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Managing your investment property and its tenants comes with a lot of responsibility, and can at times be stressful. So is it worth outsourcing the job to someone else?
What is a property manager?
Property managers are real estate professionals who work on behalf of investment property owners (landlords) to lease and manage properties. Good property managers make the ownership of investment properties less stressful and take care of many of the day-to-day responsibilities associated with managing a property portfolio.
Some of a professional property manager’s main duties include:
• Marketing the property to prospective tenants
• Going through potential tenants’ applications
• Selecting tenants for your investment property
• Collecting rent
• Liaising with tenants about potential repairs and property maintenance
• Deciding whether requested repairs and maintenance are required/necessary
• Arranging repairs
• Advising on market rents
• Negotiating leases and rent reviews
• Keeping on top of legislation and advising you how it affects your properties
• Advising the landlord what to do when the tenant is in rental arrears or in breach of the lease
• Representing the property owner at tribunal hearings
Property management costs
Property management fees are typically structured around a percentage of the rental income produced by your property. Fees within the range of one to 10 per cent are a standard indication of what to expect, although this varies from market to market. Tightly contested city markets tend to attract the lowest fees, with fees rising the further you go from the CBD.
Some agents also charge a monthly incidentals fee to cover administrative costs such as postage.
Agents may charge the equivalent of a week’s rent as a fee each time they re-let your property.
They may also charge a marketing fee when the property is being re-let.
What are the advantages of hiring a property manager?
Time and expertise are the key points driving many investors towards property managers.
Many property investors are full-time professionals, and don’t have the time during their working week to attend to the demands of their tenants, or any issues arising with their investment property.
Similarly, property management is governed by a range of legislation, some of which can be quite intricate. Property managers undergo training in order to achieve their accreditation, which involves learning the ins and outs of this legislation.
In addition to helping you run your property portfolio on a day-to-day basis, property managers can play a key role in helping you maximise your income.
Property managers with a sound knowledge of the local area will be on top of market movements – both in terms of capital growth and average rental incomes.
Effective property managers will be able to advise you when you should increase the rent you’re charging and can handle the implementation of this increase in a way that reduces the chances of you losing tenants along the way.
Similarly, good property managers will know when the market has taken a bit of a dip and can help you establish if you need to reduce the rent you’re charging.
While this may seem far from ideal, a $10 per week reduction in rent will lose you $520 over the course of one year. On a property that charges $500 per week, however, if you fail to keep your rent in line with market conditions and the property is vacant for just three weeks while you scramble to re-tenant it, you have already lost $1,500 – not to mention all the fees associated with marketing and re-letting the property.
Market-leading property managers can also advise you on small cost-effective cosmetic improvements that will appeal to the local market and increase the amount you can charge for rent (and ultimately increase your resale value as well).
Is hiring a property manager the right choice for me?
Whether hiring a property manager is the right choice for you is dependent upon how willing you are to become engaged with your portfolio on a day-to-day basis. You need to be prepared to answer the phone at any time of the day or night in order to respond to an emergency request from your tenant.
Likewise, you need to be prepared to learn the legislation applicable to your investment property and set aside the time required to attend any tribunal hearings.
You will also need to develop a marketing process for your property and be prepared to dedicate time to holding open-for-inspections, analysing applications and checking tenant references.
If you do decide to engage a property manager, ask the following questions of them to make sure they’re the right fit for you:
• How many properties do you manage personally?
• How many properties does the wider company manage?
• How can you demonstrate knowledge of the current rental market in my area?
• What action do you take if tenants go into rental arrears?
• How will you collect rent from the tenants and how frequently will you pay this money to me?
• What is the process if my property needs urgent repairs?
• How do you assess whether maintenance is necessary?
• How do you reject a tenant’s request for upgrades or repairs?
• How do you attract the best possible tenants?
• How do you screen tenants?
• How frequently will you inspect the property?
• How much can I expect to pay for your services?
• How will you ensure I’m receiving the best possible rental return for my property?
• What sets you apart from other property managers?