PropertyConnect

when purchasing an investment property you need to decide whether to manage the property yourself or ask an agent to manage it.

the following are questions you need to ask:

• how much money will you save by managing it yourself? is it worth it?

• are you prepared to organise all the repairs and deal with tenants?

• are you ready for the responsibility that this involves?

• do you know what your rights and responsibilities are?

• do you know the tenant’s rights and responsibilities?

• what are the tax implications?

managing the property yourself

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whether you decide to use an agent or manage the property yourself, as the landlord you are required to follow any state acts which are relevant and carry out your responsibilities as a landlord.

as an indicative example in nsw a landlord must:

• give the tenant a copy of the residential tenancy agreement (lease), property condition report, a list of all entry costs and a copy of the renting guide at the beginning of the tenancy

• ensure the property is vacant, reasonably clean and fit to live in at the start of the tenancy

• pay for all water and sewerage service charges

• ensure the property is safe and secure

• carry out necessary repairs to the property

• issue receipts for rent paid in person or by post

• respect the tenant’s peace, privacy and quiet enjoyment of the property.

in nsw a tenant must:

• pay the rent on time

• keep the property clean and tidy

• tell the landlord when repairs are needed

• not use the property for any illegal purpose

• alter or add to the premises without the landlord’s consent

• sublet the premises without the landlord’s consent.

using an agent

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using an agent to manage your property may sound expensive but many people think it is the best option in the long run. the agent can act as a buffer between you and the tenant, especially when there are problems. a managing agent’s responsibilities (in nsw) will include:

• finding and screening tenants for your property

• having a tenancy agreement signed by the tenants

• lodging the bond with the department of fair trading

• dealing with tenants in all matters

• arranging repairs to the property

• collecting the rent and transferring it to your account

• conducting property inspections

your choice of agent is very important so shop around and ask plenty of questions until you find an agent you feel comfortable with. always make sure your agent belongs to a reputable real estate industry body.

property management agreements

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when you sign with a managing agent, you will need to sign a property management agreement. read this document carefully and try to negotiate on points you are uncomfortable with. you might like to specify that repairs costing more than say, $100, require your approval. the agent will then handle minor repairs up to that amount.

standard agreements for property management usually contain a clause stating that a notice period applies to the termination of the agreement. it is in your interests to keep the notice period as short as possible, say a month or two.

agency fees

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agents normally charge a commission fee based on a percentage of the gross annual rental. this can be negotiated but it is usually 5-10% of annual collected rent (inclusive of let fees). agents normally send you a monthly account but more frequent payments can be negotiated. the account shows the amount of rent paid to the landlord less any costs (including repairs) and agent’s commission.

when you have a change of tenancy, a letting fee will normally have to be paid. the letting fee is usually the equivalent of one week’s rent per 6 month lease but, as with all agency fees, it is negotiable