Buying an investment property is an exciting step on the path to future financial security and thousands of Australians take the leap into rental property ownership every year. However, once you’ve bought your property you have another important decision to make – who is going to manage it for you? Of course finding a good property manager is critical to maximising your annual yield and this, above all else, should be your primary goal. Here are the 12 things to to ask about when you choose a property manager.
Naturally there’s nothing like experience when it comes to management of your property. At some stage, even the best tenants can present considerable challenges to property managers so it’s important you ask every property manager you interview two important questions; how long have you worked as a property manager and how long have you been a property manager at your current real estate agency?
2. Problem Resolution
When independent research and ratings agency Canstar Blue surveyed Australian’s about their levels of satisfaction with real estate agents, one of the top drivers of customer satisfaction was Problem Resolution. First National Real Estate was rated five stars in this category and it’s essential that your property manager has mastered this skill. When tenants can’t pay the rent, demand something unreasonable, or have been the source of a complaint from neighbours, a property manager needs to bring his or her strategic resolution and diplomacy skills to the fore. This is where the difference becomes clear . More experienced property managers can de-escalate problems, where a junior may inadvertently pour fuel on the fire.
The more properties a property manager has to manage the more chance of miss-management. A good property manager will typically be expected to manage about 120 properties. More than this and there’s an increased risk that attention to detail might start to slip, especially if the agency doesn’t use sophisticated property management software systems. Ask how many properties the real estate agency manages and how many property managers it employs.
4. Who will manage my property?
Some real estate agencies employ a Business Development Manager (BDM) within their rental department. Their role is solely to meet landlords like yourself, provide you with a management submission, and win your business. The important question to ask is therefore ‘who will be managing my property’? The BDM may impress you but that’s not much good if once you’ve signed the paperwork your property is handed to a junior. Ask whether you will have an individual property manager working on your property all the time or whether there is a pool of property managers who float across all of the properties the agency manages. Ask to meet the team if that’s the case, or the individual manager the BDM recommends prior to signing a management agreement.
Collecting the rent is central to property management success so ask your property manager what percentage of the agency’s tenants are currently in arrears. It’s normal for an agency to have a small percentage, perhaps between one or two percent, but if the property manager doesn’t know or the figure is much higher, be wary.
6. Communication and Tenants Screening
Upon receipt of written applications from prospective tenants, a good property manager will follow strict procedures. This assures you are provided with feedback after a thorough check of references, credit worthiness, employment and previous rental history via a variety of national tenancy database systems and other real estate agencies. As Landlord, you will be asked to consider this information before choosing your tenant. When interviewing a property manager, ask to review these procedures.
7. Marketing of vacancies
Naturally, another important question to ask is how your property will be marketed once it becomes vacant. Ask your agency for details of their intended marketing campaign. A proactive property manager will immediately contact their database of qualified tenants, put up signage (where possible), add the listing to major real estate marketing websites, and promote the property across various digital channels.
8. Property inspections
This might seem like a question that you should never need to ask but you should check if the agency ever lets tenants inspect a vacant property by themselves. This presents a major risk and is the sign of a very low standard of care.
Maintenance is the holy grail of property management. Good property managers must respond quickly to your tenant’s requests as well as have the capacity to juggle a range of licensed tradespeople and keep them to their commitments. Nothing irritates a tenant more than lack of communication, or having to repeatedly report problems with no response. Proactive property managers use online systems that track the status of all maintenance requests so they know exactly what is going on, right across their portfolio, at any given moment.
10. Condition reports
Before a tenant enters your property for the first time, your property manager will complete a condition report. Ask how this is done and what sort of systems the agency uses, because accuracy and attention to details counts. An experienced property manager will complete a comprehensive report and be willing to provide you with examples. The ingoing condition report will be compared to an outgoing condition report when a tenant exits your property and, once again, this is where the difference between average and good property management becomes clear. You should also ask how frequently your property would be inspected during an ongoing tenancy.
When choosing a property manager, you should also factor in what the property manager will do over time to help you maximise your annual yield. Average property managers just collect the rent but good or great property managers look for opportunities to increase your rent, gradually and responsibly, make recommendations about improvements you could or should make (to make your property more appealing), and demonstrate ways in which you can maximise your tax advantage. Ask what your prospective property manager will do over the longer term to make sure your property is doing the best that it can. The response will be revealing.
Last but not least, you need to ask what fees an agency charges for property management. Typically landlords are charged a percentage of the weekly rent but there’s also a ‘letting fee’ and possibly an administration fee at each changeover of tenant. Try not to get hung up on obtaining the lowest percentage management fee; this may be the hallmark of a real estate agency that stretches its property managers too thinly, across too many properties, in order to be profitable at a very low fee. A good property manager will be happy to explain and justify the agency’s fee structure and what you get for your money.
Should I engage the service of a Property Manager:
The following advice is of a general nature only and intended as a broad guide. The advice should not be regarded as legal, financial or real estate advice. You should make your own inquiries and obtain independent professional advice tailored to your specific circumstances before making any legal, financial or real estate decisions.