QUESTIONS TO ASK YOUR PROPERTY MANAGER BEFORE YOU SIGN
Choosing the right property manager can mean the difference between long-term peace of mind for your investments or uncertainty and lost income. Here are some excellent tools for picking the best property manager in your area.
Do they have a professional website?
Before deciding on a property manager, check if they have a professional website. It should be more than just a basic landing page. Professionalism matters and if the company you’re considering doesn’t offer any information on their website, you’ll be left wondering what other corners are being cut in their business.
Look For Online Google Reviews
You’ll be amazed how many bad reviews are out there for property managers, so don’t fall into the same trap as others. And remember, a detailed 5 star review is probably more legitimate than a 5 Star review that just says “Awesome”.
How quickly do they respond to your first enquiry?
If the property management company does not respond to you quickly when you are a prospective client, it’s a sign that their communication will be awful when you become a client. Also, if they don’t communicate well with you, they are probably even less responsive to tenants, which leads to higher tenant turnover and more cost to you.
Results & Processes: Don’t fall for the sales pitch. These next questions will let you see how things are really done at the company!
What’s your occupancy rate?
Property managers should have systems in place to maximise your occupancy rate. In most cases, a property manager who charges 2% less than another agent but leaves your property vacant for 2 weeks more, is actually more expensive because of the lost rent they’ve cost you (see the illustration at the bottom of this page). At the time of writing Propcare One’s occupancy rate for existing properties under management was 98%.
How many properties do your property managers look after?
Property management requires a lot of hands on work. You want to know that the person who’s managing your property is not overworked or unable to attend to all of their responsibilities of managing your property.
Having overworked property managers results in high rent arrears, delayed repairs, insufficient follow up, deteriorating tenant & landlord relationships, high employee turnover, poor communication and ultimately lower landlord profits.
At Propcare One, we know that a constantly overworked property manager can’t deliver on our service promise. Our managers look after 60-80 properties each compared to the Gold Coast average of 100-140 properties per person. This gives us room to serve you and your tenants properly so you can earn better returns!
What’s the employee turnover rate in the property management department?
High employee turnover can mean many issues are swept under the rug and blamed on a previous employee.
This can be costly to a property owner if a simple repair becomes a more serious issue, if many minor repairs go unattended creating and large and expensive list of repairs all at once, or if an otherwise responsible and happy tenant becomes unhappy and moves out.
Of course, some turnover is expected as people seek other career opportunities, but having a new property manager every 12 months is a significant red flag about the culture of the agency and the consistency of the service you’ll receive. Apart from retirement, Propcare One hasn’t lost an employee for over 7 years.
What’s your eviction rate?
We know that it all starts with who you accept (or don’t accept) in the property. This is where your problems will start and if you nip that in the bud from the start, your investment journey will be less stressful.
We’re yet to find a property manager who says “we find the worst tenants” so this question will remove the sales pitch and show what you can expect from the property manager. If their eviction rate is high, don’t risk it. It will cost you just as much in stress and heartache as it will in dollars.
Propcare One has only had one QCAT ordered eviction with tenants we have approved in 5 years!
Who will handle the day-to-day management of my property?
Many agencies employ a business development manager (BDM) who is responsible for bringing new managements into the agency. They are typically experienced and charismatic. Once a property owner signs up however, the daily property management work is often handled by another person or several people (property manager, leasing manager, maintenance manager etc), who are typically less experience than the BDM.
Before signing up with a new agent, it’s important to know who will be handling your property's affairs and who your main point of contact will be, because you don’t want your property handed off to a more junior person or passed around to a few different people, none of who can answer all the questions related to your property.
At Propcare One, your property manager deals with all aspects of your property from leasing, to maintenance, to lease renewals, so they’ll be able to answer your questions without passing you around from one person to another. We’re able to offer this well-rounded service because our team manage smaller portfolios than our competitors.
The added bonus of having a property manager handling the leasing is that they have a vested interest in putting in the best tenant for you (rather than the first tenant who comes along). This is because the property managers will have to deal with the tenants they select, and nobody likes making their job harder if they don’t have to. This is a major advantage in the tenant selection process compared to the leasing manager model, where the leasing manger is incentivised to select the first tenant available and doesn’t deal with the consequences of a “bad” selection.
How do you screen prospective tenants?
Finding the right tenant, not just any tenant is one of the keys to happy and successful investment property ownership. The property manager’s answer to this question should include:
a. References from prior real estate agents or property managers including rental ledgers
b. Enquiries into the number of breeches issued by previous real estate agents or property managers to determine the tenants track record
c. Enquiries about excessive maintenance requested
d. Employment verification/references
e. TICA checks (national tenancy reporting database)
f. In person meeting with tenants to assess character by the person who will manage the property
g. Conversations with references rather than just emailing forms. Picking up the phone seems to be a lost art, so make sure your property manager isn’t just sending emails.
How often do you complete inspections and how many photos do you take?
Each state is different, but you should always find out what kind of service you’re getting before you sign up. You should also ask if you’ll get an inspection report with photos each time.
When Propcare One complete inspections, we provide a report that normally contains 15-40 photos depending on size of the property. We’re your eyes and ears on the ground, but we know it helps you to see how your property is being kept too.
Does your company specialise in Property Management?
It can seem like a silly question, but many real estate agencies who have a property management department, are not property management specialists. You may hear that they have a large team or manage many properties, but ultimately the reason for their existence is not to be property managers. Many times their core business is selling real estate which is a very different skill than managing properties.
Most agency owners have a sales background and much of their resourcing goes to boost the lucrative sales business because this is what they understand best. Because they haven’t personally managed a rental portfolio, and through no fault of their own, the business owners don’t fully appreciate what Property Management involves. As result, it’s not uncommon for the property management department to be treated as a babysitting service to generate warm sales leads in the future. Not great from a landlords perspective at all.
While this can work at times, there’s comfort in knowing that the whole company you decide to work with (including the business owners) are fully invested in taking care of their landlords rather than chasing the next sale.
An easy way to get to the bottom of this is to ask what percentage of the company’s income comes from Property Management vs Sales. If it’s skewed to the sales side (ie more than 50%), then you know where the resources and energy will be directed.
While the generalist agencies can be ok, property management specialists exist to meet your needs as a landlord. When you’re talking about assets worth hundreds of thousands of dollars, it’s prudent to work with a specialist company to make sure their goals are completely aligned with yours.
How do you prevent tenants from falling behind in their rent?
There a few key things here that will help ensure your tenants don’t fall behind, but not all agencies employee these practices.
a. When a new tenant signs up, the agent should make sure they are paid in advance
b. Tenants should be encouraged to go onto an automatic rent payment system
c. Rent receipting and arrears monitoring should happen daily so things don’t get out of control. Checking arrears once a week could spell disaster.
d. Communicate, communicate, communicate! If a tenant payment has been missed, the property manager should pick up the phone for a friendly reminder. If the proper tenant selection process has been followed, the friendly reminder will typically fix the problem before the tenants are 7 days late.
You’d be surprised at how many over-worked property managers just send a SMS or wait until the rent is 7 days late to issue a breach notice without even speaking to the tenants. This is not a great strategy to recover rent or maintain an otherwise positive relationship with tenants. Of course, if the friendly reminder hasn’t worked, then a breach notice is needed.
Setting up your tenants for success when it comes to their rent payments is not only great for landlords, but it’s great for tenants too! By helping them keep their rental ledger in top shape, they’ll have an edge over other applicants when it comes to renting their next property, so it’s a win-win all around!
How much are your fees?
The answer to this is definitely important, but it needs to be evaluated in terms of overall profit to you, not just the cost of fees.
After all, a proactive agent who rents your property out 1-2 weeks faster than a cheaper overworked agent will put more money in your pocket over a 12-month lease, even though their commission is higher. This means that cheap agents end up costing more (see the example below).
A good way to think about is like this. We all know that airlines are supposed to get us to our destination and they generally do, but some charge more than others. The ones that charge a bit more generally arrive on time more often, cancel fewer flights, have better maintenance plans for their planes, offer better service and don’t lose your bags as often as the cheap airlines.
It’s the same in property management. You certainly don’t want to overpay, but you don’t want to skimp. Most of the time the cost between a cheap agent and high results agent is the same as a cup of coffee per week, so don’t get hung up on the commission percentage but look at the actual dollar amount. Most people consider that one of their largest investments is worth the extra $4 per week because property manager mistakes cost a lot more than that financially and emotionally to landlords. The costs of these mistakes from an overworked manager are certainly higher than the cost of a lost bag or delayed flight too, so if you don’t like the risk of the low service model when you book a flight, don’t skimp on a cheap agent either.
At Propcare One, our property managers look after 65-80 properties each compared to 100-140 by many of our competitors. It’s reasonable to expect a lower price and service if your property manager can’t dedicate as much time to your property, but it doesn’t mean you’ll get the best outcome by going with the cheaper option. The example below summaries this idea in numbers, just factoring in leasing times. The differences can be higher when all aspects of managing a property are considered.