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Selecting an Effective Residential Property Manager

Discussion in 'Articles' started by Jacque, 15th Aug, 2005.

  1. Jacque

    Jacque Team InvestEd

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    1,885
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    Sydney

    Introduction

    What constitutes an effective property manager? The bottom line is that you should be aiming to locate a professional who will look after your investment and keep your best interests in mind. However, the reality can be far from this, as landlords often find themselves struggling with managers who are incompetent, or at least uncommunicative. So, it is imperative to ensure that you approach the job of selecting your property manager with a similar level of due diligence to that which you apply to property selection. But what does this research entail?
     
    Last edited by a moderator: 17th Oct, 2009
  2. Jacque

    Jacque Team InvestEd

    Joined:
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    Location:
    Sydney
    Interviewing Managers

    Interviewing Managers

    Firstly, a few points to remember:

    • Don’t assume that you have an obligation to employ the services of the property manager who works for the Real Estate Agent from whom you purchased the property. The choice is completely yours.
    • Be prepared to carry out interviews of local managers and have a list of prepared questions ready.
    • Ask for references from satisfied landlords. This gives you a personal touch and any property manager worth their salt will happily comply.
    • Ensure that all paperwork (management agreement, leases, condition reports, tenant correspondence copies) is sent to you promptly, for record-keeping purposes.
    • Stress to the property manager the importance of ongoing communication. Any notices or information from the tenant or about the tenant should be passed onto you as soon as possible. A property “diary” of all correspondence with the agency is also useful.
    • During your search for a property manager, be sure to also pick up a copy of the relevant state or territory’s Tenancy Handbook and read up on your rights and responsibilities.
    Interviewing prospective managers is essential to ensure you hire the best person for the job. The 12 key questions set out in this article, while by no means exhaustive, will assist in your quest to find a suitable property manager, who will make life so much easier.

    1. How many properties do you manage?
    Ideally, one full time property manager working alone should have a portfolio of between 80-120 properties on their books.

    2. How long have you been a property manager?
    Experience may not necessarily indicate a high skill level, but time in the field (especially in the same area) reflects local knowledge and stability. Experienced managers are more likely to have efficient systems in place.

    3. What services will your company be providing?
    Any competent manager will not only be able to provide you with a comprehensive list of their services, but should additionally have an information package ready to send to you, listing all services and fees.

    4. How much are your management fees and what is included.
    For example, standard services included in the property manager’s fee generally include: quarterly inspections, follow-up reports, and payment of rates; water; strata and insurance bills.

    You should enquire about postage and petties fees, advertising costs (when/if you need to pay) letting and reletting costs, tribunal fees and any other costs that are not included in the management fee.

    Fees vary between managers and can generally range anywhere between 5-12% of the rent collected, depending on the area, the type of property, and the level of service being offered.

    Remember too that fees are negotiable and you may qualify for more of a discount if you offer more than one property to the agency for management. Management fees can have a big impact on the net return from your properties, so don’t be afraid to ask for a better deal!

    5. How do you locate prospective tenants?
    Marketing is essential and advertising should be employed as effectively as possible. This may include newspaper ads, signage, window displays and rental lists. Usage of the internet is also recommended, but again, this depends on location and property type.

    6. How do you screen your tenants? Do you carry out a credit check? How many references do you require, and can these be passed onto me if I want to double-check this person's credentials?
    Tenant screening has become more sophisticated in recent years, with national databases available (such as TICA and TRA). A proficient property manager should also follow up on references, as well as talking to two previous landlords/managers. This is important as the last agent may be looking for a reason to get rid of a “troublesome tenant” and so may not reveal all of the facts. Verifying an opinion with another landlord or property manager can help manage such situations.

    If possible, a property manager may even use the opportunity to deliver an application form to a prospective tenant’s home, to observe firsthand the prospective tenant’s living standards.

    7. What times are you available to show tenants my properties?
    Only ever sign up with a property manager who attends properties personally with all tenants. Handing keys out should not even be an option.

    Available times should be flexible enough to allow for tenants to view properties after working hours, including at least one day on the weekend.

    8. How do you handle repairs? Who do you use for handyman jobs and what is their hourly rate?
    A good tip here is to add to your management agreement, a clause which says that you are to be contacted prior to any money being spent, even if it is less than $100-200 (most agreements seem to favour this amount as being the minimum they can spend without informing you). Adding a clause such as “all repairs to be first authorised in writing by the landlord” lets you know upfront about all maintenance issues. Of course, every landlord has their own approach, and you may feel comfortable allowing repairs up to a certain dollar value without prior approval. Not everyone wants to be contacted about every repair. This is purely a personal choice.

    9. What course of action do you take if any of the following happens:
    • Tenant starts missing rent or is consistently late – and what does the property manager classify as “late”?
    • Tenant doesn’t maintain the property, or causes damage to the property?
    • Tenant “does a runner”?
    With clear procedures in place, the property manager should be able to explain these to you clearly. Also be sure to ask for clarification of such systems in writing, if they aren’t outlined in their Information booklet.

    Some landlords also like to check how often a property manager has gone to the Residential Tenancies Tribunal, as this can demonstrate experience in dealing with problem tenants. Of course, it may also be an indicator of a track-record of poor tenant selection by the property manager! But things can go wrong, even with previously perfect tenants – so visits to the tribunal are an unfortunate part of managing properties.

    10. What payment methods do you offer to tenants?
    Ideally look for a property manager who encourages Direct Debit facilities, as this is convenient and generally more consistent for both tenants and landlords. This can also help to minimise late-payment or non-payment of rent, especially if a system can be set up for tenants to automatically pay their rent directly out of their bank accounts.

    11. How often are statements sent out and payments made to my account?
    Monthly seems to be the preferred industry standard for statements, whilst payments to your bank account can be scheduled according to individual wishes. Most landlords select either fortnightly or monthly transactions. You must make sure you regularly check the money is being deposited on-time. Engaging a property manager does not mean abdicating control of your investments. Remember that Real Estate agencies sometimes go broke and you don’t want that to happen with them owing you thousands of dollars of back-rent!

    12. When do you hold rent reviews?
    Regularly reviewing current market rentals and ensuring you are getting the best rent achievable for your properties is a key task for your property manager. Property managers should endeavour to stay abreast of market changes and suggest changes accordingly. Ask them when they usually carry out reviews of current rents.
     
  3. Jacque

    Jacque Team InvestEd

    Joined:
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    Posts:
    1,885
    Location:
    Sydney
    Summary

    Summary

    You should apply the same level of care to selecting your property manager as you apply to finding your investment properties in the first place! A good property manager can make life much easier by letting you focus on the big picture investment issues. On the flip side, an incompetent or just plain lazy property manager will invariably cost you money and cause you endless hassles – the very thing you were trying to avoid by outsourcing.

    Treat your interviews with potential property managers like a job interview. They should be able to persuasively sell their skills, experience and services to you to get the important job of managing your investment properties.

    See also