Most overseas investors would have had some bad experience with their property
managers . But is yours one of them?
In the world of rush hour traffic, work deadlines and family commitments it’s easy to forget an investment you purchased thousands of kilometres away. But as you’re focusing on the more pressing things in life, how has your investment been fairing?
That’s a question you should be asking your property manager and there are some very
easy criteria for deciding if they have been doing a good job or letting your investment
plunge into disaster.
1. Rents stay put
If your investment has not seen a rental increase in quite some time, two things could be at work. The more common reason is that the market could simply be in trouble. What is considered renting ‘at market’ could have remained stagnant due to increasing vacancy rates or falling employment figures. Worse, rents in the area could even be slipping – a common occurrence in suburbs or towns where there has been sizeable depopulation or where a major factory, retailer or other employer has shut down.
✔️ The easy way to find out if this is the case is by doing a little homework. Certain portals and sites will tell you the vacancy rate for your suburb and will also show you what the median rent is for that area. If the vacancy rate is anything lower than 3%, it’s doubtful that there would have been no increases in “market rent” for a period longer than about 18 months. This brings up what could be the other likelihood for experiencing static rents: bad property management.
“It amazes me how often landlords miss out on their full rent… Sometimes when we take
over management of a property from other agencies, we find that landlords are receiving 10% to 20% less than the current market rent for their properties,”
✔️ One of the most important jobs of a property manager is to negotiate rent. A good
property manager will be constantly working in a group of suburbs and should know the
market rent back to front. A bad property manager will insist on lower rents.
“One landlord we recently came across was found to be $17,160 out of pocket every
year on three properties,” says our property manager. “That’s an average of more than
$100 every week of every year. Imagine what you could do with that amount of extra
cash?”
2. Disputes get ugly
“Relationship building with different parties and tenants is the basis of successful
property management,”
✔️ You must have a good working relationship with the agent, who must have a good relationship with the tenant. The alternative is to see major problems arise such as non-payment of rent, theft and vandalism. There is a saying in real estate: ‘build the relationship and the conditions become negotiable’… one of the most important aspects of a manager is to ensure their dealings are relationship based.”
Problems that arise with tenants can thus often be the fault of a property manager failing to communicate properly with the tenant. This is especially true if the property is within a cheaper area with a lower socio-economic profile. When this is the case, bad property managers will be reluctant to spend time in these parts of a town or city, lessening their relationship with the tenant.
3. Lacks support
I lament the fact that the property management division of the typical Australian real
estate company is the poor cousin of their sales division. “Real estate agencies are often
owned by sales people who don’t have the operational management and attention to
detail required in property management. The result is the property manager does not get the support, systems and training to help them do a better job.” he says.
✔️ Importantly you should be wary of any property manager that is not supported by a network of other property management professionals. “If the property manager is away, who is looking after your property when they are not?”
4. Excessive repair bills
Acquiring quotes for repair work is a time-consuming exercise and part of the point of
having a property manager is to take the work off your hands. Good property managers
will know a number of different tradespeople and will have a working relationship with
them. They will be able to source you the best deals and will help minimise your
maintenance costs.
It may seem like one of the more obvious failings that a property manager could have,
but you’d be surprised at just how bad some property managers can be at it. In extreme
instances, property managers have been known to siphon money from their clients by
using fake contractors and then billing the owners for repairs that were never done.
✔️ The best recourse is to get a property manager that has a very large client base. This
ensures they have a lot of power when negotiating with trades. The property manager
will constitute a large source of potential jobs for a trades person and can dictate a lot of
the terms. If they do a bad job, the property manager can take his business elsewhere.
5. Lack of repairs, inspections
Just as an unnecessarily large repair bill can signal a terrible property manager, the
opposite is true as well. A generally incompetent or lazy property manager will not undertake regular inspections of the property, allowing potential problems to exacerbate and tenant damage to persist.
✔️ Property managers are responsible for the physical management of the property, including regular maintenance and emergency repairs. Work done by contractors and other repairmen must be inspected to make sure it is up to standards and that they are completing their work in a timely manner.
6. Not a property investor
“A property manager who invests in property is worth their weight in gold,” A potential
sign of a poor property manager is one that has little knowledge of the concerns and
frustrations of owning a property that is often in a different country or city from you.
✔️ A great property manager should be a key to helping you create a more profitable future. With property investing you surround yourself with good people who you know will look after the detail so you can keep focus on the big picture of finding profitable deals, balancing cash flow, loan gearing and growing your property portfolio.
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