If you own an investment property, or are thinking about buying one, then a crucial part of the process is engaging a property manager who will give you peace of mind.
Performance Property Advisory and Carbon Group have teamed up to give you the full rundown on what is property management, and the difference between an average and great property manager.
They are currently providing a limited-time offer of a 7% + GST management fee to prospective Carbon clients who are considering making the transition. This offer expires 15 December 2023.
Passive investment, not active investment
Investment properties should be as close to 100% passive as possible, which means outsourcing all the hard work to professionals who do it every day, and do it well. The difference between a good and bad property manager could be hours of mental stress and time-consuming tasks, as well as tenant disputes and issues, lost rental income, and even legal problems in more dire circumstances. Therefore it is important you get this right from the start.
Your property manager’s core function
A property manager’s role is to take care of the whole end-to-end process of getting your property rented by the right tenants, at the right price and then dealing with any and all ongoing work required to keep the property leased.
However, the best property managers also keep updated with market trends in both the rental and sales property markets, as well as understanding demand and supply factors that impact the rental market, such as immigration and vacancy rates, in order to get you the best possible outcome.
The main tasks involved in getting a property leased, and ongoing work are:
- Advertising the property for lease (including photos/listing descriptions)
- Setting a price per week for rent (ability to understand market value rent)
- Tenant application process including reference and identity checks
- Completing lease agreements (which can be complex)
- Organising a property condition report and lodging bond
- Paying bills (council rates/water rates/land tax)
- Organising maintenance (including after-hours emergency requests)
- Responding to tenant queries and dealing with tenant disputes
- Conducting periodic routine inspections of the property
- Monthly profit and loss reporting and collection and distribution of net rent to owners
Great property managers go above and beyond
- Communicate frequently and openly with owners so they are aware of each step of the process.
- Have an intimate knowledge of the local market to set the appropriate rent amount.
- Knows what to look for in a great long-term tenant to avoid vacancy periods, and ensures rent is always on time to avoid owners being out of pocket.
- Works to save you time, for example setting a maintenance limit with owners (if any maintenance request quote comes back below an agreed threshold i.e. $500, the property manager will organise the fix without consulting the owner).
- Understands the Residential Tenancy Act and gets in front of potential problems before they become expensive legal issues.
What are the costs of a property manager?
There are two ways property management agencies charge their management fees.
Percentage of rental income
This is the most common method, the management fee is an ongoing percentage of the rental income of the property. Across Australia, this varies from 6% to as high as 13% of rental income. Be careful when comparing fees, as some agencies only include very specific duties as part of their management fee fees, and will charge extra for things like end-of-year profit and loss statements (which your tax accountant will need to do your tax), administration fees, leasing fees, and inspection fees.
The fixed fee model is less common amongst rental agencies, and is usually an all-encompassing fee (includes inspection fees etc.). This allows owners to forecast their cash flow more accurately. Typically when comparing the two fee structures, the fixed fee model works out to be more expensive.
Regardless of the fee method, always ask for a full fee schedule up front which shows any additional costs on top of management fees.
Although cost is one factor, your highest priority should always be the quality of the property manager, as a good agent that can simply maximise your rent is usually enough to outweigh the cost savings between two agencies.
What to look for in a great property manager?
The public domain is a great place to start when looking for a property manager. Checking Google reviews, and looking at ratings on websites such as Realestate.com.au, Domain, and Rate My Agent will give you a good idea.
We recommend narrowing down your search to 3 property management agencies, and then having a discussion with each. Come prepared with a short list of questions and see how each agency responds accordingly. Ensure you ask questions about how fees are charged, how they would market your property, do they manage any properties in your suburb, and what is their current vacancy rate for the portfolio that they manage.
Borderless property management
Performance Asset Management has an advantage as a national business with a presence in the major capital cities, and even some regional areas, and therefore can take care of your whole property portfolio rather than having multiple agencies in different states.
Why Performance Property?
Performance Property is one of Australia’s most trusted Property Investment and Portfolio Management Company for private investors and entities with property portfolios worth between $2m and $150m. Their end-to-end suite of services includes national property management, allowing them to build and manage high performing portfolios.
Performance Property is offering a special rate of 7% + GST management fee to Carbon clients for their investment property until 15 December 2023.
Why Carbon Group?
For professional guidance that gets your business moving in the right direction, speak to our team of experts at Carbon. We do more than help you start; we help support your venture into the future.
Check out more of our articles or just give us a call on 1300 454 174 for the answers you seek regarding accounting and tax, bookkeeping, virtual CFO services, financial planning, start-up investments, insurance brokers and finance and lending.