First Time Investors: Should I use an Agent?
One of the major dilemmas for first-time property investors is whether to manage the property themselves or use an agent.
Most experienced property owners would recommend the latter. While property managers will eat into your earnings, generally taking a 5 percent cut of the weekly rental (although this can go as high as 10 percent), most would say it's well worth it.
Being a landlord after all is not for the faint-hearted. You really need the time and the patience to deal with your tenants. If there is a catastrophe at your property — say a gas leak — then it's you who will be called at 2am if you don't have a managing agent.
There are also the personal issues if disputes arise. It's much better to be at arm's length and have a third party handle any nastiness that might ensue.
Finding suitable tenants is also an area where an agent can prove invaluable, not only when you first enter the property-investment market but also when you need to find new tenants. An agent will invariably have potential renters on their books, which can mean you are not left for weeks with an empty apartment.
It's common practice for agents to charge an additional amount for letting or re-letting your property that is usually equal to one week's rent.
Taking a DIY approach means once you find a tenant, you'll have to organize the tenancy agreement and lodge the rental bond with the Office of Fair Trading in your state. Again, an agent can streamline this process and make sure everything is done according to law.
The ongoing role of the managing agent includes the collection of rents, repairs and maintenance and conducting regular property inspections.
It's important to remember that just because you own the property, you don't have the right to drop in at any time you choose.
For instance, you are only allowed to conduct four inspections a year and you have to give your tenants at least seven days' notice of your intention.
Terminating a lease can also be problematic. What are the tenants' rights in your state? What are your rights? In NSW, for example, once your property becomes tenanted, you have to provide your tenant with a copy of The Renting Guide, which outlines their responsibilities.
If you choose to go down the managing agent road, then make sure they are licensed.
Of course, if you have the time and inclination you can save money by being a private landlord, but it may prove false economy.
Joe Catanzariti, president of the Law Society of NSW, says owning an investment property is "not a picnic"
"You are a landlord and you need to account for it with proper records and proper books," he says. "It can be a lot of pain and hassle."
As a landlord, you should take out landlord insurance to cover you for malicious or accidental damage by a tenant, any legal liability that may arise and also the loss of rental income due to any malicious damage or absconding tenants.
According to insurer Allianz, 19 percent of claims made against landlord insurance in 2008 were due to rental default and it expects the figure to rise this year given the tough economic conditions.
There may be many opportunities to buy into the property market now with low prices, low interest rates and low vacancy rates but don't squander these advantages by mismanaging your tenants.
By Gillian Bullock
|
