Tuesday, November 25, 2014

Self-managing your investment property

Self-managing an investment property has been a discussion point for ages. I remember a friend who was self-managing ten properties using the age old method of a combination of PC based software such as Word and Excel and plain old paper.
A lot has changed in the past few years. Let’s go back in time and review how things were done.

How things were done by a Property Management Company
The most important aspect of any property investor is to get tenant who paid on time and looked after the rental property.  This usually meant that a property management company having lists of previous tenants that they use as a starting point. Sure they did a great job in vetting and selecting a list of tenants.  But from the inventors perspective this meant that their options of getting a good tenant was very restricted.

The second most important aspect was to make sure the tenants paid rent on time.  For many tenants this involved a trip to the real estate agent on a Saturday morning to pay the rent. Most tenants paid in cash or cheque. The property management companies had to employ staff to manage the banking and other regulatory tasks involved in handling cash. For some bigger agencies this meant having special arrangements to keep large amounts of money on premises.
Once a suitable tenant was found the next big thing is the inspection. Property inspection reporting and rectifying issues can mean the difference between your investment property making money and losing money. The inspection scheduling was a nightmare with emails and phone messages to organise a suitable time. Often the results of an inspection was not shared by all relevant parties and the reporting mechanisms were largely a manual process. Data entry was generally duplicated and sometimes vital information was either missed or misreported.
Advertising a rental property, finding a suitable tenant was also done by very traditional methods.

Revolution
In the last 5 years or so there has been a mini revolution going on in all things to do with property. Today we take it for granted that almost all the property investors will advertise their properties using well know listing portals in their area. The reach of these advertisements are now global. The details that are available online are quite simply put “incredible”. Things ranging from distances to amenities to average income profiles in the area and much more. Whilst some of the property listing portals seem to favour property management companies, many are now allowing investors to directly advertise their properties.  Prospective tenants now can use tools to apply to vacant properties online by using products. Tenants no longer have to either visit real estate agents or fill forms by hand, they can simply use an online form that goes directly to the landlord. Once an application is made the landlord spends 10 minutes going through the applicants and chose an applicant. From a tenant’s perspective, these products retain their details for future use or use on multiple applications.
When it comes to the collection of rent, almost all of the property management companies would insist on a direct debit arrangement between the tenant’s bank and the trust account. No more cheques and cash to deal with.
So given the current trends and developments in cloud computing and the power of mobile devices the time is rife to disrupt the status quo. There is no need to spend hard earned money to pay for property managers. After all most of what they do have been automated or streamlined.
We have all the tools and technology available to put the landlord and the tenant indirect contact. This will certainly reduce the ongoing costs of having a rental property being managed by an agent. Given today’s market average rent on an inner city apartment would be around $500. With management costs and sundry admin costs would be around $50 per week. That’s more than $2500 per year.  The argument that all management costs are tax deductable and hence it does not matter is quite misleading. More importantly people are increasingly looking at value for money and convenience.
In conclusion I would say that we now have the technology to streamline the process of managing an investment property while drastically reducing the costs.

By Ravi Weerasooriya
"Ravi is a Prince2 Practitioner and a certified SCRUM Master, has a degree in Computer Science from La Trobe University, Victoria Australia and Microsoft certified. He is a member of the Australian Company Directors Association and Australian Computer Society."

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