We have some exceptional property managers who do the heavy lifting for us in our portfolios. They’re a very important part of our asset management. But you need to pour over your property agreements and make sure they’re working as hard as they can for you, explains editor Phil Tarrant.
I’ve been recently speaking with Steve Waters, my buyer’s agent, and the topic of how to handle a property manager came up.
I’m a believer of giving them a float. Usually, they’re not in contact with me for anything, unless it's for an issue which will cost me more than about $100.
But for Steve with his own portfolio, he doesn’t believe in a float. He’s in constant communication with them and they’re not allowed to spend one cent of his money unless he gives them the go ahead. It’s not that he doesn’t respect them – the opposite – but he wants to make sure their strategies align with his.
Look, in my view, if the taps are dripping, you can send out a handy man. That’s fine.
If the hot water is leaking, you can send a plumber out to inspect it, and he goes, ‘It's stuffed,’ or it might just be a valve that needs cleaning or something or another. He leaves it, calls up the property manager and says, ‘Yes I needs to spend an hour working on it, I need $150’.
He calls me, and he says it’s $150, and I say yes. They call the plumber back and say, ‘Yes, you’ve been approved for $150,’ then he’s going to get out there in two days’ time to find the time to fix it. In my opinion, it’s better that he just goes out there and fixes it on the spot.
But as Steve pointed out to me, if you’ve got a large portfolio, that $150 could turn into lots of little $150 payments here and there, and before long you’ve got over $5,000 to spend. If you're in that boat, it's something to consider.
Now, something you need to be careful about is that, while property managers are likely to fight for you in negotiation with tradies, your managing agreement could be hiding a clause that allows them to earn more than they should.
If we talk about 8 per cent as a baseline, if it says they can take 8 per cent of rent collected, fair enough. But if it’s 8 per cent of all money collected, this could mean they could be taking 8 per cent out of a $100 bill from a plumber.
It’s doubtful any good property manager would do this and, again, this isn’t meant to be negative towards property managers – every property we have is managed by property managers.
I don’t think I’ve ever had any problems with property managers, to be honest. By and large, they’re okay, and frustration is part of the game. The lesson? Be across the stuff that makes a material difference to your portfolio over time, and have your agreements and your team working as hard for you as they can.