How to choose the best property manager?

I have recently purchased an investment property and I am currently interviewing property managers.

I have a few questions in regards to what you look for in a property manager:

Do you look for a local property manager or do you use someone who manages properties throughout a capital city.

What fees do you think are reasonable? Obviously you get what you pay for - But is there a range you are think is reasonable?

Do you look for a boutique firm or do you use a real estate company' management department such as Barry Plant ect?

What process do you look for in a property manager than ensures you get the highest yield from the rental market?

What screening process do you look for in a property manager to ensure you get top quality tenants?

There are other considerations like properties per manager (Less than 150), inspections (6 monthly), process regarding repairs ect, but I am interested to hear your thoughts on the above and any other items that can help me pick a great property manager.

Appreciate your thoughts

 

The latter. You never know when you might purchase more properties and being able to keep them all under one roof is paramount. Keeping that 1-1 relationship will help you a lot in due course. Additionally, being close to the property doesn't help any - it doesn't add anything at all.

How long is a piece of string? Different cities / areas have different amounts, eg don't try to ask for 6.6% in Perth but in Sydney that might be fine. I'd check you found someone you think you can work with first and consider that over and above fees.

Might be a little bit biased here, but I think boutique is the way to go. I've no experience with Barry Plant at all, but with my experience of working for other agencies and also using them for my own investment properties, I'd never use an agency that has a sales department again for a couple of reasons
1) Vast majority of them don't take property management seriously, its just a side burner to their sales department to provide some revenue to keep the lights on , and
2) They get vast majority of their clients from people who have purchased properties from them and dont know that they can actually choose their own (The agency will usually say its easier to keep it with us in order to get the rental listing), and therefore they have a steady stream of clients. This makes them complacent unlike the boutique ones who need to do brilliantly to score and keep clients.

This is going to be different in each area. The PM should be familiar with what features most of the local applicants look for in a home, and also with how each area (and type of property) is currently performing. For example in some of my areas, built in robes, gas cooking rather electric , etc are sought after items. And houses in one area are flying off the shelf whereas units in another are impossible to move.

I think this is more about understanding and trusting their screening process. Unknown to some, but sometimes this is price related as well - My theory is that if a property is overpriced, it attracts applications from lower quality tenants because the good quality tenants have no trouble finding properly priced properties.

For the inspections question, you should be getting as frequently as your state allows. For the other 2 questions in that block, I dont think there's any right or wrong answer there, but are good conversation points. Discuss those items with them and see what you feel you gel with.

 

I'm prob almost the opposite of D.T.

Finding tenants is a numbers game and alot like fishing. The more tenants you have looking, the more likely you will find a good one.

To locate a good PM, you need to find someone who covers off on a couple of points

1. Can they get someone in
2. What do they charge
3. What happens if it goes pear-shaped.

To answer point 1, I think like a tenant, where would I go if I wanted to rent a place around where my rental is?

Would I go to someone in the city? Or would I go to all the local agents - For me, clearly the local guy wins. Not only do I get the tenants that are expressly interested in my place, but I also get the referrals of tenants who just missed out on something similar. I don't think you can get that with someone who is so broad. Also, when it comes to rent review time, the local PM with 50 in that local area, surely would have a better idea about what you can obtain than the guy with 50 across the state.

With point 2 on what people charge, you need to be fair to what the market it, currently I have two that I pay 5.5 inc GST. Sounds cheap, but cheap doesn't always mean bad service, same as expensive is not always great service.
However I will never pay someone a fee to get the current tenants to resign a lease (I think that is a component of a PM doing their job), however you can't expect a PM to go to VCAT (or similar for free). An interesting fee that one of my current places has is if they get involved in a fencing dispute haha.

Point 3 is where PMs make their money, however the expectations have to be set by the landlord. I have the appropriate landlord insurance and therefore as soon as by tenant is behind, processes are in place to remove the tenant from the property. So long as you have someone on the ball, there are no issues. If they are timely, ensure rent is paid, and if it isn't, get rid of the tenants - thats all i need.

 

I assumed everyone searched online these days. You can see properties from all agents without leaving your chair.
Going to ask an agent not only means spending hours instead of minutes, but even worse you are limited to only the very small number of properties that they manage.

 

I don't think I've seen a tenant go to an office looking for a potential rental since about 2008.

Agree with this. There needs to be a qualitative assessment as well, otherwise we'd just sort all the agencies low to high and pick the top one.

Make money from when things go pear shaped? This is generally where a pm will make a loss in terms of hours spent vs fees received. The best bet is to avoid these situations by choosing good tenants, having good processes in place, etc

 

I think the agent can cover a reasonable area but not too large and so they don't have to be in the suburb of your property. If an agent should manage less than 150 properties, then too large an area may mean that the agent doesn't get to know the local market very well. I would expect it to be very difficult in Sydney for an agent to cover Hornsby to Penrith to Hurstville.

If they are somewhat close and have a couple of properties in the area, my guess is it is more likely for them to stop by the property to deal with issues.

I'd watch what is and isn't included. There have been numerous previous posts on Somersoft regarding postage fees, admin fees etc.

I think what is most important is the PM looking after your property rather than the actual company. I remember renting a place and during the 2 years there were 3 different PMs. One didn't know how to get in through the main entrance as they could only find the locked gate into my private courtyard which they couldn't open. This would have been a disastrous if it was an inspection for new tenants.

I always take the 5 mins to do a quick search on what similar properties are asking for in rent. Also put in calendar reminders of when lease is up, inspections report should be received etc. I don't do this to micro manage but as a control in case there is a slip up.

If PMs know the local market maybe they can suggest what improvements to make to a property. I've found my PM to shy away from recommendations though.

I haven't heard of any special process or task a PM does over another. I think it comes down to if they actually care about their job and does the common sense tasks diligently. Most PM's do the agency checks, employment checks, ID checks. Otherwise, maybe experience as a PM may be an indicator on how good they are.

Not sure but do any agencies do credit checks now?

I ask for the tenant applications to be emailed to me so that I can have a quick glance prior to the discussion with the PM on which tenant to go ahead with. I find it's a more constructive conversation.

You need to be able to trust your PM. When you get a maintenance request, and then a single quote to fix it which is lowish value (<$200), there's a sense of trust that the work needs to be done and it is a fair quote. I think this comes down to getting on with them.

When do they hold inspections? Is it only during business hours? If possible, maybe you should head to one of their inspections to see how they are to prospective tenants.

I don't know if the automatic application form encourages or discourages a tenant to apply. Think it is oneform.

What is the period of the management contract and what the termination clauses are. Can you terminate quickly without any penalties?

Service level is an important one. How soon do they promise to respond to your call/email. Good practice would be a written down policy but I don't have one with my PM. She has the common sense to respond quickly for urgent request (quotes for tenant maintenance request) and appropriate turnaround for other stuff (question about a line item on the statement).

I'd ask to see an example of their inspection report. Does it have photos? Can details in the photos be seen or is it a granulated picture? Are sufficient notes taken/pointed out? If possible, I'd actually ask for two reports for the same property to see if there is variability in what is noted.

A website to access all statements and reports would be great. I guess most people would save them on dropbox etc so may not be useful.

 

Appreciate your thorough responses.

Interesting to note conflicting views over some questions above.

I have seen it written somewhere on this forum - in terms of the management contract, are you able to trial the property manager or put a clause in the contract that allows you to leave if you're not completely satisfied?

I have talked to about 6 property managers with fees from 5-9%. The cheaper managers included an extra fee for nearly every task involved.

 

This really comes down to the agency. We offer a service guarantee where you can change after 3 months with a full refund and reduced notice of 7 days.

Yes, cheaper managers will always add in extra fees as most investors are essentially blinded by the percentage and not the total cost of management. They are very quick to agree to reduce their percentage knowing they will make it up in other fees. Overall the margins for each agency are essentially the same so the only thing that suffers with agencies who are willing to discount quickly is the service - they pay their managers less, they cram more properties per manager, they don't pay for the right software and systems and at the end of the day, the investor gets an inferior service and the common complaints arise.

 

So the same price then?

What you want in an agent is someone who will be responsive to you, ensure your property is rented, the rent is collected and the property is reasonably cared for by the tenant. An added bonus is if they have decent paperwork.

For the record I use botique agencies. I tried a local, big brand sales and rental agent once, other than telling me they had put a "for rent" board up (they hadn't) telling me they had photographed the property to list online (photos were not my property) and holding opens (first one did not happen) they were fantastic.

It's easy to change agents once outside the contract period. Fill in the paperwork at new agent and they do all the leg work.

 

One thing to add: a property manager who doesn't respond to tenant calls and only talks to landlord is one to avoid. have had 2 of these. i called to see if my PM was available. t the PM Manager first said no and asked 'if i was landlord or tenant'.

 

How they handle adviersty and conflict is important.

A lot of property managers do not have the emotional resilience to handle bad situations, some are scared of tenants and will behave at the effect of tenants "the tenant said it was like this to begin with" - too scared to stand up and defend the landlord.

I've stepped into a tribunal hearing this week from another agency - took over the day before the hearing, where an inexperienced property manager was taking a sympathetic approach on the tenants being in arrears.

The landlord was also not advised about appropriate landlord insurance and The tenant was put on a periodic lease until she was able to prove herself - this is what inexperienced managers do. It's really quite bad, because lease break charges and insurance claims can't be maximised. An experienced property manager would never have advised for a tenant to be put on a periodic lease because she was in arrears. It's actually a dumb thing to do and no thought behind the bigger picture at all.

Just go for somebody with experience who can get things done. Speak to some of their clients. Ask for a list of 10 names you can call and speak to, ask for clients that have had absconded tenants, defaults, properties trashed and see how these things were handled. If anyone is telling you these things dont happen they are either lying or have not been in the industry long enough.

Ask for the number of properties at their managing and the number of properties that are in arrears at the moment. If they say zero they are lying - test their ability to be up front with things - a pm that can call a spade a spade is more effective with tenant communication and telling you later exactly how it is, not sugar coated or sales pitches.

 

This is a fantastic idea.

I have decided to go towards a boutique management firm. I like that their business relies solely on how they operate and does not benefit from properties from the sales department. I believe this adds accountability to their work.

 

Great

Having a sales department dosent always take anything away from property management. Only if the principal is focused on sales and leaves property management to people who have no idea what they are doing - happens a lot.

I'm an agency principal focused on property managent but also have a sales division that is run through my company by other people. Whatever the sales people do does not affect how we manage properties, infact they add to it because we get to manage all properties sold to investors.

 

Hurry up and open an office near my Sydney property please.

 

Hi, I went through all this end of last year with our first investment build. I actually kept a mini spreadsheet to compare the agencies I made enquiries with - most of the rates were comparable, the number of inspections and reporting and in the end I interviewed a small and very local agency who in conversation told me they lived in the area, were available to provide inspections as when the enquiry came in and I think these factors made the decision easier for me. And it worked well, we got the keys four days before xmas, had the property online immediately and within days a tenant was secured.

 

As a tenant I prefer a rental office located close to the property, or at least not too far away. That probably is also the lanlord preference.

 

Just curious - For what purpose?

 

I have been in both roles (in Sydney). As tenant proximity greatly helped us with submission of application, rental documents and repair requests in paper. More than often emails and phone calls were not sufficient to warrant a solution. And there were occasions where we would have to meet and talk in person with the PM.
For lanlord, I guess the advantage of retaining a PM within the area is about local knowledge and the fact that it might be preferable for prospective tenants.

 

what does everyone think the best way to search for agents is?

Do you make a list of all the agents in your area by searching on domain and re etc?

Do you send out a Questionnaire email to them all and ask them questions like:

What are your fees?

Are you OK with 90 days contract and 30 days after?

How many properties have you leased in the first 2 weeks of advertising in last year?

other questions?

I would prefer an agent initially that does large turnover and can get tenants in to a place that is not in a real busy area. I do not like large agencies but I'm thinking they might be best for the first few months just to get a tenants in then after the contract of say 3 months I will give them notice if they are not doing a great job and then look for a smaller agency. That way I have my tenant in as I have found small agents to take a long time sometimes to find a tenant.

 

I second that!