Do you need a property manager?

18 Apr

One for the investors, or future landlords out there.

If you find yourself in the fortunate position of owning an investment property, then it is likely you have thought about two things:

Should you self-manage or use a property manager?
And if you choose the latter, how do you find a great property manager?

Self-management

Self-management means that you have a direct relationship with your tenant and then there is no middleman or company. The main benefit of this is that you save money. Additionally, you retain complete control. You can:

Choose which tenant you place in the property
Choose how to respond to maintenance requests
Negotiate changes to the rent/length of tenancy directly with the tenant

On the flip side:

You are required to know and comply with rental laws e.g. How much notice you must give, issue rent receipts
You may find it challenging if the tenant goes into arrears and/or causes damage to the property

Self-management usually works best for people with only one or two rental properties who live close by the property. This allows you to dedicate the time required and be on top of any maintenance requests. It may save you money, but remember that any money you do spend is likely a tax deduction you can claim.

Using a property manager

This is where you pay a company to assign a property manager to take care of the administration on your behalf. Most property managers look after hundreds of properties at a time, so the attention to detail might not be what you are expecting. Property managers help to provide a buffer between you and the tenant. They will also be across industry-wide changes and regulations, ensuring that your rental agreement remains compliant.

Usually, the costs of a property manager include an upfront letting fee / finding a tenant fee, plus an ongoing weekly fee. There may be additional fees if the property manager needs to organise tradespeople, chase up rental arrears, and/or attend the rental tribunal on your behalf. The fees can add up quickly, although they are usually tax deductible.

A property manager works best for those with an investment portfolio of properties and/or properties that are not located in the same area you are.

Finding a great property manager

One of the biggest frustrations of investors is finding a great property manager. I often get asked for recommendations and it is the one area where I struggle to put my name behind a recommendation. Why? It is a tough job and very few people stay in it long enough to become great at it. It requires long hours that do not fit neatly into 9am-5pm and it comes with little recognition or thanks. Property managers are often copping abuse from someone about something not being done right.

I think it's difficult to find a great property manager. If you do stumble upon one - hold onto them tight. If they move companies - consider moving your rental with them.

There is another option

There are also new hybrid digital property management companies popping up all the time. This is where you self-manage in terms of communication, but the administrative documentation and compliance are covered by them.

I have been using a company called Cubbi for the last four years and for a very small weekly fee they cover everything except the conversation between the tenant and I over the lease term and rent (which is only a conversation that comes up once a year). There are other companies out there now as well doing a similar service - RentBetter, eezirent, etc.

A lot of people think having an investment property is a set-and-forget investment. Whatever option you choose for renting your property, you should always maintain some involvement. You should always be the decision-maker. Make sure if you are engaging someone to manage the property on your behalf, that they understand what is important to you.