Here's how you can save on real estate agent fees by leasing and managing your investment property on your own.
If you want to maximise the return on your property investment you can handle everything yourself. This eliminates the commission costs charged by an agent or property manager.
This guide will run you through the eight steps of the rental process and help you become a DIY landlord managing your own property.
The 8 steps to renting out your property on your own
- Get your property ready for lease
- Decide on an appropriate rental price
- List your property
- Handle inspections
- Go through applications and select a tenant
- Paperwork and finance
- Insurance and rental bond
- Ongoing communication
1. Get your property ready for lease
The first step is to get the property cleaned and ready for tenants to live in. This might require professional cleaning or even renovations.
You also need to organise repairs if anything is broken and make sure the property is safe to live in.
2. Decide on an appropriate rental price
Make an honest assessment of your property and what it's worth on the rental market. Obviously, you want to collect as much rent as possible, but if your price is unrealistic, no one will rent the property. This could cost you weeks or months of rent until you come to your senses and lower your asking price.
It's also harder to see if you're being unrealistic without an expert to guide you, so be sure to look at the following factors when deciding on the price:
- Location. Check the rental prices of similar properties in the area. Location is key, and you need to know the desirability of the neighbourhood. Many websites offer free suburb profiles filled with information.
- Number of bedrooms and bathrooms. This is always a crucial factor in determining how much you can charge.
- Property size. This can be harder to judge when looking at other properties, but if you think your rental property is larger than the average you might charge slightly more (all other things being equal). You could even go on a few inspections of neighbouring properties to get a sense of the size.
- Convenience and amenities. A property near a train station is probably going to rent for more than a similar property that's far from the station. Proximity to parks and shops is also a huge benefit. But being too close to noise and crowds can be off-putting for some tenants.
3. List your property
You'll never find tenants unless you advertise your property online. Not using a real estate agent means you have to do a lot more work here, from writing descriptions of your property to taking photographs.
Luckily there are many websites that let you do this (sometimes for free) and for a relatively small fee will boost your listing or offer professional photographs, copywriting and other services.
Here are some listing companies that can help you:
4. Handle inspections
When potential renters find your listing and get in touch, you will need to set up inspection times so they can view the property in person.
This also gives you a chance to meet your potential tenants and get a sense of their character and suitability.
To make life easy for everyone, be prepared before inspections. Gather as much information about the property as you can, make a list of the property's best features and be ready to answer any questions.
It's good to be as transparent as possible with potential tenants. Let them know what your expectations are and when the property is available. If you don't allow pets, say so upfront.
5. Go through applications and select a tenant
Hopeful tenants will submit applications. You will need to go through these and create a list of suitable applicants.
To work out if an applicant is suitable you should look at the following:
- Current employment status
- Credit history
- References from employers or previous landlords
6. Paperwork and finance
Once you find a suitable tenant and agree to rent your property to them you will need to get all the paperwork organised.
You and the tenant will need to sign a tenancy agreement. The exact form varies by state but most government websites have a free form you can download and use.
An agreement should specify:
- The number of occupants allowed in the property
- The size of the rental bond
- The bank account in which you will receive the rental payments
- All relevant contact details
- Any other specific conditions of the property
When the tenant moves in, be sure to make a thorough check of the property together and document any minor chips, scratches or damage that has occurred prior to your tenant's arrival.
7. Insurance and rental bond
You need insurance to cover the building. Landlord insurance is also a good idea, as this protects you against damage caused by tenants to the building and any contents in the property that you supply.
You should also remind the tenant to organise their own contents or renters insurance because your policies will not protect their household items in case of theft or damage.
The rental bond
There are strict laws in each state regarding rental bonds. It's your responsibility to know the following:
- How much you are allowed to charge. In NSW and Victoria, for example, a bond can only be a maximum of four weeks' rent.
- How to lodge the bond. You can't just keep the bond money in the bank. You need to lodge the bond with the relevant board or authority. This can usually be done online.
8. Ongoing communication
Be sure to exchange contact details with your new tenant and specify your preferred method of contact.
It's also a really good idea to lay out some ground rules around what to do in case something in the property breaks.
Many repairs to the property will be your responsibility as a landlord. Let your tenants know if you have preferred tradesmen to call, or if you're able to handle a repair yourself.
How much can you save as a DIY landlord?
It's hard to estimate the savings you can make by handling all landlord duties yourself. Agents and managers set their own fees and charge very different amounts.
Some property managers charge a percentage of the rent as a commission, others charge a flat fee. Commissions can vary from 8-12% of the total weekly rent or higher.
Let's say you rent out a unit for $450 a week. With a 9% agent commission, you would lose $40.50 per week. That's $2,106 a year, which is over a month's rental income.
What if I want to use a real estate agent or property manager?
If you've read this guide and decided that being a DIY landlord is too much work, you do have other options.
You can find a real estate agent or property manager and accept the costs involved. Here's a helpful guide on choosing a good property manager.
If you need more help finding a real estate agent or property manager who offers the services that you need at a price you can afford then companies like OpenAgent and Commingle can help. These companies let you compare agents, check out reviews and accept offers from local agents.
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