SELECTING A PROPERTY MANAGER
How to avoid the worst and select the best
When it comes to investing in real estate, the greatest fear after buying the wrong property is selecting the wrong agent to manage the property. Many investors have found that it is better and safer to actually self-manage their property. However, this is not always a practical solution for investors and therefore finding the right agent is imperative.
The success of an investment property is largely dependent on the property manager. The market conditions may rise whilst you own the property, but if the tenants are constantly in arrears and flee with rent owing whilst the condition of the property deteriorates due to neglect, the success of the investment will be diminished. A pleasant gain is turned into a painful lesson.
To select the right property manager for your asset, it's important to work toward a set criteria.
Salesperson vs Property Manager
Selling a service and managing a property are completely different skill sets. It is common for many firms to hire a salesperson to sell the agency's property management service. Many people understandably but mistakenly put confidence in the salesperson they sign the management agency agreement with. Often, it is only later when something goes awry that the landlord discovers that their investment property is actually being managed by a different person in the firm.
The person that made the promises and offered the assurances is paid a commission for making a sale and then they move on to another. If something goes wrong between the promises made and the delivery of service, the person that made the promises cannot be held to account.
To avoid being caught out by this subtle change, insist on meeting the person that will ultimately manage your property.
When interviewing agents, if a property manager does not seem overly dynamic, be careful not to rush to assumptions. Remember, you are looking to hire a diligent property manager, not a salesperson. The best property managers have a different skill set to salespeople. At the end of the day, you want a good property manager to meticulously manage your investment, not a charismatic salesperson.
Happy Clients, Communication, Arrears and Condition Reports
The best property managers can be identified by their track record. Indeed, a property manager should be selected by their track record and less so by promises and inducements of future service.
To get a gauge of the property managers track record, ask to speak to past and/or current landlords. If the agent cannot or will not provide such information, ask why not? Most landlords are happy to offer feedback on a firms service as they empathise with your fear of making the wrong decision in selecting a property manager.
When you get to speak with landlords of the short-listed firm, focus on three aspects of the service. Communication, arrears and condition reports.
Communication - Does the agent respond to requests and phone messages in a timely fashion? Are they proactive as far the management of the property is concerned? Is the feedback problem based or solution oriented? The best agents are accessible and available. In times of crisis, they calmly rise to the challenge.
Arrears - A cheap agent will feel good at the time of signing an agreement. It won’t feel so good if the rent is constantly in arrears though. You need to know how an agent handles arrears. Remember there is no such thing as a standard contract or agreement. Insist on performance clauses in your agent's agreement prior to signing with them. As an example, if the tenant falls behind in the rent by a certain amount, have a clause stating that you can dismiss the agent and find a new property manager. Rest assured, the property manager will keep a watchful eye on arrears.
Condition Reports/Periodical Inspections – To sign over a renovated investment property to an agency is a leap of faith. To inspect that same property several years later and find that it has been neglected and abused is shattering. Condition reports ensure that you can track the condition of your property over time. If condition reports are being conducted as they fall due, these reports can always be cross referenced with what you witness when you inspect your property.
It is easy to have video walk through tours of your investment property emailed to you. Digital cameras, iPads and email have made getting video tours and multiple photos to the landlord cost effective. Insist on such service prior to signing with an agent.
If you merely hope for a good experience with a property manager, you may or may not get it. Insist on good service with get out clauses for non-performance in place and the chances of success sky rocket in your favour.
A Good Property Manager
When it comes to investment properties, 'a stitch in time saves nine'. A good property manager will be on the front with maintenance issues.
If tenants know that both the landlord and the agent are vigilant about maintaining the condition of the property, they are more likely to treat it well too. A property manager's vigilance in this area is only worthwhile to the degree that the landlord supports them. A landlord that constantly resists minor maintenance has to accept the consequence if their renovated investment property becomes a neglected shack.
Spending a few hundred dollars to attend to a minor issue can often save thousands in full-scale repairs down the track. A good property manager knows that their job is not just about collecting rent and skimming a commission off the top. Their role is to protect the condition of the asset. Most importantly, if the condition of the property is maintained, this then feeds straight into price growth.
Many landlords will pick up in the media and commentary that the rental market has surged. However as the market has risen, if the condition of their investment property has fallen, a price increase cannot be justified. This scenario is when the decision to neglect maintenance comes back to bite, causing real financial loss.
Landlords are well advised to remember that the rent will only keep pace with market growth if the condition of the property is maintained in the same or better condition.
The best property managers are well informed on legislative changes. The law is constantly changing, with updated requirements and guidelines for landlords to adhere too. The best property managers ensure that they communicate these changes quickly, clearly and explain how they may practically impact on a respective landlord.
In your search for the right property manager, look behind the glossy brochures and aim to select the person that will manage the property right.