EP38: Self-Managing Rental Properties - How to avoid the Pitfalls

In this episode of the Property Investors Handbook Podcast, host Adam Bell is joined by Colleen Sutherland from Sutherland's Property Management Group. Together, they delve into the often-overlooked complexities and risks of self-managing rental properties. Colleen shares her expert insights on why simply collecting rent and handling maintenance isn't enough and highlights the importance of adhering to strict legislative guidelines. Tune in to learn about the vital documents and procedures needed for proper property management, the potential consequences of missteps, and how outsourcing key tasks can save you both time and money. Whether you're a seasoned landlord or considering taking on property management yourself, this episode is packed with valuable advice to help you avoid common pitfalls and manage your investments effectively.

What is The Property Investors Handbook With Colleen Sutherland?

Discover the secrets of successful property management and investing on "The Property Investors Handbook" podcast. Join Colleen Sutherland as she shares expert insights and strategies for acquiring, managing, and maximising returns on real estate investments. Whether you're a beginner or seasoned investor, this podcast is your essential guide to navigating the world of property investment. Tune in and unlock the keys to financial success in real estate.

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  Hello and welcome to another episode of the Property Investors Handbook Podcast. I'm your host Adam Bell and today we're looking into the immediate dangers of self managing rental properties. We're joined once again by Colleen Sutherland from Sutherland's Property Management Group who is going to highlight the key risks and how to avoid them.

Colleen it's great to have you with us.

Thanks Adam.

Okay, so, can you explain why simply collecting rent and fixing maintenance issues doesn't fully cover the responsibilities of a landlord?

Well, that's a good question. What it would be is that you need to know the processes and the processes go well beyond just collecting the rent and fixing the leaky taps.

Yep. They are quite a strict set of. guidelines that a landlord must follow as well as a tenant, and setting out the rights and obligations of both the landlord and the tenant.

We've delved into those, you know, in quite a bit of depth, in other episodes, isn't it? Just the legislation that is around all of this and changes to it all the time.

With property management you begin with in mind. So if you haven't done XYZ, you may have to go back to the start. So you need to know what XYZ is to avoid, any losses.

No, absolutely. I mean, even we talked about in the last episode about renting to family and friends and that came up.

How often should you pay rent? inspections, but all of that is governed, as you've said, by a set of rules, by a set of legislation, and, you know, just as a, property owner, you're not going to be okay with those, are you? And it's going to take a lot of time to actually become It does, to catch

up. Oh, wow.

It's just huge. And, like, there is stage to part two coming in. So we got told that there was going to be changes and we've had to pivot quite a bit in the last four years. However, what they didn't tell us that we had to pivot on the pivots. Right. Yeah. So when I learned about those, it's like, Oh, Why would you manage it yourself?

Because there are so many pitfalls that you get yourself into trouble and you're the property owner could be at a loss.

Absolutely. I mean, it's just been a common theme of this whole entire podcast that we've done. You are a professional. This is your full time job. You've been doing it well as an owner for 20 years, but for over 30 years, what you don't know isn't worth knowing.

But look, that's the type of. You know, commitment and experience you need to be able to manage properties effectively to have the systems in place, to have the paperwork, to cover absolutely everything. I just can't imagine why someone would want to manage one themselves. knowing that what you do, how you do it, and how would someone who has a full time job and doing something else be able to do that themselves?

Correct. So that property owner who owns, who wants to manage the property themselves, and it can be done, but you need to be au fait with the legislation first and foremost. And secondly, you need to have the time. And then thirdly, you need to carry out. Whatever those, requests or requirements are. And you have to have that time.

You can't just jam it into, I'll do it on a Sunday when I've got a free day. You can't do that unless you've got certain things in

place. Sure. And the consequences of not managing a property correctly, so breaking some of the rules or Yes. or breaching some of the legislations, you know, I don't want to scare people, but what are sort of some of the consequences that could come out of, you know, those sort of things?

So what we've found, previously is that, a landlord lives around the corner and his property, he rents the property out himself and, you know, he collects the rent. Gone are the days we used to go around there and collect the rent, but he collects the rent as in the tenant pays him. So. He feels that sense of entitlement that he can go around to the property whenever he likes and fix that fence or go in and fix that tap or something like that where they think that they are entitled.

Yes, you do own the property. I do get that. But when you own an investment property, and I know I've said it before, is you then put it in the category of this is a little business. And the little business comes with. the legislation that I have to follow with the government, and respecting the privacy of the tenant and then understanding my rights and obligations.

So there are a lot of variables within that, little business that you need to follow to make sure you're not in breach of any section of legislation. And that's where, and I know I bang on about it a lot, but that's where a professional property manager can do it for you. And to ensure that you don't get yourself in trouble and that you create a loss by avoiding that.

Doing something you think that you

can just go and do. Absolutely, I mean, you would have written procedures and instructions and systems in place to manage all of these things. Correct. And, as a property owner, where, you've got maybe one or two properties, that's not something you've set up.

And you're just really doing it on a whim, aren't you? Yes.

You are and hoping

you get it right.

Yes. Especially with the changes like in the last two years and there's another one to come in May 2025. If you're not okay with that, you can easily trip yourself up and then cause. Whether it's cause an argument, conflict, that you've got to negotiate your way out of or you cause yourself a financial loss.

And that's what you don't want to do. And so the money that you're saving by not engaging a property manager, it could cost you way more if you, trip up. And it could be a genuine mistake, but it costs money.

Oh, absolutely. We talked about paperwork earlier. So if someone is self managing, what would you say would be the minimum amount of paperwork and documents that you'd need from start to finish that you'd need to put in place as a self managed, landlord?

To cover

all the scenarios, well, you're going to need

a lease to start off with.

Yeah, you need the lease, the bond forms, the entry condition reports. Entry notices, breach notices, there's a lot, there is a lot and to be honest I haven't counted them up because there are so many variables again with managing the property you need to be able to pivot when that happens, you do this, when this happens, you do that.

So yeah, I actually haven't counted up the things.

The amount of

procedures that you need in a

lot, and you'd want to have paperwork for all of those, because anything where there's a gap, again like we've talked many times before, it's okay until there's a problem.

Yes, that's right. It's okay when you're going in a straight line.

But when you've got that curve,

for sure, for sure. And look, I guess flowing on from that thorough record keeping as well, in terms of, you know, the rent collected and, et cetera, et cetera.

Yeah. So what we have. a little bit of trouble with when we're doing a application is a person who is renting from a private landlord. And they can't give us the, records that we require to be able to approve that. So we need to be able to prove that they paid the rent on time, which is a general, which is a, And an owner doesn't keep that, those records and it is a requirement under legislation that you need to know, have a written form of when the rent was paid, when it was paid from and when it's paid to and how much was paid.

And that can be in the form of an Excel spreadsheet, but if a property owner, which has happened twice in the last two weeks, I'd say, hasn't kept those records correctly, then I can't accept that tenant because I've got nothing to say that he pays it on time, every time.

Sure.

Yeah. So it then will affect the tenant renting from a private landlord, unless the private landlord has those procedures in place.

The other thing we need is, the, routine inspections. So we asked the property owner, were they done regularly? Was there any problems? Blah, blah, blah. And they go, Oh, we never went there. And it's like, okay. So if you don't go to your property at least once a year as a private property owner, that could void your landlord's insurance.

Sure.

So

it has ramifications.

Now, for those landlords out there maybe listening who are self managing or considering self managing, you are able to offer just, bespoke services, aren't you? Correct. So, you know, just the lease or just the inspections. Yes. So give me the key things. If a landlord does want to, let's call it self manage, but outsource, The most important things so that they can let's just say minimize risk What would be the things you would suggest that an agency like yours that you would outsource as a bare minimum

right as a bare?

minimum I would be outsourcing the Putting it placing a tenant so to place a tenant you need to Have checked out their application form, done your due diligence. You need to have done an entry condition report that is quite detailed with lots of photos and you need to have the, agreement in place with all the terms and conditions set out in writing.

That would be the bare,

bare minimum. So at least get the person in under the right.

Yes. And the right entity, the right, the correct terms and conditions.

But the lease, all of that done.

Yeah, with all that done. Now that may cost you two weeks rent, maybe three weeks rent.

So make sure that you've got the tenant in there with all of the, All of the right paperwork, everything's legal, at least everything's started and yep it could cost you two or three weeks rent but at least you know that everything is in place from that point.

So

that's part of the reason why I go on about beginning with the end in mind. So that lease will take you all the way through, so say it's a 12 month lease, and it will take you through. that 12 months and making sure that all your I's are dotted and your T's are crossed. Sure. And then you're covered.

Okay. Until the next thing happens.

Look, I mean, I'm going to just come straight out and say, I think you'd be mad to, to try to, you know, self manage your, your own properties. But look, if you do, Colleen has still got, the services that can help you through that, some advice. But look, I mean, it's about having a.

attention to detail and a proactive approach to compliance and documentation.

The other thing that we do for a couple of clients and this is at their request, is that even if I don't place the tenant, I will manage the, rent. I manage the money.

Sure.

And that in itself might just be something.

And again, it's cheaper, but then don't be surprised when we say to you, an inspection will cost you this much or carrying out your maintenance will cost you that much. And you can either have all in one, or you can just have bits and pieces of the service. So a few clients, we do just rent collection.

Yep. And then there's a few clients we do just the inspections. So. One scenario was a landlord lives next door, and we just do his inspections, so he does everything else. We do his inspections, whether they're entries, exits or routines, because he's in a wheelchair.

Right.

So that's where our service comes in handy, where we can do those things for him to make sure that he remains compliant and that he knows his property's being well taken care of.

Sure. So, yep.

Fantastic. Well, look, thanks so much for joining us again in here today, Colleen. Some excellent advice there, and look, I'd just like to say to anyone out there self managing, give Colleen a call at Sutherland's Property Management Group. Talk through these bespoke services. You know, there may just be one or two things that she could take off your, your hands that would make your life so much easier.

And, you know, you're only paying for that part of the, part of the service, but as always. As you know, if you've listened to any of these other episodes with me, I think the full service is well worth it. It's weight in gold where you've got absolutely nothing to worry about. And, Colleen and her team look after everything.

So look, thanks so much again, the website to go, check out Colleen and her team and her services is spmg. com. au. So until next time, thanks so much for joining us on the, Property Investors Handbook Podcast.

Thanks, Adam.