A huge amount of effort goes into managing a rental property, from dealing with maintenance requests and communicating with tenants, to marketing the property and screening prospective new tenants. So should you hire a professional or attempt to do it yourself?
Hiring a property manager or managing your investment property yourself is an age-old debate. Having a trustworthy and diligent property manager can free you of the mundane and time-consuming day to day duties of managing the property.
According to the Real Estate Institute of Australia (REIA), more than half of Aussie investors use the services of a property manager. But those willing to take on these tasks themselves can save themselves money in the long run.
What does a property manager do?
According to Jo Natoli, Principal and Licensee of Sydney-based property management firm The Rental Specialists, you can break down the responsibilities into five key areas:
1. Lease management - making sure both parties are fulfilling their obligations under the terms of the lease and the Residential Tenancies Act.
2. Financial management - setting market rent and ensuring that the tenant pays their rent, attending to the payment of property-related expenses for the investor, and maintaining concise ledgers for the investor for their taxation purposes.
3. Relationship management - relationships between landlord and tenant, landlord and strata manager, tenant and strata manager, landlord and neighbour, tenant and neighbour, tenant and trades contractor - all need to be managed. Property managers facilitate and manage all these relationships as the need arises.
4. Document management - maintaining all the relevant legal documentation involved with being a property investor such as leases, condition reports, invoices, income and expense reports.
5. Physical management - undertaking the tenancy inspections, attending to the repairs, upgrades and maintenance of the property, ensuring the property continues to meet the compliance and habitable standards required.
“In addition to the above, we're also responsible for marketing and leasing the property when it becomes vacant,” Ms Natoli said.
How to hire a good property manager
Ms Natoli said finding the right property manager can be tricky.
“Gone are the days where a property manager needs to be within five minutes' walking distance from the property in order for them to do a great job, so don't be afraid to venture outside the general location of your property to find a gem,” she said.
“Your property manager should have their real estate license (either Class 2 or Class 1) or be currently studying their Certificate in order to earn their license.”
Ms Natoli shared her tips for finding the right property manager:
Look for a property manager who is also a property investor themselves.
“If they're a property investor themselves they're far more likely to understand, and anticipate, the needs of the client, and they'll likely have a far better understanding of the client's position, point of view and financial considerations, which is always a great thing when we're dealing with our investor clients.”
Meet the property manager.
“A number of businesses will engage someone whose sole role is to sign up and onboard new investor clients. Their titles vary from office to office and could be known as an Investment Consultant, Relationship Manager or Business Development Manager, to name a few titles,” Ms Natoli said.
“Make sure that the person you're interviewing is going to be the same person who'll be managing your property. If they're not, that is ok, however, you should then ask about how and when your property will be handed over to the person who will be the manager of your property.
“You should try to meet them as well so that you can start to develop a rapport with them and let them know what's important to you in the leasing and ongoing management of your property.”
Find a property management specialist.
“Specialist property managers have chosen to become property managers because they love building trusting relationships with people, and they love helping people. They're not using property management as a training ground to learn the real estate industry so they can then move on to an illustrious sales career,” Ms Natoli said.
“A specialist property manager's care factor, bespoke and personalised service and dedication to their profession help to set them apart.”
Don't chase the cheapest fee.
“Don't make a decision about which property manager you'll engage based on fees. Instead, search for a property manager who instils in you a level of trust and comfort that they know what they're doing, they have the experience and knowledge to provide you with the service and care that you, your property and your tenant needs, and they have your best interests at the forefront of their minds,” Ms Natoli said.
“Look for the value they can bring to you, your property and your tenant.”
Questions to ask when searching for a property manager
- How will they go about marketing your property for lease when it's vacant, or about to become vacant?
- What is their rental market appraisal of your property?
- Who will be managing the property and what experience do they have?
- Ask about their tenancy inspection policy (frequency and whether they're done in-house or outsourced) and whether you'll be receiving reports after each inspection conducted.
- What is their communications policy and how soon you can expect to hear back from the property manager when you're looking to connect with them?
- How long they've been at that particular agency for?
- How do you terminate the engagement if you find you're not happy?
The argument to hire a property manager
Principal Advisor and Client Director at Property Tax Specialists Amir Ishak says if you're an investor with property holdings, it's important to have a property manager in place to deal with the day to day tasks of managing your investment.
“From tenant screenings and lease negotiations to rent collection and property maintenance, a property manager can take care of everything for you so that you can focus on other aspects of your business,” Mr Ishak said
“One of the main benefits of hiring a property manager is that they can screen tenants for you. This includes running background checks and credit reports to make sure that the tenant is qualified and will be able to pay rent on time. A property manager can also handle lease negotiations, which can save you a lot of time and hassle.
“Another benefit of having a property manager is that they can collect rent from tenants on your behalf. This means that you won't have to worry about chasing down late payments or dealing with bounced checks. The property manager will also take care of any maintenance issues that arise, so you won't have to deal with those either.”
In short, hiring a property manager takes a lot of the stress out of being an investment property owner.
The argument for managing your investment property yourself
If you want to manage an investment property yourself, there are some key factors to consider.
Firstly, having the time to be available to your tenants is key. Secondly, make sure you understand the legal side of property management i.e. The Residential Tenancies Act.
CEO and Founder of The Room Xchange Ludwina Dautovic told Your Investment Property Magazine finding the right tenants is key.
“The property I manage is the family home that we built in Newport, Melbourne. It's a double story townhouse in a much sought-after suburb so we knew it would be easy to rent,” Ms Dautovic said.
“I had a very clear idea of how I wanted the property to be managed and I wanted to give young adults the opportunity to apply to give them a hand up into the rental market.
“I have two young adult children myself and have always believed that you need to be the example you want others to be. One day my own kids would be moving out and someone needs to give them a chance.”
The responsibilities
The initial responsibilities include advertising, interviewing and deciding on the tenants.
“Once that is worked out, we then have to do a property report that we all agree on. The lease is signed and both parties receive a copy,” Ms Dautovic said.
“The bond is deposited with the rental bond board and receipts of it are sent to the tenants. The rental payment method is also agreed upon and set up.
“I do property inspections at the allocated times and organise repairs on the property when things need fixing.”
How to find the right tenants
“I advertise in the usual places. I arrange group property inspections to save me time,” Ms Dautovic said.
“If they're interested and they apply, I'll then set up a phone call. If the call goes well and their paperwork is good, then I'll call their references. If they check out and their finances show that they can afford the place, we finalise the lease at our home over dinner, give them the keys and they move in.
“We have dinner together as it's a nice way for them to see our home and to know that we're everyday people with a life and expenses as well. It also helps to build rapport and trust between us all. It's worked for me for seven years and I've never had issues with any of my young tenants.”
Advice for investors choosing the DIY route
“Make sure you have the right paperwork and processes in place,” Ms Dautovic said.
“Ensure that all the paperwork is signed and noted appropriately before they move in. Do the inspections and give the tenants the required notice and respect they deserve before entering their home. It's your house, but it's their home. Be as prompt as you can with any repairs that need to be done, especially urgent ones.
“Always communicate in written form whether it's email or text so you have it documented should you need to reference something down the track. Assume the best of people as the majority of people in the world are good people and that includes tenants!”
Ms Dautovic advises investors to be fair with the rent if you have good tenants rather than risk losing them and having the property sit empty in the name of getting an extra $20 a week in rent.
“It's much better to have happy ongoing tenants without any rental gaps than to lose them because you want more rent. More rent doesn't necessarily mean better tenants. If you have good tenants, do what you can to retain them.”
If the tenancy is going well, Ms Dautovic says investors should offer the option for a longer lease after the first year.
“This will provide them with housing security as opposed to hoping that each year the lease will be resigned. Provide your tenants with any references from previous tenants or offer for them to speak to one of your past tenants.
“The comedian, Tim Cashman, is right when he talks about this. A year's worth of rent for our home is $26,400. That's a big investment. Knowing that you're going into business with someone who will look after their customer is comforting.
“Give them a gift at Christmas. Do something nice for your tenants. They're human after all.”
