Managing your investment property
You will need to learn about managing your investment property following its purchase. Property management is a big responsibility as tasks such as finding tenants, chasing rental payments and coordinating maintenance can be time consuming.
When managing your investment property, there are two options to be considered; self management or hiring a property manager to do it for you. It is important to weigh up the facts and consider the pros and cons of each option before making a decision. Check out our post on the Pros and Cons of Self-Management vs. a Property Manager.
Choosing a Property Manager
A property manager can play a vital role in the rental process of an investment property. The property manager will seek to maximise weekly rental income and source high quality tenants who will best take care of your asset. If you have decided to have a property manager represent you and your property, it is crucial to choose wisely.
Once you have shortlisted a few potential property managers, it is important to meet with them individually to discuss the possible rental of your property.
Questions To Ask When Interviewing a Property Manager
- Does your agency have a dedicated property management department?
Some agencies will view the task of property management as less important than selling and will therefore leave this task up to the front desk staff or receptionists. . Discover if the agency is experienced in the area of property management and has dedicated staff to effectively manage your property.
- Is a director/owner of the agency overseeing the property management department?
How focused is the agency on property management? The more important property management is to an agency, the more likely they are to effectively manage your asset.
- How many years of experience do you have in property management?
Experienced property managers will be able to attract the best tenants to look after your property and deal with those that become difficult.
- Can you provide me with a written comparison on rental values in the market?
An experienced and knowledgeable agent will be able to benchmark comparable rental properties on the market and advise you of the optimal rental return you should receive from your property.
- What is your process for reviewing potential tenants?
How do they determine whether the tenant is suitable for a property? Do they conduct police checks, or checks regarding their past rental history, current employment, etc?
- How many properties are you managing at the moment?
Are they representing many other people, hence being reputable and successful? Bigger however is not always better, it is also important to establish if you will be a priority and get the service and attention required during the property management process.
- Will you go to court to represent me if needed?
In the case that you experience difficult tenants, you may need to go to court to resolve certain issues about the bond or other matters. The property manager you decide on will need to be experienced and willing to support you in these times.
- Will you advise me of any maintenance and repairs that need to be made to the property?
In particular when non urgent repairs need to be made, will you seek approval before getting items repaired?
- What are your fees?
Enquire about management fees as well as any other costs a property manager may charge. Typical fees you may incur include those related to sourcing tenants, ongoing management of property and monthly statement fees.
- Can I please see some references or contact details of the landlords using your property management services?
What level of service was provided to past clients? Did they take care of the landlord and follow through on all which was promised?
Property Management Fees
If you have chosen for your property to be managed via an agent, it is important to understand the fees and costs that are associated with property management. Generally, this monthly fee covers the continual task of property management tasks such as: inspections, rent collection, etc. In some cases, agents may charge additional fees to cover the cost of finding a tenant. Property management fees will vary from state to state, as outlined below.
A majority of the agreements between the Agency and Landlord have a fixed percentage rate on all rent received. The percentage varies and is negotiable between the Agency and Landlord.
All fees are negotiable.Some agencies may seek an additional ‘letting fee’ for each new tenancy as well as on charge costs related to advertising / marketing to find tenants.
The Property Agents and Motor Dealers Act (PAMD) outlines regulations which govern property management fees and commission.
The PAMD governs fees and have set a 5% +GST cap on rental fees. There are also some restrictions on what can be charged as a letting commission (most commonly agents will charge an amount equivalent to one week’s rent plus GST). Any other fees or charges are negotiable between the agent and the landlord.
The Real Estate Institute of Tasmania (REIT) outlines a commission rate which agents should charge for property management. However these rates are only a guide and are negotiable.
Property Management Fee Residential - 13.44%
Commercial - 13.44%
Car Parks - 13.44%
Less than 12 months - 6.4% of annual rent
12 months to 24 months - 7.7%
Over 24 months - 9.3%
The system in the Northern Territory is deregulated, therefore there are no fixed fees. They are negotiable between the Agency and Landlord.
Although negotiable, generally property management fees range between 8 – 10%. Some agencies may seek an additional ‘letting fee’ for each new tenancy as well as on charge costs related to advertising / marketing to find tenants.
Property management fees in WA are deregulated and hence negotiated between the client and managing agency.
Although negotiable, property management fees are generally around 8%. Additional fees may be required on top of the monthly fee.
- Why Invest in Property?
- Cost of Investing
- What Makes a Good Investment Property?
- Understanding the Property Cycle When Buying
- Tax for Property Investors
- Managing Your Investment Property
- Your Responsibilities as a Landlord