Property managers play a very important role in looking after your valuable investment and helping you maximise its cash flow. However, there’s a world of difference between a great property manager and a poor one – it’s like comparing night and day.
Have realistic expectations
Being a property manager is a tough job. They are often caught in the middle – tenants may have a long list of requests, while investors are usually focused on keeping expenses to a minimum.
Over the past decade, the workload for property managers has increased significantly due to more onerous residential tenancy laws. These include minimum rental standards, mandatory compliance checks, and tighter controls over rental increases and evictions, and so forth.
Most property managers earn between $70,000 and $80,000 a year, which means the role often attracts relatively junior staff with limited life and property management experience. While technology has helped the industry become more efficient, it remains a demanding job.
It is therefore unrealistic to expect your property to be managed perfectly without your involvement. As the owner, you still have a responsibility to guide and manage your property manager to ensure you achieve the best possible outcomes.
Don’t be a pushover
Property maintenance requests can be tricky to navigate. On one hand, you want to keep expenses to a minimum. On the other, preventative maintenance can save you money over the long run, and if you are not prepared to look after your own property and keep it in good condition, you can’t expect the tenant to either. Most investors do the right thing and ensure their tenants enjoy safe, comfortable accommodation.
After many years of owning investment properties, one thing I have learned is this: you need to critically assess maintenance requests – don’t just approve them all without any questions. First, as the property owner, it’s your responsibility to consider the root cause of any issue. Is it just normal wear and tear, or does it indicate a deeper underlying problem? Property managers are often so focused on day-to-day tasks that they deal with the immediate symptom rather than thinking like an owner. You cannot assume they will investigate the real cause (its great if they do) – that’s your job to ask the right questions and make sure it’s being addressed properly. Second, check whether the quoted cost is reasonable, and if you are not sure, there is no harm in asking the property manager for a second opinion or quote.
As I have discussed before, preventative, and proactive maintenance is one of the best ways to avoid bigger, more expensive problems later and to help maximise your gross rental income. Just don’t rely solely on the property manager ascertaining whether the request is necessary and reasonable.
Attend inspections
Property managers should conduct property inspections at least once a year to ensure the property is being properly maintained by the tenant and to identify any maintenance needs. If possible, it’s a good idea to attend these inspections – they don’t take long. It shows both the property manager and tenant that you’re actively involved in managing your asset, and it gives you a chance to address any potential issues firsthand.
If your property is interstate, attending the inspection can be trickier. However, if you happen to be traveling for other reasons, try to schedule an inspection while you are in the area. Most states only require giving the tenant 7 to 14 days’ notice.
How do you manage rental increases?
As an investor, your goal is to maximise your property’s net cash flow. That doesn’t necessarily mean raising the rent every chance you get. Instead, it’s about considering the cash flow after all expenses. A tenant who pays their rent on time, takes care of minor issues, and does not make unnecessary maintenance requests can be far more valuable than one who pays higher rent but causes constant headaches.
Another factor to consider is the risk of losing a tenant. This can be expensive, as you will likely incur a letting fee, usually 1 to 2 weeks’ rent, and possibly face a period of vacancy.
In general, if you have a good tenant, it might make sense to apply more modest rent increases, even if your property is under-rented. The longer you keep such a tenant, the more under-rented your property will become. That’s why turning tenants over every 5 years or so, which often happens naturally, can be beneficial because it gives you the chance to bring the rent up to current market levels.
Finding a good property manager
The key to finding a great property manager is to look for an experienced professional with a solid reputation, ideally someone who either owns and/or runs the property management business. These individuals make all the difference, as they are more likely to invest in training their team and set high standards.
The best way to find a great “career” property manager is through referrals. You can ask other property investors who own properties near yours. I have also found reputable buyer’s agents to be a reliable source of referrals, as they often know the agencies in their areas of expertise and work closely with many investors.
Switching to a new property manager is straightforward. First, check your notice period – it’s typically 28 days, but you should confirm. You can notify your current property manager of your decision by email and copy the new property manager in on the message. The new property manager will usually take care of the rest, including picking up keys and documents, notifying tenants, and handling the transition.
Property management fees vary
Property manager fees vary across states. In Melbourne and Sydney, the typical management fee is 6% to 7% of the gross rent, with a letting fee of 1 to 1.5 weeks’ rent. In Brisbane, fees are slightly higher at 7.5% to 9%. Adelaide and Perth have the highest fees, ranging from 9% to 11%.
As the saying goes, fees are what you pay, but value is what you receive. Personally, I don’t base my decision on fees alone. I look for a great property manager and pay a fair fee for the services they provide.
Selecting great tenants
In my view, a great tenant is one who can handle small issues like minor toilet repairs, drain cleaning, and other routine maintenance without requiring a trades person. Of course, a good tenant also pays rent on time and takes care of your property.
From my experience, prospective tenants who have not rented before often have unrealistic expectations, which can lead to unnecessary frustration and expenses. For this reason, I tend to prefer tenants with a rental history in Australia.
Older tenants or those with higher incomes are also less likely to share the property with others, so you can generally have more confidence in who you’re renting to.
A good property manager is an invaluable resource when selecting a new tenant. They know what to look for and the right questions to ask. While most states now require, or will soon require, property managers to use a standard rental application form, this does limit what landlords can ask. That’s why having a property manager with experience is so helpful.
Property investing isn’t set and forget
Managing and overseeing your property manager should not take up much of your time. Typically, it should only require a few hours each year. There may be the occasional year where a bigger issue arises that takes more time, but that should be the exception, not the norm. The key takeaway is that while it does require some of your time, it’s time well invested.
Biggest problem with property management industry is turnover of staff and low staff retention.
Inexperience staff in another issue that plagues the industry.
With 40 years as a property investor, in my experience 99% of managers don’t invest in property themselves and that’s a huge problem in itself.
Furthermore, there is a huge gap in the industry as most agencies put it in the too hard basket which opens the door for someone focused with industry experience and foresight to go next level and effectively manage 40k-50k properties in a management business with the aid of technology easily creating a $100-$200m business valuation….
Hi Marty, it is certainly hard to find the right property manager who will stick with you through your property investment journey, and particularly for an investor like yourself over 40 years old. That’s why, in my view, it’s critical to be selective about who you entrust with managing your properties. A good buyer’s agent, who deals with property managers daily, can be invaluable in referring you to someone with the right expertise and stability.