Should I cease Rental Manager and Manage a property myself?

I have a 3 bedroom weatherboard house in a Regional Town which is rented out at $280pw. It is ugly on the outside but thoroughly renovated inside 2 years ago. The person who rent it is a man in his 50s, on pension and take care of the house as if it's his. He even turn the once ugly lawn to a great garden now, all by himself!

Recently, he approached me directly and said he wants to sign a 5 year lease in the house. He suggested he wants to pay me direct and do away with the rental Manager.

I must say I am pretty tempted in this as it helps me save the commission to the agent which stands at about 7 percent now. The tenant pays direct through his pension so payment is guaranteed. Any repairs in the house can also be taken care of by my tradie whom I always got to attend to any repairs anyway, rather than the tradie used by the agent. For the record, there has been very little maintenance issue in this house ever since it was rented, thanks to the good reno job done.

I can roughly guess what the tenant is thinking : By going direct, I can make more rental and this will stop me from increasing his rent. So on paper, this is a win - win for both of us.

Now the thing stopping me are :

- The lease will expire 6 months later. Assuming I decide on this path, how am I going to break this news to the agent? They will get pretty upset I believe? Am I wrong to do this?

- Is it worth doing this after all?

- Is such a practise common in the rental market?

- There is another property that this agent is managing for me so will this action of mine affect his managing of the other property?

Thanks. Any advice is appreciated.

 

Seems like you have everything sorted out.

Just tell the pm you are taking over the management yourself at the end of the agreement.

 

You can always trial self management and re-engage a PM if required.

Some owners choose to self manage and source a specific time limited service as required such as as going to market to source and screen a new tenant at the end of a lease.

 

Hi @Xiao Hui, we have the same first name yay.

it seems you're in a good position to self manage. A tenant who makes improvements on their own initiative are rare to find- keep them when you do!

Only advice I have is to brush up on tenancy laws in your state in case any issues come up, and remember IPs are a business agreement- try to keep emotions and attachments to a minimum.

Self managing is a worthwhile experience for the learning it brings.

Wish you the best.

 

Dear mates

Thanks for your replies. Look like I have got the answer.

Now, the tenant is pestering me to do this asap. But there is still a 6 months tenancy left. So by doing going direct to me, he's actually breaking the contract.

So If I am willing and surely will not penalise the tenant for doing so, what should I do?

 

Is a 5 year residential lease even legal?
I seem to remember reading somewhere that the maximum is 2 years???
Marg

 

I will check on the insurance.

As for the tenancy length, yes I read and discovered 5 years is too long. I will sign a 2 years max. End of 2 years I might up the rent, who knows?

 

3 years can be done with normal paperwork, longer than 3 is ok too, but it must go on the title, not a big deal, but need to get solicitor involved and tell the lender....

I would put a clause allowing rent increases though

 

Not sure which state IP is situated but in QLD you can change PM or elf manage at any stage of the tenancy agreement. You should not be penalised for that as it is your property and your choice.

But as Dabbler said if you agree for a long term lease I would but in allowance for potential rental increase yearly so property does not become under rented.

I don't think it will effect your other property if anything the agent will want to prove to you that you need to bring back this property for them to manage.

 

Xiao please check the legalities of a 5 year lease in your state. It may need to be registered.

 

Hi Chuvaun and Xenia

Thanks for your advices.

 

Dear Xiaou Hui,
The tenant is pestering me .....

are you sure you really want this ?
Is it worth your time to be at his beck and call?
just another perspective

 

Rather than at the PMs?

PM doesn't have any special powers

 

I have had tenants that were specifically looking for self managed properties. They were sick of sending issues to PMs and having them ignored. We talked and I told them anything urgent I would have rectified by close of business on the day of notification. Non-urgent things take a bit longer. I love tenants who notify my of issues with the property. It can save so much money down the track. I have not had any issues with tenants that don't like PMs.