If you want to maximise your property investment returns, then having a good property manager is as important as finding the right loan for your home. After twenty years investing in Australian property, here are my tips for choosing a good property manager.
I was speaking to my property manager of about 6 years this week and she gave me the “good” news that she had just resigned from her job and was moving to another property management company. It came as a shock as I knew she loved her job, but ultimately it came down to money and her current employer was unable to compete with her new salary.
Unfortunately for me, her new employer was based well away from the location of my investment properties and it would not be possible for me to simply move by business to her new employer. Now, I am waiting with anticipation as to who will be appointed my new property manager. I have had so many bad property managers over the last twenty years that it has forced me to think about whether or not I will need to search for a new property manager.
So with that in mind, I thought I should document how I have gone about finding a good property manager in the past.
And before I start, it is important to be clear what I mean by finding a good property manager. I don’t mean finding a good property management company. In my experience, you can have a “good property management company” but a lousy property manager. It all comes down to the individual, and so this is how I go about finding a good property manager.
1. Identify & Short List Potential Property Management Companies
The first step is to develop a list of potential property management companies. Get referrals from friends, do a google search, or look on www.realestate.com.au to identify property managers that are active in the area of my investment properties.
I then try and reduce my list of potential property management companies down to 3 to 5. In finding a good property manager, identify property management companies that meet the following criteria :
- property managers that present their rental properties the best on websites like domain.com.au and realestate.com.au. By this I mean, make sure the property manager includes good quality photos and adequate descriptions that will entice prospective tenants to inquire about the property.
- property managers that advertise properties most similar to yours. Some property managers will specialise in certain types of properties (eg. apartments, furnished rentals, executive homes etc).
- property managers that are located in reasonable proximity to your investment properties. Your property manager does not need to be located within walking distance of your house, but the closer the property manager is to your house the more flexible they will be in showing prospective tenants through the house, thus ensuring minimal rental vacancies.
2. Understand the Property Management Company Organisation Structure / Business Model
This is a key step.
You first need to understand how the property management company manages their rental property portfolio – you can ask each property management company over the phone. There are two management models that are generally employed when it comes to managing a portfolio of properties.
- the property management company assigns separate roles to different property managers, meaning a different property manager will be responsible for different aspects of managing your property. Some of the different roles will look like this.
- Business Development – responsible for adding new properties / landlords on the books
- Renting Properties – responsible for advertising vacant properties, open inspections, tenant applications, signing new leases
- Day to Day Property Management – dealing with maintenance requests, chasing late rental payments, monthly statements etc
- Inspections – quarterly inspections of property and inspection reports.
- the alternative (or traditional) property management company structure has each person assigned responsibility for all aspects of a portfolio of properties. That means the same person will be responsible for tenant selection, day to day property management and inspections.
Whilst the first model might be more efficient from the property management company point of view, there are almost no benefits to the landlord, and I have not seen this translated to lower property management fees. I prefer having a single point of accountability, and like to be able to discuss all aspects of my investment properties with one person rather than needing to deal with multiple people, or with someone that doesn’t have the full picture with regard to my property.
You will also want to be on the lookout for a structure whereby they say Person A is going to manage your property but for all intents and purposes they delegate this responsibility to a junior property manager or even worse an office assistant.
I found out this was happening to me about eight years ago when I asked to accompany my property manager on her quarterly inspections of my investment properties. It wasn’t my property manager that turned up, but the office assistant who was about seventeen years old (at most). One of the properties during the inspections was presented very badly. The tenants were three university students. The bathroom hadn’t been cleaned in months, the lawn was 30 cm high, you could no longer see the gardens due to the weeds, and there were large oil stains all over the driveway. The “property manager” said nothing to the tenants who were present during the inspection, and her inspection report only made a passing comment about weeds in the garden – no mention of anything else. In addition, I noticed that an old wooden pergola on the side of the house was on the verge of collapsing. I asked the “property manager” about it, and she said it had been like that for at least a year. I went back and checked all my property condition reports and there was never any mention of the urgent maintenance that was needed. As it turned out the pergola collapsed a month after the inspection.
I promptly changed property management companies after these inspections.
3. Interview Your Property Manager
Now that you understand how the property management company structures things (and you have hopefully narrowed down your potential property managers to the ones which follow the second business model), you will now need to interview the property manager.
This is where things can get a little tricky. There may be push back from the manager that they won’t allocate the property to a property manager until you sign up, or that their property managers are too busy to talk to you. Don’t allow this to faze you.
Insist, if they want your business they need to decide who would be responsible for the property, and ideally have that person meet you at the property before you rent it out. If that is not possible, have the property manager inspect the property, and then interview them subsequently.
When interviewing the property manager, you should be looking for someone who :
- comes prepared to the interview (has done homework prior and has an estimate of market rent for the property, and examples of similar properties recently rented or currently available);
- is managing no more than 150 properties – ideally they should only be managing around 100 properties;
- has significant experience in the property industry (ideally more than 10-15 years), as well as job stability (ideally atleast 3-5 years with current employer). Property management can be a tough job, and turnover can be high, so you want to be confident this person will stick around. After-all you have just spent all this time finding a property manager so you don’t want to have to do it every couple of years;
- has a confident and assertive personality who is not going to get pushed around by difficult tenants;
- provides some constructive suggestions to improve the rent or attractiveness of the property to tenants; and
- someone who owns their own home or, even better, is a landlord themselves (my current property manager is a landlord herself and understands the balance between maintaining a property in good condition, keeping a tenant happy, and ensuring the landlord is getting a good return on their investment).
4. Selecting Your Property Manager
There is no specific rule here. I have endeavoured to provide you with the issues I think are most important when it comes to finding a good property manager, and now it is up to you to weigh up the pros and cons of each property manager (and property management company).
You also want to ensure you are going to be able to get along with the property manager, and that the property management company understands you are selecting them based on a specific person managing your property.
One thing to look out for, is that in my experience, there is no correlation between quality of property management and fees. In twenty years I have paid high property management fees and received bad service, and now I pay the lowest fees I have ever paid and receive fantastic service. That is not to say “no thrills” cheap property management is always going to work out – be guided by the criteria in this article first, and price second.