Join Australia's most dynamic and respected property investment community

Onsite vs. Outside PM - Brisbane

Discussion in 'Property Management' started by Foodie, 18th May, 2016.

  1. Foodie

    Foodie New Member

    Joined:
    1st Mar, 2016
    Posts:
    4
    Location:
    Sydney
    Hi all, have an OTP settling soon in Hamilton, Brisbane.

    As i understand it, in Brisbane the onsite manager is also allowed to provide letting & PM services to owners to help find tenants.

    Keen to hear some of your experiences with onsite PM, pros and cons vs. engaging an outside PM.
    I dealt with 2 other PMs in Brisbane to manage the other properties (house) and can bring one of them in.

    Some points I can think of:
    Onsite:
    Pros: Regularly available to show to prospective tenants. Is also the Building manager, so any issues they can assist quickly.
    Cons: Also likely to manage 50 others investment units in the building, for them it doesn't really matter which one gets rented first.

    Cheers
    Foodie
     
  2. Marg4000

    Marg4000 Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    906
    Location:
    Qld
    Check the building management agreement. Some buildings give exclusive letting rights to the in house manager. Others allow you to use whoever you want.
    Marg
     
  3. RPI

    RPI Property Lawyer, Town Planner Business Member

    Joined:
    19th Jun, 2015
    Posts:
    712
    Location:
    Brisbane
    No longer allowed to be exclusive, breach of competition law.
     
    DiligentPM and Marg4000 like this.
  4. dabbler

    dabbler Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    2,668
    Location:
    Sid en e - olympic city
    My thoughts are, if the fees are similar, and the managers seem to be competent onsite, then they would be better placed to inform/act if a tenant is a troublemaker.

    I do not think your pros or cons amount to much in the equasion.
     
  5. Marg4000

    Marg4000 Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    906
    Location:
    Qld
    We used an in house manager.

    Main (unexpected) advantage was that he handled most of the tenancies. As our unit was in a desirable location in the complex he kept a "waiting list" of tenants within the complex who wanted to move into a better located unit. We had virtually no vacancies as most tenants came from within the complex.
    Marg
     
  6. MyPropertyPro

    MyPropertyPro SE Qld Property Management & Investor Services Business Member

    Joined:
    1st Jul, 2015
    Posts:
    223
    Location:
    Australia
    As mentioned, you can't be forced to use an onsite manager however if you have a rental guarantee, the purchase contract may stipulate that to obtain the guarantee you must use the onsite manager. There will then usually be fairly high fees involved (percentage of management plus all the "trimming" fees such as monthly admin fees, statement fees, lease renewal fee and possibly even inspection fees) that you'll have to pay if you want the guarantee and the onsite manager won't negotiate - which they often won't as they know they don't need to as the landlord will usually want the guarantee.

    There is an easy way around this but it depends on the guarantee length and rent you obtain. Usually the guarantee goes for 3-6 months and only tops up whatever rent you don't get. So if you say have a 6 month guarantee at $450 per week and you get a tenant after two weeks paying $450 on a 6 month lease, the lease will outlast the guarantee and once the tenant is in place you're free to shop around for management. Obviously if the lease rental amount is less than the guarantee then you have to crunch the numbers to see whether the extra top up you're going to get is more than the higher fees you'll more than likely pay. Unfortunately in the Brisbane OTP apartment market, rents are dropping so there is a fair chance the guarantee will be higher than the rental amount you'll get.

    I personally don't use onsite managers for my apartments for the exact reason you listed as a con. Sure, they're onsite and can tend to things "quicker" but you should have an excellent and proactive PM anyway and the difference between a two minute walk and a ten minute drive is negligible in my opinion to avoid just being one of the crowd. There aren't many issues that come up that require someone to be there within minutes and if there is, it's probably emergency maintenance. You shouldn't be paying any of those extra fees either as we believe they're part of the percentage so the sooner you can negotiate those out (or engage a PM who doesn't charge them) the better your return will be.

    One final point, just because they're onsite managers doesn't mean they've been picked as the best or most knowledgeable for the site. The sale of management rights is big business for developers and the whole system is packaged up quite nicely accordingly. Developers charge a couple of hundred grand for the rights, onsite manager gets exclusive rights to manage any units under the guarantee (for those who wish to claim it) and the payment for the rights essentially funds the rental guarantee from the trust account which more often than not comes from a small premium built into the purchase price itself...meaning the buyer is paying for it! It's a clever part of the sales process but I firmly believe you should still always select management based on their individual merit.

    Good luck! :)

    - Andrew
     
  7. DiligentPM

    DiligentPM Well-Known Member Business Member

    Joined:
    18th Jun, 2015
    Posts:
    443
    Location:
    Brisbane
    We arrive fifteen minutes early for our half hour Open Home or inspection by private appointment for properties located where there are onsite managers to ensure applicants are not poached away if arriving early.

    It comes down to deciding via due diligence who you feel comfortable working with, to compare fee structures and to choose a PM who will communicate well and follow through on maintenance matters