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May 22, 2010

What does a good property manager really do?


Let’s start with the bottom line: is your investment growing more because of the expertise of your property management company?

BY EMILY SIM

We all know it’s a good idea to have an investment property, just as we know we should spread our investment risk by diversifying, but it’s fair to say there’s more to managing property than collecting rent and organising maintenance.

The basic expectation for a landlord paying management fees should be a relationship with their property manager or the principal of the business and a business plan for how their investment property can grow in capital value for them.

Some basic elements of this could include:

  • an annual routine inspection,
  • a negotiation for the renewal of the tenancy agreement,
  • an annual rent review,
  • a recommendation for maintenance (scheduled, non-urgent and improvements).

But the value-added elements come in the form of the extra services they can incorporate into the management of the property. Obviously a property manager can’t do everything but they’re good at coordinating all the services you need for the total management for your investment.

I’m sure you can’t argue that if property management included depreciation advice or information pertaining to competitive mortgage appraisals and an annual review for making maintenance and improvement suggestions to increase the capital value of the property, they’d be worth the management fees. And then some.

A property management fee for the average rental property is most commonly less than a monthly mobile phone bill. It’s certainly important to shop around, but I’m not talking about shopping around for a difference of half a per cent, I’m talking about quality of service over and above market expectations, and the agency’s dedication to increasing the capital value of your property.

We all know someone who’s been burnt by a property manager who never fulfilled their promises. From not knowing the garage door was broken, to “the tenants vacated last week”, it seems everyone has a story. The good news is that this industry is in a time of reinvention and sub par service won’t be tolerated in the future.

But here’s the catch; you need to set the expectations for what you want for the management of your property. What’s the value of having an expert manage your investment and advising you on how to improve it? What are your requirements in order to feel that this service is being delivered?

When you know these answers here are some questions to ask your property manager:
1. Do you use a rent payment system?
2. Can I nominate when I can receive my funds?
3. When can I inspect my property?
4. Can I set a range of preferences for the life of the management?
5. What are the recommendations for the growth of the asset?

You can be sure your property manager is doing a lot of work, you just need to make sure it’s the kind you need!

Emily Sim is the brains behind property management online community – www.apmasphere.com. With a career that includes senior roles at McGrath Partners and the Ray White Group, Emily is dedicated to finding new ways to deliver wealth to property investors. Email: emily.sim@apmasphere.com.au


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17 Comments

  1. Emily, it’s great to hear about all the things a good property manager should be doing. The depressing bit is knowing how hard it is to find somebody who ticks all these boxes!!

    I’ve changed PMs on an investment property a couple of times in the past few years, and well, Bono said it best – I still haven’t found what I’m looking for…

    Comment by Matt — May 24, 2010 @ 9:30 am

  2. I’ve had some good property managers and some very bad ones. In many cases the difference came down to COMMUNICATION – the bad ones simply didn’t communicate with me (or the tenants) enough.
    In my experience, the PMs who stay in very regular communication with both their tenants and the owners tend to be the good ones.
    Slow response to tenant issues is another way for PMs to become unpopular fast – in some cases this can put owners at legal risk, if the tenants notify the owner of a potentially dangerous situation and the PM doesn’t act on it promptly.

    Comment by Alain - Gold Coast — May 24, 2010 @ 1:23 pm

  3. Matt – I know Bono’s words well. I’d be interested to hear what you are looking for in a property manager? In addition to Alain’s accurate comments, I think if a landlord can set up the relationship with the property manager in the beginning by making their expectations clear, half the battle is won. Not to say this is a landlord’s responsibility but it might help a good property manager become even better and deliver on your requirements. This may go some way towards better communication too.

    Comment by Emily — May 24, 2010 @ 3:01 pm

  4. Having had numerous PMs, I’ve finally got a good one who I’ve established a good rapport with. But I still find that, more often than not, circumstances favour the tenant more than the landlord. Case in example, rent review: the lease is about to expire, tenants won’t agree to any increase and I’m not allowed to advertise my property or allow people through until they give 14 days notice, even if the lease has expired, where I have to give the tenant TWO MONTHS notice if I want them to vacate.

    Comment by Scott — May 25, 2010 @ 8:16 pm

  5. Good News Scott, it is possible to find a property manager you like to work with. I think the magic word here is rapport. Absolutely agree regarding tenancy favouring tenants, it’s not always fair. I encourage you to speak with your property manager about this and plan for the changes you want to make to achieve your investment strategy. The legislation may prevent an immediate outcome but there’s a lot you can do with some planning.

    Comment by Emily — May 26, 2010 @ 9:28 am

  6. Emily – I’d settle for someone who is organised, communicates well and acts on our requests promptly and efficiently. A couple of our recent property mis-managers have not ticked any of those boxes.

    Most recently, it’s taken a number of requests from us just to get the property manager to notify the tenants about something.

    I’ve no doubt there are good property managers out there, it’s just not easy to find them (and even then, sometimes they move on).

    Comment by Matt — May 26, 2010 @ 10:43 am

  7. Recently purchased my second investment property on the Sunshine Coast.
    Previously I took the selling agents advice and let my 1st investment through that agent.
    What a mistake. Uncoperative, non communicating, consistant clerical mistakes and finally tenants that proved a nightmare.
    This time I followed the recomendations of Ann, a Buyers Agent who not only sourced the property, negotiated the most advantageous figure and conditions, then finally referred me to the Letting Agent she uses – who only lets properties and doesnt sell them – who has turned out to be a Godsend with quality tenants and superb communication.

    Comment by Syd — January 4, 2011 @ 12:00 pm

  8. Great news Syd, interesting that you have noted tenant selection and superb communication as your highlights. Property Managers take note, this is what landlords want.

    Comment by Emily — January 10, 2011 @ 11:35 am

  9. My wife and have just invested in our second investment property, until now we managed the first one ourselves which was quite simple to do for us and we had long term tenants.

    But now we’re looking at using a Porperty Manager (PM), I’m trying to find out if there is somewhere (maybe a forum) where PMs are rated in someway by investors.
    I don’t to get a PM that sits on their backside whilst my property is being trashed or the tenant won’t pay the rent, I want someone whom is actively working on my behalf.

    Comment by EddieS — May 5, 2011 @ 8:48 am

  10. There seems to be a great theme with the comments that investors want a very well organised property manager to provide them peace-of-mind that their investment is well maintained and renst are up-to-date. The other theme is that investors are wanting their property manager to be a great communicator. I believe lastly fees are very important. I believe percentage fees(%) do not make sense and flat ongoing fees are more transparent and fair. As one of the other commentors have mentioned – the trick is finding a property manager which ‘ticks all these boxes’.

    Comment by Roger Perrett — May 6, 2011 @ 5:35 pm

  11. A property manager maintains a good relationship between landlord and tenants.

    Comment by Anonymous — July 2, 2011 @ 10:08 pm

  12. Yes buy a property is the best investment. Because there is a minimum risk in it. A good property manager maintains a good relations.

    Comment by Anonymous — July 3, 2011 @ 3:34 pm

  13. Hi Emily Sim..
    You are absolutely right investing in the property is really very good idea for your investment planning. But without a right property manager we cannot do this. So please share some tips that we should see before consult a property manager.

    Comment by Anonymous — July 6, 2011 @ 3:40 pm

  14. Hi I wonder if others share this experience – Type X property manager is Big picture, has good business sense, communicates well but lacks detail, does not provide regular inspection reports. Type Y property manager is pedantic, lacks business sense but does regular inspection (with photos). From a landlord’s perspective, the “Dream team” would be to deal/ liaise with Type X who is supported by Type Y in the background. To date, I have not found my “Dream team” property manager despite having tried several agencies.

    Comment by Kim — August 24, 2011 @ 10:10 am

  15. Great Post! This is right that investment in the property is really a very good idea for your investment planning. But firstly find a good property manager who provides you best service.

    Comment by Real estate christchurch — September 21, 2011 @ 4:08 pm

  16. Hello to all,

    not easy finding good PM espicially when just starting out in the rental game, you talk to one nice PM @ first then they give you another when after you sign that confusing Letting-Managing Authority paper…… jee have to be careful to make sure they dont lock you in forever , for instance after lease expires or tenant breeching lease and you go to another company PM then you have to keep paying ongoing Agent Fees with original PM whom has that confusing Letting-Managing Authority paper.

    Comment by Andrew — November 10, 2011 @ 12:04 pm

  17. Hi All,

    I have worked in Property Management… In the Pilbara, incase you are not aware, this one of the towns with an average rent of $2000per week for a standard 4×2… I understand the frustrations of owners and tenants trying to find the right property manager. I’d like to tell you MY biggest frustrations when working as a PM:
    - poor communications with owners
    - owners buying investments with the expectation they will be banking the whole rent “otherwise we(owner) cant pay our mortgage” – stupidity really? what happens when the HWS gives in? a cyclone blows over? or termites set in?
    - owners consistently blaming tenants for maintenance which is clearly wear&tear
    - owners demanding to speak with you on a weekly basis when you are managing over 200 properties when there are no issues and the property is in tip top order, rent is paid, the tenants are OCD when it comes to cleaning and all reports/monies are sent up to date out them?
    - companies renting properties, suddenly there is another kettle of fish, companies(tenants) think they can pay rent when they want, in line with their payment terms – WRONG! Owners – make sure you come to a reasonable outcome with your PM on this one
    - owners that dont understand emergency maintenance??
    - owners who think you are renovators
    - property managers are on average one of the most UNDERpaid workers around…

    All in all – you want a stern, level headed property which you can trust. Someone you know will communicate with you the moment there is problem and when issues are beginning to arise and keep in touch enough to maintain a good relationship. As Emily notes, shop around, speak with other investors, shop for quality, not half a percent cheaper – dont be stingy!
    Ask how many properties your PM manages and if she has anyone helping her… there really is only so much one person can do and when overloaded, like every PM in the Pilbara due to staff shortages, things go pear shape!

    By the way – I will never work in Property Management again and take my hat off to the really good Property Managers out there helping investors make it happen – I sure know my PM does… :)

    Comment by Ursula - Karratha — November 29, 2011 @ 2:21 pm

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