10 Tips for selecting a property manager.
If you get the chance to have a casual chat to the principal of a real estate firm (when they are not trying to win your business), ask them if they have a property management arm of the business. Most will tell you “Yes, but only out of necessity, there is more money in sales”. That pretty much sums up why the property management industry faces high staff turnover, poor stakeholder communication and spiteful consumer reviews. Not to speak negatively about the industry, there are good operators around. Find an effective property manager with these tips:
1) Experience. A 20 year old TAFE graduate with desires to be a real estate agent may not be the best option to manage your investment. An experienced manager should be an expert at rental determination, selecting and screening the right tenant, managing disputes and understand the tenancy act. An experienced manager will have seen it all.
2) Communication. This is a 3 way relationship and just like any good relationship, clear communication is key. All parties need effective and timely communication which will lead to better retention and fewer issues.
What medium do they use to communicate? (See technology).
3) Always go local. There’s no good reason for appointing a manager based on the other side of town. An effective manager should be local, have similar local properties under management, understand the market, have a good source of local tradespeople and always be available to provide access to trades and undertake routine inspections. It’s not the tenant’s responsibility to stay home to let in the smoke alarm guy.
4) Google reviews. Always check the recent reviews. It gives a great indication about the weak points of a business. it's important to keep in mind that reviews are subjective and should be read with a critical eye, as some reviews may not accurately reflect the true experience for the general user.
5) Capacity: How big is their rent roll and how many properties do they manage in this location or in the building (if any). If they manage too many properties, you and your tenant may not get the service you require.
6) Fees. This could be a whole blog on its own. For a standard long term lease, a fee of 8% + GST is high but not uncommon. If you pay a premium fee you should expect a premium service. You could do it yourself with the help of online management services for as little as 2% (see below). We are aware that some managers charge a $99 fee to the owner for inspections (routine, maintence etc). This is not standard and should not come as a surprise if written into the agreement.
7) Technology. If a property manager is still printing paper contracts and posting entry notices in the year 2023 (yes, they still exist), look elsewhere. Whilst this industry is late to the game with technology, there are some property managers who have adapted to modern tech, for better communication, financial management and better organisation. Remember, this is an industry with high staff turnover, so the internal operation needs to be seamless.
8) The onsite manager is usually the best choice for apartment management. They are local, they know the building and your apartment + have a built in list of trades people and a database of people looking to get in the building. Having said that, the above rules still apply – always do your research.
9) Manage yourself. This is a great way to form a human to human relationship with your tenant at a fraction of the cost. There are plenty of great online services that help you manage your investment such as: RentBetter, Cubbi and Propper. Whilst you will save on management fees, you’ll need to put in the work yourself with tenant selection, setting market rents, running open houses, performing routine inspections and fulfilling maintenance requests. You’ll also need to have a general understanding of tenancy laws. Ideally, you should be local to manage your own investment effectively.
10) Risk calculation. A good manager should be keeping you up to date with market trends and making suggestions about rental changes well in advance of the lease expiry. Having said that; Don’t be a greedy dick! Just because you can increase the rent, doesn’t mean you should. Why jeopardise a working relationship with a reliable tenant if you are making reasonable returns? Your tenant is subsidising your mortgage so why not reward the good ones instead of punishing them for a few extra bucks. Your property manager should be able to calculate this risk and advise accordingly.
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