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 13 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 wheat gets sorted from the chaff and 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 there is to drop the ball. 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 your individual manager.
It’s important to take a look at the reviews a real estate agency receives on their Google Business page. This is where tenants will often loudly proclaim their disatisfaction and this can provide some insight to a real estate agency’s professional standards. Just bear in mind that bad reviews are written by disgruntled tenants, more often than not when they’ve been met with the consequences of breaching the terms of their lease in some way. However, if all the reviews reflect a longterm tendency of the real estate agency’s staff to not respond to maintenance requests, phone calls, emails and the like, there’s probably a good chance that the standard of property management is not going to impress you either.
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 afraid. Be very afraid.
7. Screening tenants
Good property management starts with quality tenant selection so it’s vital your property manager is on track in this regard. Ask how he or she selects tenants and about the processes the agency uses. You should expect that your property manager would have access to a national tenancy database, which reveals whether potential tenants have a poor history of paying rent or worse. You would also expect that all applicants wanting to lease your property would be checked for their credit worthiness, current employment and rental history with other agents.
8. Marketing of vacancies
Naturally, another important question to ask is how your property will be marketed when it becomes vacant. A good property manager will put up a sign, do some online marketing through a major real estate portal, and presumably have access to a good tenants database. At minimum, you should expect a property manager would start with an email or SMS text message campaign to alert potential tenants to the availability of your property. However, you should also ask if the agency undertakes any social media based marketing.
9. 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 your tenants more than having to repeatedly report problems and get no response. The best 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.
11. Condition reports
Before a tenant enters your property for the first time, your property manager will conduct a condition report. Ask how this is done and what sort of systems the agency uses, because accuracy and attention to details counts. 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’ (usually one or two week’s rent) 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.