While many investors spend a large amount of time and effort carefully researching the property markets and then finding the top investment, they ignore the role that a professional property manager can play in preserving their property’s capital value and maximising its income.
With our property markets growing strongly and no shortage of tenants, many beginning landlords fail to ignore the relationship with their property manager as an ongoing business partnership. Too many landlords choose their property manager on fees alone.
Others think they don’t need a property manager at all and can do it themselves. This is possibly because they don’t understand that property management is much more than just collecting rents.
To manage your property to minimise vacancies and maximise your returns requires:
* Industry specific skills and knowledge such as knowing how to market your property effectively to get it exposed to the maximum number of tenants.
* Setting the rent at an appropriate market level to ensure quick leasing, the choice of a variety of good tenants and at the same time maximise the returns in these days of rising rents.
* Checking potential tenant’s references to ensure you have a reliable tenant who is unlikely to cause troubles.
* Drawing a fair and comprehensive lease to protect your interests as a landlord.
* Lodging the bond with the relevant authority.
* Handling repairs and maintenance with skilled, licensed tradespeople.
* Paying insurances and outgoings on behalf of the landlords who will work at fair prices.
* Keeping up to date with complex ever changing tenancy legislation.
Because the relationship with our property manager will be a long and ongoing one, let’s look at how to select a top professional.
First, draw a list of potential property managers.
With new technology many property managers have centralised their services, so it’s not essential to appoint a managing agent whose office is in the same suburb as your investment property. It is important however to find someone who has the experience in the property market that your particular property is located in.
I find it best to arrange to meet the short list of property managers at their offices as this gives you a great opportunity to observe them on their home turf. It will help you decide if you feel comfortable working with them and should allow you to gauge their level of professionalism.
When you meet potential property managers, clarify which services are included in their proposal and ask some specific questions – for example, check how they handle arrears, routine inspections and rent reviews.
Here are 11 questions that you should ask your prospective property manager:
1. Does the agency have a dedicated property management department and how many staff will be looking after my property?
Many agencies see property management as a “poor sister” to the more glamorous sales department and some even leave the management of client’s assets to the front desk staff and receptionists.
Ensure that your agent has a dedicated property management department. It would be preferable that this department is staffed by a number of experts so there is continuity of management in the event of one property manager being ill or leaving.
2. Is a director/owner of the agency involved in the day to day management of the property management department?
Most agencies have a sales department and a rental department. Generally the business owner has a sales background and not a rental background, and looks after the sales department leaving the management of their rental department to a property manager. [sam id=41 codes=’true’]
This is often because the sales department has a higher turnover and high income. The rental department has a lower income, is more intensive and difficult to manage.
You may find that an agency where the director has an active involvement of the property management department will take the business of property management more seriously.
3. How many years has the property manager looking after your property been working in real estate?
This relates to the property manager and not the agency. Going to a brand name agency doesn’t mean their service is going to be any better.
Many people start their career in real estate as receptionists and then move up to the property management department, and some of the top performers move into sales.
Yet some individuals choose property management as a career and this is the type of person that should be looking after your property.
4. How many years has the property manager been with the agency?
You should look for stability in your property manager. You want someone who will learn your property inside and out. You want to pick up the phone and talk to that person today, and in 6 months time you want to be able to talk to that same person.
Due to the stresses involved in property management, the staff turnover tends to be quite high. This is another reason why you should look for an estate agent who has chosen property management as a career.
5. Does the property manager give you a written proposal?
Some property managers just go out and look at your property and say “OK, we’ll put it on our books”. Look for someone who has put in the time and effort to present a professional image to you and gives you a written proposal.
If they make the effort to present their services professionally to you, it is likely they will look after your property professionally also.
6. What geographic area does the property management service cover?
While you should be looking for a property manager with expert local knowledge, consider what your property portfolio will look like in a couple of year’s time. Will you own a number of properties spread throughout the suburbs?
You could either employ a specialist property manager in each geographic location or you could instruct a large property management company that covers a larger geographic area.
Australia is now following the overseas trend in the formation of agencies that are solely dedicated to property management and cover a larger geographic area. With the advent of internet advertising and electronic banking, these “super offices” no longer need to be located in the local shopping strip to manage your properties.
Many professional property investors are turning to this type of asset manager who will be able to look after their entire property portfolio.
7. Does the Property Manager hand out keys or do they attend property inspections with prospective tenants?
If they just hand out the keys and let the tenant inspect the property on their own, move on to another agency. Too many things can go wrong with this approach and the security of your property is compromised.
Inspecting your property with a prospective tenant means that the agent has a better opportunity to promote the property, as well a chance to get to know the tenant a little better.
8. How many properties does the manager look after?
A property manager who looks after too many properties may not have time to devote the attention to your property. Some busy agencies have 200 properties per property manager.
In general, this is far too many to give your property individual attention. At some boutique agencies each property manager looks after about 100-150 properties. While these agencies may charge a little more for their property management services, landlords find this extra expense translates to a trouble free investment that often produces a higher return.
9. Do you have staff available to show my property to prospective tenants six days a week?
The hectic pace of life and the advertising of rental properties on the Internet 24 hours a day means a good property manager must be available to show prospective tenants your property when it best suits the tenant.
10. Do you have a system for checking prospective tenants with regard to credit worthiness, past rental history and their current employment?
Ensure that your property manager subscribes to a major tenancy database and screens all prospective tenants carefully.
11. Will you go to court for me if need be and what is your success rate for previous appearances?
Unfortunately, you just might have to go to the tenancy tribunal to protect your rights as a landlord. If this happens you will need an experienced property manager to represent you as tenancy laws have become quite complex.
When you have chosen your property manager, establish a collaborative relationship and agree on your working parameters.
Explain to them how involved you want to be in the ongoing management of your property. Make it clear what they are allowed to do without referring back to you and when you do require them to contact you.
This will avoid many of the misunderstandings that arise between property managers and landlords.
For example, if you signed an agreement for your property manager to spend up to $200 on repairs without obtaining permission, don’t expect them to phone you each time a tap washer needs replacing.
Listen to your property manager if they suggest you undertake non-urgent repairs or maintenance on your investment. This will keep your property in top condition and you will be less likely to lose your tenants.
As a property investor you have the choice of managing your investment properties yourself or delegating the day-to-day management to managing agents. Engaging a property manager is the preferred option for investors in today’s more complex property market.
However, it is critical that you choose your property manager wisely as proactive property management can considerably increase the return from your investment property.