Pro's & Con's - PM vs Private

Hi Guys,

As i'm going to have to make this decision very soon i thought i'd pick your brains as to the best option.

I personally don't think i want the hassle of collecting rent etc... Opening the home for countless inspections etc... However, i also know i'd do a better job reporting on the condition of the home given i know how slack the PM's were when i was renting (EG: Inspections supposedly every 3 months but we only have 1 visit in 3 years - and i found out from the owner he was being charged as if it was every quarter).

Anyone have any advice for a first time IP purchaser that hasn't done either before?
 
Hi Snort,

We self manage our IP's and although there is the occasional hassle for most of the time we don't hear from the tenants and things generally run smoothly.

It is really important to select the right tenants even if it means waiting a few extra weeks or you will have problems. I use the REIQ Application for Tenancy doc which requires 100 points of ID and all the background info you require to check out the prospective tenant.

In Queensland, we have the RTA that provides all the necessary documentation such as Tenancy Agreements etc. There is probably a similar government organisation in WA.

Cheers,

Bazza
 
Our first IP had a tenant that paid directly to the owner so we left it at that. It was a bit of a hassle as I needed to check that the money was in and when it was a few days late (often) I would ring up to ask why. It always went in a few days after I rang (but if I hadn't?). The next tenant was a friend who just did direct debit. Easy. When he moved out the new tenants paid 10% more than asked (competition was fierce). BUT they complained about everything the first 2 weeks. After that they were fine. But I'm glad the agent dealt with it first hand.
Our second IP had a tenant and we left it with the agent. She pays direct debit each month on time. Never hear a thing. That's the way I like it. At 5.5% it's not much ($16 a week). So on that one there's nothing to do really, just transfer the money. From memory I think Perth rates are higher.

I think it would depend on the weekly rent and the % of charges. Work out how much it will save you to do it yourself and decide if it's worth that to you. Get a good tenant with direct debit and there's not much to do. Have problems and you may wish someone else was dealing with it. Thing is you don't know. What if you have a tenant default. Do you know all the processes to follow?
Also rates etc. Will you get the agent to pay these? I decided not to but I'm envisaging lots of bills as my IP's increase in number so might get the agent to do this also.
 
things to consider?

Do you live nearby?
Are you prepared to research and keep up to date on all relevant leglislation regarding tenancy issues?
Do you intend to take holidays (away from home) of more than a few days? If so, do you have someone you can delegate your responsibilities to in case of sudden issues arising?

and finally:

Scenario: Young family with 3 kids under five. Hubby is badly injured in an accident (no compo) and can't work and they can't keep up the rent in full. Could you evict them?

Marg
 
Can you pretend to be the Manager / Caretaker of the property?
The tenants will not know you are the owner, and just tell them you are acting on the owner's behalf.
We self manage, but Rob always introduces himself as Evil Landlord to applicants.An Aussie can get away with so much here in Canada....:)
 
I could bang on (again) how you can do it yourself but for the sake of the members here I won't....if you do a search you should find plenty of discussion about this topic.

It all comes down to what you are comfortable with yourself and looks like you have made that decision pretty quickly.

But...there is always a but..... as you mentioned, PM's can be slack as...so you will have to manage your new PM....in saying that...we find managing the tenants far easier than managing PM's...different strokes...;)

Good luck and good on you for making a positive investment decision.
 
After a bad experience with a PM, I now have what I consider to be a very good one but I would recommend you inspecting the place after a tenant leaves. Its YOUR investment and I dont think the best PM in the world is going to care as much as you. I recently had a vacancy and picked up 3 things that the PM missed that the tenant was billed for.

Our PM always sends out a letter saying when they are going to do an inspection and we have the option of attending. Is a good idea if you have the time as you can assess then and there any maintenance issues instead of relying on photos or the PM's memory or their interpretation on aceptable wear and tear. Remember your IP is probably only 1 of 200 or so that they manage. You cant expect them to remember everything about your property.

Remember its YOUR investment, YOUR money, YOUR risk and YOUR future.
 
things to consider?

Do you live nearby?
Are you prepared to research and keep up to date on all relevant leglislation regarding tenancy issues?
Do you intend to take holidays (away from home) of more than a few days? If so, do you have someone you can delegate your responsibilities to in case of sudden issues arising?

Marg

Very well said Marg..........

Plus REA fee is tax deductible, let them do their job so you can spent more time how / where to buy more IPs.....


KK
____________________________
Trust your hopes, not your fears
 
Agree with KK and Marg. The PM has the knowledge and the management is their bread and butter. Unless you have nothing better to do, apart from saving a few grand, let them do what they do "best", manage them by all means but it frees you up to do what YOU do best.
 
Unless you have nothing better to do, apart from saving a few grand


Ahhh, I always wait for this comment to show and it invariably does comes up. Fantastic well thought argument, until the number is a few hundred grand.


manage them by all means but it frees you up to do what YOU do best.


Every investor knows that you cannot do what YOU do best all the time, cos the credit boys at the Bank won't let YOU. One needs to wait a few years when YOU are hocked up to the eyeballs to let the values go up and the LVR's go down before YOU can proceed to do what YOU do best.

In the meantime, whilst YOU are waiting.....
 
Management fees is not worth arguing about even if it gets to 100s of thousands. Logic will have it that my portfolio is in the 100s of millions and still not worth my while.

I have not had any problems with the credit boys at the banks nor have to wait for years. I continue to do what I do best which is creating wealth from my IPs.

In the meantime, I don't wait for no one.
 
A REA I know has a mate that has so many IP's, he now has a full time PM who he employs himself.

If I was paying out more than the PM's wages in fees, I would do this as well. At least they would have to concentrate 100% on your properties.

I can only dream of this scenario. Would be nice to have this situation one day.... sigh....
 
I guess it really depends on your comfort level.
We have 33 units, and we self manage. This is my husband's job.
Nobody will look after your property any better than you.
Next year when we start living in 2 countries, we will need to have somebody to reply on while we away.
It won't be a professional property manager. It will hopefully be someone we trust.They will check with us if there is a problem, and they will follow our directions.

I honestly don't understand why someone would want to pay so much money on Property Managers.
If I understand correctly, you pay 5-8 % in management fees.Then you pay another 1-2 weeks reletting fees.I.m sure there are other smaller fees not calculated into in. The PM's are suppose to do regular inspections, and we have heard from tenant forumites, that is not always true. Managing the PM's seems more of a hassle than it's worth, plus you are paying them. So what if it is tax deductible.

That would easily be $30 K we would be paying. Too much. We have better uses for it.
 
PM fees

Different strategies work for different people. I dont like to rely on my own time because the moment I stop, there is no income. The goal is to generate enough passive income that you can do whatever you want, whenever you want without worrying about small stuff. PM are meant to do what they do and sure they may never do a better job than you, but to me, thats not worth my time, which is more expensive and I can spend creating more wealth, makes sense?

I can live off the fees that I pay my PM but why should I then be bogged down with the worry of looking for some friggin plumber during a weekend with my family?? I sure have better and more important things to worry about. If I go down that road, my portfolio will never grow, but that doesnt mean you should follow what I do. Whatever makes whoever happy is best and there is no one correct way to wealth.

All successful business people have professional people to manage their affairs while they go about searching for more opportunities and maximise their own skills which pays the most which people like PM can never do.
 
Different strategies work for different people. I dont like to rely on my own time because the moment I stop, there is no income. The goal is to generate enough passive income that you can do whatever you want, whenever you want without worrying about small stuff. PM are meant to do what they do and sure they may never do a better job than you, but to me, thats not worth my time, which is more expensive and I can spend creating more wealth, makes sense?

I can live off the fees that I pay my PM but why should I then be bogged down with the worry of looking for some friggin plumber during a weekend with my family?? I sure have better and more important things to worry about. If I go down that road, my portfolio will never grow, but that doesnt mean you should follow what I do. Whatever makes whoever happy is best and there is no one correct way to wealth.

All successful business people have professional people to manage their affairs while they go about searching for more opportunities and maximise their own skills which pays the most which people like PM can never do.

Considering we bought our first IP in 2004..and now have 33, we continued to grow quite well.
Good luck with your decision.You will probably need all you can get.
 
Depends. Like I said, different strokes for different folks. Property is not my only source of investment. Who knows, maybe you should have 66 instead of 33 if you had used a PM, or two. Good luck to you too! :)
 
I guess it really depends on your comfort level.
We have 33 units, and we self manage. This is my husband's job.
Nobody will look after your property any better than you.
Next year when we start living in 2 countries, we will need to have somebody to reply on while we away.
It won't be a professional property manager. It will hopefully be someone we trust.They will check with us if there is a problem, and they will follow our directions.

I honestly don't understand why someone would want to pay so much money on Property Managers.
If I understand correctly, you pay 5-8 % in management fees.Then you pay another 1-2 weeks reletting fees.I.m sure there are other smaller fees not calculated into in. The PM's are suppose to do regular inspections, and we have heard from tenant forumites, that is not always true. Managing the PM's seems more of a hassle than it's worth, plus you are paying them. So what if it is tax deductible.

That would easily be $30 K we would be paying. Too much. We have better uses for it.

I agree so much with this post as i know i would do a better job than any old PM would. I'm a builder also so maintenance etc... is easy for me to organise. I've heard horror stories from both sides of this arguement and i'm now undecided (again). I've a few months before i need to make up my mind though so i'll keep investigating for now.
 
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