Finding a competent property manager is a matter of knowing the right questions to ask.
You’re on the lookout for a good partner, someone who will look after your needs, attend to the small details and generally have your well-being at heart.
What you don’t want is indifference, unreturned calls and problems swept under the carpet.
So, how do you find that special person – a good property manager.
Property expert John McGrath says landlords should interview at least three property managers before making a choice – and price shouldn’t be the main criteria.
“You want the best one, not the cheapest one,” McGrath says. “Make your selection based on who you think is going to give the best service.”
Melbourne-based property manager Kim Wilson, of the Barry Plant Knox Rental Centre, recommends landlords hold face-to-face meetings with managers.
“The main thing is to trust your instincts when you meet the people who are going to be managing your property,” says Wilson.
“If you don’t like them from talking to them, don’t go with them just because they’re cheaper. For an investment, usually of at least half a million dollars, you should be picking the person who you feel is the most professional agent to manage the property.”
Experts recommend asking some key questions at that first face-to-face meeting at the top of the list is: ‘what’s your ratio of properties to manager?’
Wilson, who is a part-time lecturer in real estate at Victoria’s Swinburne University, suggests a ratio of fewer than 200 properties per manager.
“If people are managing more than 200, you find they don’t have enough time in the day to service those clients,” she says.
Another question that should be high on a landlord’s list is how long your prospective manager has been doing this type of work.
Alan Fox an investor says “Too many” property managers are “17 or 18-year-olds just out of high school who have done a certificate course online”.
Fox says the turnover rate of managers is high due to the nature of the job.
“Being a property manager is a really horrible job because all they get is tenants who complain and landlords who won’t fix things,” he says. “No-one ever rings to say they’re doing a fantastic job. I want to know how long they’ve been there (with an agency) because the one you’ve got now, in two years’ time they might be gone.”
Fox looks for managers with five to 10 years, or more, experience.
“They’re generally 40 to 50-year-old women and men who actually enjoy the job,” he says. “They have their heads screwed on and they can sniff a bad tenant at 10 paces."
WHAT SERVICES ARE ON OFFER?
Other questions to ask prospective property managers include: how are tenants selected and screened; how often are inspections undertaken; and how detailed are inspection reports?
McGrath advises asking management agencies if they have a tenant database.
If they do, how many tenants are on it and how will the agency use that database to find the best tenants use that database to find the best tenants for your property?
He also says property owners should ask to see the manager’s checklist for screening tenants and the tenant application form used.
Once the tenants are ensconced, the industry standard is that inspections of premises are usually carried out after three months, and then at six-monthly intervals, but some managers extend this to 12 months.
McGrath suggest asking managers how they deal with repairs and if they have a good relationship with tradespeople who offer discounted rates.
A manager’s response time to tenants’ requests can also be an indicator of how good they are at their job.
“They need to be timely. I’ve seen property managers request things of me but when I look at the date the tenant asked for it, it was a week before,” Fox says.
On the other hand, he doesn’t want to be bothered with trivial matters.
“If the tenant wants to hang a picture, screw a light bulb in, or install cable TV, I don’t want to be bugged with that sort of nonsense; I want the property manager to handle it.”
To accompany inspection reports, digital photographs have become the norm.
Wilson says, “We have a lot of interstate and overseas landlords and for them a picture is worth a thousand words.”
“If we just tick a box and write, ‘clean and tidy’, what does that mean? So that’s why do the photos,” DVDs can also be provided.
FEES AND CHARGES
Fees for property management vary between states – and sometimes between suburbs.
However, standard charges in Australia are generally between five and 10 per cent of a property’s rent, with other services, such as lease preparation and letting fees, billed on top of that.
Wilson urges landlords not to base their choice of manager on a fee difference of “$5 a week”.
“There are budget-cutting agencies out there and they are budget-cutting for a reason,” she says.
“People need to ask, ‘are there any hidden extras?’”
These ‘extras’ can include lease renewal fees, statements, postage and sundries, and inspection fees..
HOW TO CHANGE MANAGERS
Like all relationships, the one between landlord and manager doesn’t always run smoothly – and sometimes the landlord wants ‘out’.
Wilson says many landlords are under the false impression that when they sign a 12-month tenancy agreement, they’ve also signed an exclusive management agreement.
As a result, she says, many landlords wait until the end of the 12 months to change managers when in fact they can change as soon as the exclusive management agreement has expired.
“The standard agreement is a 30, 60 or 90-day authority,” Wilson says, “but 30 days is probably the most common.”
If the form produced by a property manager includes a longer period than 30 days, a landlord can reduce this by negotiation.
The figure of 90 days, for example, can be crossed out and 30 days inserted.
Once this exclusive management period – designed to cover the letting period – has expired, the process of changing managers is simple, Wilson says.
“All you have to do is sign an authority with a new agent who will inform the previous agent that they have taken over management.
“The new agent will send over a standard fax to the previous agent, advising that they’ve taken over management on behalf of the landlord and to have the file ready for collection within 48 hours.”
This notice in writing voids the previous authority.
She says this procedure avoids awkward conversations between owner and former manager.
QUESTIONS TO ASK YOUR PROPERTY MANAGER
1. Does the agency have a dedicated rental department and how many staff will be looking after my property?
Many agencies see property managers as a ‘poor sister’ to the more glamorous sales department and some even lease the management of client’s assets to the front desk staff and receptionists. Ensure that your agent has a dedicated property management department.
2. Is a director/owner of the agency involved in the day-to-day management of the property management department?
You may find that in an agency where the director has an active involvement, the property management department will take the business of property management more seriously.
3. How many years has the property manager been working in real estate?
Going to a brand name agency doesn’t mean their service is going to be any better. Many people start their career in real estate as receptionists and then move up to the property management department and some of the top performers move into sales. Yet some individuals choose property management as a career and this is the type of person who should be looking after your property. They should preferably have four years’ industry experience.
4. Does the property manager give you a written proposal?
Some property manages just go out and look at your property and say, “Okay, we’ll put it on our books.” Look for someone who has put in the time and effort to present a professional image to you and give you a written proposal.
5. What geographic area does the property management service cover?
While you should be looking for a property manager with expert local knowledge, consider what your property portfolio will look like in a couple of years’ time. Will you own a number of properties spread throughout the suburbs? You could either employ a specialist property manager in each geographic location or you could instruct a large property management company that covers a larger geographic area.
6. Does the property manager just hand out keys or do they attend property inspections with prospective tenants?
If they hand out the keys and let the tenant inspect the property on their own, move on to another agency. Too many things can go wrong with this approach and the security of your property is compromised.
7. How many properties does the manager look after?
A property manager who looks after too many properties may not have time to devote attention to your property. Some busy agencies have more than 250 properties per property manager. In general, this is far too many to give your property individual attention.
8. Do you have staff available to show my property to prospective tenants six days a week?
The hectic pace of life and the advertising of rental properties on the internet 24 hours a day means a good property manager must be available to show prospective tenants your property when it best suits the tenant.
9. Do you have a system for checking prospective tenants’ credit worthiness, rental history and their current employment?
Ensure that your property manager subscribes to a major tenancy database and screens all prospective tenants carefully.
10. Do you have a system that daily checks rental arrears and takes the appropriate action immediately?
A good property manager who uses electronic funds transfer for rent collections and up-to-date computer systems should be able to monitor rental arrears daily and minimise late rental payments by regular communications with tenants.
11. Will you go to court for me and what is your previous success rate?
Unfortunately, you just might have to go to the tenancy tribunal to protect your rights as a landlord. If this happens, you will need an experienced property manager to represent you as tenancy laws have become quite complex.
Editors Note: This article has been republished for the benefit of our new readers It was written by Elizabeth Allen and originally published in Australian Property Investor Magazine and was republished on Property Update with their permissionhttp://www.apimagazine.com.au/