Whether you have one investment property or a multi-property portfolio it’s imperative that you get the most from your assets.
This means staying on top of costs (and ensuring they don’t blow out) and making sure you’re maximising the earning capacity of your portfolio.
What is a property manager?
Property managers are often cited as a key member of the team of professionals you should have around you in order to build a sustainable and efficient property portfolio.
Property managers are real estate professionals who work on behalf of investment property owners (landlords) to lease and manage properties. Good property managers will make the ownership of investment properties less stressful and take care of many of the day-to-day responsibilities associated with managing a property portfolio.
Savvy property investors know a lot about the property market they’ve bought into, are financially ‘fit’ and know what they want from their portfolio, but they often don’t have the time to deal with tenants on a day-to-day basis and might be in the dark about certain legislation. This is where a professional property manager can save you a lot of stress and hassle.
What are a property manager’s responsibilities?
A property manager should perform three main functions for you, the landlord: provide excellent customer service, act as a liaison between you and your tenants, and help you get the most from your individual property and/or your property portfolio.
Some of a professional property manager’s main duties include:
• Marketing the property to prospective tenants
• Going through potential tenants’ applications
• Selecting tenants for your investment property
• Collecting rent
• Liaising with tenants about potential repairs and property maintenance
• Deciding whether requested repairs and maintenance are required/necessary
• Arranging repairs
• Advising on market rents
• Negotiating leases and rent reviews
• Keeping on top of legislation and advising you how it affects your properties
• Advising the landlord what to do when the tenant is in rental arrears or in breach of the lease
• Representing the property owner at tribunal hearings
In a robust and thriving property market, selecting tenants may seem like an easy task. After all, if people are competing to live in your investment property, surely you can have your pick of the bunch and charge even more than you were initially planning?
However, wading through numerous rental property applications may not be the most effective use of your time, and good property managers know what to look for and can quickly and easily check up on a prospective tenant through their references and rental ledgers.
In addition, a property market that is currently attracting numerous prospective tenants may not stay that way for the property’s entire lifespan, so having a property manager who can attract quality tenants in different market conditions will ensure your portfolio is generating sufficient income even when the boom is over.
One of the largest unexpected costs associated with investment property ownership arises when a property becomes vacant and isn’t filled with new tenants quickly. Vacancy periods can drain your cash flow and seriously hamper your ability to invest in more properties.
Property managers should help you minimise vacancy periods (or avoid them completely) by ensuring the rent you’re charging is in line with the market rate, marketing the property effectively to prospective new tenants and managing your tenants so that (where possible) they are on a fixed-term lease.
What to look for in a property manager
You need a property manager who is going to work hard for you and your property portfolio. They will be taking some of your rental income to cover the cost of their services so you would be wise to make sure you’re getting the most from your property manager.
It’s important to remember that even though the property manager works for you — and not the tenants currently occupying your property — it will be easier for everyone if they have a good rapport with the tenants and communicate effectively with them. Tenants are more likely to communicate issues with and damages to a property if they feel their property manager is listening to them.
This doesn’t mean the property manager has to say ‘yes’ to every request from the tenant that comes their way; instead they should be able to effectively act as a liaison between you, the landlord, and the tenant, and explain the reasons behind a decision and what may happen in the future.
Some property industry experts will say experience is everything. After all, how can someone be the best of the best if they only just joined the game?
It’s important to remember that experience doesn’t just relate to the individual property manager though.
As an industry, property management does have a relatively high turnover rate, so in certain property markets it may not be a simple task to find the perfect property manager who also has years of solid industry experience.
In these instances, it’s important to focus on the experience of the property management company, rather than the individual who will be looking after your property. Ensure the company has a strong record of managing properties in the area and has robust training mechanisms in place for new property managers who may join the team and take over your properties.
The ‘care factor’ is a big one when it comes to property management.
A lot of property managers are tasked with managing numerous properties, so it would be easy for them to simply focus on the ‘problematic’ properties and let the others simply keep ‘looking after themselves’.
Even if your property and your tenants are completely problem free, a portion of your rental income still goes to the property management company, so you should constantly be assessing whether they’re working hard enough for your hard-earned investment dollars.
This is where passion is key. A passionate and driven property manager who cares for the local area is more likely to go above and beyond for you and ensure that your property is at its maximum earning capacity.
How a property manager can help you grow your property portfolio
In addition to helping you run your property portfolio on a day-to-day basis, property managers can play a key role in helping you maximise and grow your income.
Property managers with a sound knowledge of the local area where your property is located will be on top of market movements — both in terms of capital growth and average rental incomes.
Effective property managers will be able to advise you when you should increase the rent you’re charging and can handle its implementation in a way which reduces the chances of you losing tenants along the way.
Similarly, good property managers will know when the market has taken a bit of a dip and can help you establish if you need to reduce the rent you’re charging. While this may seem far from ideal, a $10 per week reduction in rent will lose you $520 over the course of one year. On a property which charges $500 per week, however, if you fail to keep your rent in line with market conditions, and the property is vacant for just three weeks while you scramble to re-tenant it, you have already lost $1,500 — not to mention all the fees associated with marketing and reletting the property.
Market-leading property managers can also advise you on small cost-effective cosmetic improvements that will appeal to the local market and increase the amount you can charge for rent (and ultimately increase your resale value as well).
Questions to ask your property manager
If you still need some help selecting your property manager, here are some questions you can ask to ensure you find the best person for the job.
• How many properties do you manage personally?
• How many properties does the wider company manage?
• How can you demonstrate knowledge of the current rental market in my area?
• What action do you take if tenants go into rental arrears?
• How will you collect rent from the tenants and how frequently will you pay this money to me?
• What is the process if my property needs urgent repairs?
• How do you assess if maintenance is necessary?
• How do you reject a tenant’s request for upgrades or repairs?
• How do you attract the best possible tenants?
• How do you screen tenants?
• How frequently will you inspect the property?
• How much can I expect to pay for your services?
• How will you ensure I’m receiving the best possible rental return for my property?
• What sets you apart from other property managers?
Call the Living Melbourne office on (03) 8610 6343 for more information.
A good property manager can be the difference between an investment property that plods along and one that supercharges your portfolio’s growth — so how can you identify the perfect property manager?