By Victor Kumar
I find it frustrating that some investors don’t consider the importance of property management enough.
Instead, they focus on the management rates – such as the percentage they will be charged as a fee by a property manager.
Of course, you get what you pay for.
Now, I’m not saying that you should ignore the fee that property managers charge, because some slug you with additional fees for simple tasks.
This can especially be the case with property managers who might charge a lower percentage of the weekly rent, but then charge high fees for renegotiating the lease, re-letting the property or even paying rates or general bills on your behalf.
One issue when it comes to property management prices is that fees are not universal around the country.
For example, in Sydney, property managers will generally charge investors three to six per cent of the weekly rent; in Brisbane you will rarely pay less than five per cent; and in Perth, property management fees usually start with an eight!
Mystery shop research
Before you engage a property manager, my suggestion is to mystery shop the agency. In other words, you must think like a tenant and even pretend to be one for a little while. One way of doing this is to choose a property they have advertised online and send an online enquiry or call them about it. Of course, you don’t want to take it any further than that, but it will give you a reasonable idea of their customer service.
You can also leave a message with reception indicating you are a landlord looking for a new property manager for your property and see how long it takes them to get back to you.
When they do – if they don’t, well, you need to slam that door shut – there are a number of questions that you should ask them such as:
- How many properties does each property manager look after directly?
- Do they operate off a pod system? That is, does each person manage a
certain number of properties but the team is overseen by a senior manager.
- What is their position and procedure regarding tribunal appearances and rent arrears?
- Who does the repairs? Some agents insist they can spend one week’s rent for repairs without your approval, but I don’t agree with this policy because, at the end of the day, it’s your money, so they shouldn’t spend it without your consent.
- How many properties do they manage and how many are vacant at that point in time? You can then calculate their vacancy rate to see if it’s in-line with the local area.
- How many routine inspections do they undertake at each property per each year? It should be at least two.
- If repairs are identified during inspections, what is the procedure to have those completed?
All these questions will help you to evaluate whether they are a good property manager or should be given a wide berth.
It’s important that you undertake this research even if the property manager has been recommended to you personally.
As I mentioned at the outset, property management is one attribute of successful property investment that too many investors ignore, which will likely them cost them money in the long-term.
Don’t get caught up in how much the fees are and focus on the end result – which is that the property is rented out quickly, and you’re not being charged for mundane activities that should be part and parcel of a standard property management fee.
Another tip is to put your property manager on probation.
Most property management appointments are for fixed terms with a hefty break fee attached.
However, I recommend renegotiating the agreement to include your own clauses that give you the opportunity to walk away if they are not performing professionally.
These could include if they can’t keep arrears under control or they don’t undertake regular inspections.
It’s also important to consider whether your property is similar to the ones that they usually manage.
They should also have an office front, because while we all do business online these days, tenants must have the ability to talk to your property manager in person if necessary.
Some final points include having one person as your primary contact, regardless of whether they manage a number of your properties.
It’s always best to have one person overseeing your properties because that way you can form a relationship with them.
Plus, they can understand how you want your properties managed as well as the type and frequency of communication that works best for you.
They should also email all of your inspection reports, photos and rental statements so you can keep them in a central online location.
Finally, it’s a given that the end of year financial statements for each of your properties include all of the revenue and expenses so you don’t have to spend any more of your own money having your accountant calculate these on your behalf.