes, a landlord has no desire or available time for anything other than emergency issues and engages a property manager to undertake all tasks.
The property manager is given authority to undertake these tasks and reports back to the landlord on completion. This allows the property manager to approve repairs up to an agreed value, review rents as appropriate, negotiate with the tenant and attend to all the necessary duties to keep your property running smoothly and profitably.
This type of arrangement needs a clearly documented and comprehensive schedule, monetary limitations and a plan. Both you and the agent need to be clear on who is responsible for what and when.
Most investors start with a level-three involvement and slowly allow things to slide into a level-four arrangement. As time passes, they tend to take less and less of a hands-on interest in their property and rely more and more on the agent. As the transition is not planned, there is no schedule, guidelines or plan for the agent to follow. This can lead to tasks not being completed and ultimately a neglected property and tenant.
So how hands on are you?
For a simple look at budgeting and expenses see our blog here.
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