If you are looking into real estate property management then it is likely that you have just purchased an investment property and want to find a property manager to look after it. It is also likely that you have consider whether you should undertake the investment property management yourself and reached the conclusion that the time, dedication and education required to do so could most likely be best invested elsewhere. I personally err on the side of using a property management company (Real Estate agencies will also normally have a service offering) as my personal time constraints should mean a dedicated property manager should be able to do a superior job with little cost outlay in the overall scheme of property investing.
The benefits of having a good property manager far outweigh the costs, so I would suggest consulting your Buyers Agent for recommendations of property management companies they or their clients have used.
Property Management Services
What real estate property management services should a property manager normally be able to offer?
- Do thorough checks on tenants with the aim to securing long term renters (with a good rental history) for your property. Some agencies will have their own tenant database that they will be able to draw from to minimise vacancies.
- Understand the local real estate market in order to identify market opportunities, market your property, as well as maximise your rental price (whilst ensuring minimal vacancies).
- Responsible for rental reviews and rent raises, where they should also be suggesting potential renovations or additions to your property that will maximise your potential rental returns.
- Have a comprehensive knowledge (and understanding) of local tenancy legislation that effects your property as well as staying abreast of new laws and amendments that are to be introduced that will impact status quo of your property management requirements.
- They conduct regular property inspections (internal and external) ensuring everything is in good order and informing the owner if there are any issues/maintenance requirements. Property managers should complete a condition report on entry, exit and at time of inspections.
- Have access to qualified and trusted tradespeople that handle property maintenance. Some property managers will have organised deals with tradespeople, theoretically reducing your property repair costs.
- Responsible for rental bond lodgement.
- Responsible for rental payments, as well as tenant rental statements.
- A property manager may also pay on your behalf council rates, water rates, body corporate fees, insurance cover, strata levies etc
- Produce end of year financial report for your property.
- Handles tenant communication/dispute resolution as well as dealing with problematic tenants’ on issues such as late rental payment and property maintenance.
- Provide proven and professional legal documentation as well as industry best practice, to protect you as the landlord.
Property Management Fees
What property management fees are there with using the services of a real estate property management company?
Property management fees will usually range from 5 to 10 percent of your gross rental collection, depending on the level of service you choose from the property manager (other factors such as number of properties also can come into play).
Typically fees are split by management fees (maintenance, inspections, rental collection, tenant statements/notices etc) and letting fees (finding tenants for your property, advertising etc). All property managers have differing payment schemes (which can be negotiated) however as a general indication letting fees are around one weeks rent and some will charge additional management fees on services such as inspections. Whilst this may seem like it should be part of the normal percentage fee, it can work in an owners benefit (if the initial percentage is low enough). Take for example if you had two apartments in the same complex you good negotiate a better outcome on inspection visits for yourself.
Also worth noting is that property management fess are fully tax deductible.
Before you sign the dotted line
Remember the property manager wants you to engage their services, so if you aren’t happy with the boiler plate contract or fees they have provide you, make sure you remove/include any clauses that will give you additional comfort your property management requirements are being met e.g. you may want to change the cap on the maintenance repairs that can be done without your prior approval.
Real estate property management is about a lot more than collecting rents. Finding the right property manager can go a long way to increasing the chances of your investment property management not turning into a burden on your time or an additional stress.
In the next post we will touch on some questions to ask potential property managers before signing up to their services.