There’s a reason why 80% of Australian investment property owners use a property manager. Owning an investment property comes with a lot of responsibilities and risk, and can take up a lot of your precious time.
But what does a property manager do? Are their services worth it? And most importantly: how do you separate the good from the bad?
Never fear, the team from :Different is here to help with all your burning questions, equipping you with the knowledge to decide for yourself if you need a property manager for your investment property.
What is property management?
Put simply, property management is everything that goes into running and maintaining a rental property. While you can do this yourself as a DIY property manager, it’s a time-consuming job that involves a lot of work.
From finding the right tenant to dealing with complaints, maintenance requests, and even chasing up arrears, doing all these things whilst maintaining good tenant relationships is a tough gig - especially if you already have your hands full with work and family obligations!
This is why 80% of investment property owners in Australia bring a property manager on board. You get an expert who lives and breathes the industry to manage your real estate for you, giving you peace of mind that everything is taken care of.
Different types of property managers
Property managers are the people who make your life as a property investor a breeze. You’ll mainly run into 3 different types of property managers:
1. Traditional property managers
Real estate agencies and boutiques often offer property management as one of their services, alongside sales and leasing. Property managers which operate under this arrangement are known as traditional property managers.
Many investors hire a property manager this way out of convenience, especially if they bought the property from the same agency. These agencies can also ensure you have a local presence, whilst benefiting from the reputation of a big name.
On the flip side, these agencies typically don’t solely focus on property management, and turnover rates are known to be high for property managers. In fact, the average tenure of a property manager in Australia is only about 9 months! This can leave you in the dark when you’re switched over to a new property manager without warning, with poor communication being a common complaint from property owners. Traditional property managers are also known to manage up to 150 properties, meaning it’s unlikely your property is truly their top priority.
2. New model property managers
A growing number of disruptors are emerging in the property management space, that are disrupting the market by offering something different. By finding new ways to use tech, these companies aim to deliver better service at a lower price point.
Whilst traditional property managers will typically communicate via email and phone calls, new property managers improve communication and data visibility through smarter tech solutions, think mobile apps, online portals and live chat.
Efficiencies are then created through the reduction in time needed for the property manager to respond to emails, place phone calls, or do menial admin work; all of which can then be passed back to the owner through price savings.
For example, :Different uses a combination of smart tech and a team-based approach to property management. This allows them to automate routine admin tasks, which frees up the team to focus on areas where a human touch is needed.
3. DIY property managers
If you’d rather try and manage everything yourself, you can also become a DIY property manager. However, it involves a lot of work, and a fairly steep learning curve to boot.
From learning what to look out for during inspections, negotiating tenancy agreements and keeping up to date with tenancy laws, it can be tough to manage everything by yourself.
DIY property managers are also put at a disadvantage when it comes to leasing, as individuals aren’t able to make listings on popular sites like Realestate.com.au or Domain. This could cause you to lose out on promising tenants, and is all the more reason to look into a property manager who could take care of everything for you.
What to expect from your property manager
A property manager has an extensive list of duties and responsibilities that they should be performing on a regular basis. This depends on their service model, which varies from one property manager to another.
A common example is that some property managers will represent you in court, but others will not - so it’s important to make sure their service model aligns with your expectations.
Here’s a quick rundown of a property manager’s duties and responsibilities, which are almost always included:
- Setting the rent to maximise rental yield
- Collecting rent and chasing up any arrears
- Obtaining new tenants
- Taking care of maintenance requests
- Maintaining tenant relationships
- Conducting routine inspections
- Staying up to date with tenancy laws
Some property managers offer additional services for an extra charge, such as:
- Preparing for tribunal proceedings
- Representing you in court.
You should also expect a personal touch in service from your property manager, as this is key to their success. Poor communication, a lack of updates, and sporadic responses are all common complaints about bad property managers. When these complaints start to come in from tenants as well, it can turn into large problems, and possibly make you lose out on rental income.
A good property manager should be someone who:
- Responds to any queries within 24 hours
- Updates you regularly on your property and tenants
- Informs you of any maintenance requests so they can be approved ASAP
- Advises you on how you can increase your rental yield
- Actively involves you as part of any decisions or changes which impact the property.
The bottom line: How much will it cost?
When it comes to property management fees, it’s important to understand how they work and what services are included, to figure out if you’re being charged a fair price.
There’s two main ways of structuring property management fees:
- Percentage-based fees
- Flat-fee structures.
Most traditional property managers and agents operate on a percentage fee basis, where they charge their services as a commission of the weekly rent plus GST. This rate also changes based on the location of your property.
In Sydney and Melbourne, property management fees average 5.5-6%, but over in Perth, they can easily hit the 8-10% range. Even in the same state, management fees for metropolitan areas are typically lower than those in regional areas due to demand.
Let’s see how this works in practice. Say you have a property in Melbourne with a weekly rent of $550, since the average rate in Melbourne is 6%, you’ll be charged $33 a week plus GST - which adds up to about $142 per month.
Fees can also be negotiable, depending on your circumstances, meaning it can be difficult to tell whether or not a company truly has a good deal. This lack of transparency makes it hard to obtain the best rate, especially if you don’t want to provide any personal information upfront.
Flat fee structures
Flat fees means exactly that. You pay one flat fee each month, and it doesn’t vary depending on your rental yield, the location of your property or anything else.
The main difference is that while percentage-based fees are calculated on how much rent the property collects, flat fees are calculated from how much it costs the property manager to manage the property with their service model.
For example :Different uses a $100/month flat fee structure. Since it requires the same amount of resources to service a $700 or $350 a week property, all owners pay the same $100 monthly fee.
Keep in mind that flat fee structures aren’t necessarily “cheaper” than percentage-based fees. It’s totally possible to get more value for your money from a percentage-based fee than from a flat fee, and vice versa!
The main benefit of choosing a flat fee structure is because it’s more transparent and simple, you always know exactly how much you are paying.
This also makes it easier to compare property management services, and ensures you’re not paying extra later for additional inclusions. On that note…
What’s included in the fee?
As property managers can charge different fees depending on their service model, it can be difficult to know if you’re being charged a fair price. So it’s super important to know what you’re really paying for in your property management fees.
For traditional property management firms operating on a percentage basis, there's usually a lot of “additions” which cost extra down the line. Some of these include:
- Monthly admin fees
- Lease renewal fees
- Annual statement fees
- Tribunal attendance and/or preparation fee
- Property leasing fees.
With a flat-fee structure, many of these fees are already included and won’t be a concern; but always check for a full breakdown, to make sure you won’t be bitten later. If you’re ever in doubt, the complete truth will always be in the property management contract before you come onboard.
How can I find a good property manager?
While finding a good property manager can be a challenge, putting in the effort now will pay off since you can rest easy, knowing your rental is in good hands. Here are our tips for what to look out for in a property manager to help out with your investment property:
1. Establish your selection criteria.
Before you start looking at property managers, it’s important to know what you’re looking for. We recommend looking at three main criteria:
- Service level
- Ability to manage risk and get results.
While some degree of compromise may need to occur, we believe it’s possible to find property managers that are doing great work that gets results, without having to pay high prices. But you’ll have to do your research!
2. Find a pool of potential managers.
Once you’ve established your selection criteria, it’s time to get online and take a look at your options. It’s also a good time to reach out to fellow investors to see if they have any recommendations based on their own experiences. Make sure you’re checking each candidate against your selection criteria, and aim to find 2-4 property managers that fit the bill.
3. Interview your property manager candidates.
Now you’ve got your candidates, it’s time to put them to the test. It’s important to prepare some tough questions to ask each property manager that allow you to test their knowledge of the market, how they screen tenants, and their ability to help you make the most of your investment. After all, you want to make sure your property is in good hands.
4. Check that you’ve made the right choice.
While it can be tempting to kick back and relax once you’ve chosen a property manager, it’s a good idea to follow up on them for the first few months to make sure you’re getting what you’ve paid for.
Are they proactive and reaching out to keep you updated? Or are you chasing them up for information already? Keep an eye out on how things are going with your property manager, so you can make sure you’ve made the right choice.
At the end of the day, a good property manager is there to make your life easier whilst helping you get the most out of your investment. Any seasoned property investor will tell you it’s worth spending time now to find a good property manager so that you save yourself from headaches and problems down the road.
You, your investment property, and how we can help
With shared values around transparency, fairness and a modern technology approach, :Different and Upside have teamed up to provide property investors the very best experience when they are buying a property, selling a property or need to have their property managed.
If you want to learn more about how a property manager can help you with your investment property needs, book a call with the team at :Different.