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You’ve probably done this before — and if you haven’t, I bet you’ve been tempted to. I’m talking about taking the easy option when renting out your investment property.
Let’s say you buy an investment property. It already has a tenant in place on a 12-month contract; that was one of the selling points when you were assessing the deal. It’s being managed by a local property manager and the tenants are all set up with that particular real estate agency.
So what is your next step?
Do you approach at least three or four local property managers for a quote? Do you interview each of them to find out who has the most experience and best local market knowledge?
Failing this, do you at least interview the current property manager to ensure they’re up to the job?
Or do you take the easy way out and simply accept your new property manager, without so much as blinking an eyelid?
If the last scenario sounds familiar, don’t be ashamed — it’s a very common way forward for many landlords. It’s the path of least resistance and it tends to happen most often when a long-term renter is in place, as the new investor doesn’t want to “rock the boat” and risk upsetting their loyal tenant.
But here’s the deal: you’re not going to upset them. At worst, they will have to update their payment process if you do decide to move to a new property manager and if that small act is enough to make them want to move out, then they’re clearly not the ideal tenant anyway!
And let’s get real… you’re not an average, everyday landlord, are you? You have something the others don’t — a financial and investing education. You know better than to accept the status quo.
So the next time you’re reviewing your options for property management, make sure you ask the following questions of your potential candidates:
In a boutique, service-oriented property management agency, a property manager can be responsible for as few as 40 properties. However in some over-worked, under-staffed real estate agencies, each PM is handling up to 100 properties — sometimes even more!
Just do the maths on that for a moment… One property manager looking after 100 properties means they service, on average, 20 properties per day. That doesn’t leave a lot of spare time to deal with tenant emergencies and unexpected disputes, let alone getting through the routine inspections, market appraisals and reports.
My tip? Ask to see referrals and testimonials from other investor clients and also question them on their processes and procedures; if they run a tight ship, they may be able to adequately handle a higher number of properties.
We live in a data-rich world, which means that at the end of the day, just about anyone can provide comparative market data from an auto-generated report. But what can your property manager offer in the way of genuine market knowledge and advice? The best property managers will be able to tell you what price range the market can support, what types of tenants are most active, which types of properties are most popular and more.
My tip? Look for someone who can demonstrate their expertise in the local market with genuine tips, advice and feedback specific to the suburbs they service.
You wouldn’t go to a hairdresser who sports an unflattering hairstyle. You wouldn’t take health and diet advice from a morbidly obese nutritionist. So why would you put your most valuable physical asset — your investment properties — in the hands of someone who doesn’t know what it’s like to be a landlord themselves?
My tip? Don’t be afraid to ask them about their personal investing portfolio. I make it a habit to only work with professionals who invest in properties themselves, as it means they’ll be more in tune to my needs and requirements.
These are just some of the questions you should ask your property manager — the list of questions that I (and my students) usually ask runs for a full A4 page!
At a minimum, however, these three key questions will give you an understanding of the type of people you’ll be working with, including their expertise and experience. It’s a quick and painless process to qualify your experts and believe me, the lasting benefits of getting the right people working with you are more than worth the effort in the long-term.