Australian Property News

Why it pays to get a property manager

Posted on Monday, February 18 2013 at 4:43 PM

Positive cash flow property is all the rage at the moment as investors take advantage of low interest rates and, in some cases, booming mining towns.

But high yield does have a catch – many regional and mining areas have expensive property management fees, starting from 10 per cent. They might also include things like GST, high admin fees and extra fees for finding tenants.

However, whatever the cost, property author and millionaire Jan Somers says paying extra for property management fees will actually save you in the long run. This is also the case if property management fees in remote areas are much higher than normal.

“I’ve managed myself and it’s a disaster,” Somers says.

“We managed the first property we owned. It’s not a matter of organising tradesmen to get the property fixed and it’s not a matter of negotiating rent. It’s people skills. There’s always going to be something that goes wrong, the tenant is behind, they want to move out and break the lease. It’s those kind of things that will cause problems.”

Somers argues the law is structured to support the tenant, not the landlord. For example, a landlord is required to give a tenant two months’ notice to vacate the property, yet a tenant only has to give a landlord two weeks’ notice in Queensland. Somers says unless you have great people skills and a lot of time, it’s simply not worth the drama and you risk problems down the track.

In fact, Somers is so convinced self-managing is a bad idea, she’s even had a property manager for the same tenant, who has been in one of her investment homes for 19 years. Other tenants have been in properties for more than 15.

“I could easily just say to the agent ‘we’ll take these on’ as I know the tenant isn’t leaving but it’s not worth the hassle, trying to keep track about who paid what and when. You need a third party to negotiate what happens if they get behind in the rent.”

Somers says those looking for a property manager should use the following tips:

-       Trust word of mouth.

-       Try and find someone who has been in the business for a long time.

-       Talk to people who have had their properties managed.

-       Ask the agent how many properties they manage. If it’s 200, it’s too many, Somers says. Instead, the property manager should have no more than 150 on their list.

-       Also, make sure the property manager is proactive.

“A really good one will have a tenant ready to go in when the last one goes out, others will take a week or two and that’s money lost,” Somers says.

She adds investors buying property in areas with high property management fees should try and negotiate their fee. Also make sure you’re not being charged every time a lease is renewed, she says.

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