Finding tenants and a manager for the property
Once the sale is finalised and you've taken over possession of the property you will need to find tenants and a manager for the property.
The case for hiring a property manager
One thing that anyone managing a rental property will tell you is that it can be a lot of work.
While you probably have many other duties and responsibilities, property management professionals look after rental properties full time. It's their job and has their undivided attention.
They can save you time and effort by taking the helm and relieving you of the many different duties that a landlord or property owner would normally need to attend to.
This includes advertising for tenants, screening applicants, running viewings and preparing the lease when you have selected your preferred candidates.
Once your property is tenanted, the duties of your property manager are far from over.
They'll handle all liaisons with your tenants, including all money transactions (deposit, rent, late fees), respond to any issues with the property and arrange repairs if necessary.
Property managers bring experience and know-how to the table that can prove real assets in the management of your rental property, including comprehensive knowledge of tenancy rules and perhaps even established relationships with local repairers and contractors that get you good rates, reliable service, or both.
While as a new landlord you could be in for some surprises, and even shocks, their experience will mean there isn't much they haven't seen - and handled - before.
Additionally, by employing someone else to manage your property, you needn't be on hand or in the area at all times. This can liberate you to travel or live in another area while retaining peace of mind that if an issue were to arise with a tenant or your property, it can be seen to in your absence.
Managing an investment property means more than simply collecting the rent. Yet even if that were the case, property managers would still be a great resource for owners.
Your relationship with your property manager will be an important one, and one which could last for many years. For this reason you need to make sure you choose the right one.
Consider writing up a checklist of things that you need from a property manager and use this as a guide when interviewing agencies. Here are some things to look for in your future property manager.
Tips for choosing a property manager
- Does the agency have a specific department for managing rental properties?
- How many years experience does the agency have?
- Can the manager give evidence to suggest rental rates?
- What is their process for choosing 'assess rental applications'?
- How many other properties are they managing?
- What are their fees?
- Do they have references?
In every aspect of owning a rental property, the goal should be to form stable and lasting relationships.
This goes for the people renting your property, just as surely as it does for those you are paying to manage it.
You may want to find out whether your property will be managed by the same person at all times, or whether it will be shared among several agents.
If it is one person, consider asking how long they have been with the agency. If they've been around for a few years, this isn't just a good measure of their experience, but can also provide extra certainty that they are going to stick around. Changing property managers often could be a stressful and tiring experience for you as well as your tenants.
Ideally, your property manager will have knowledge of the suburb and general area that your property is located in.
This will be an advantage when they are advertising the property as they'll know how best to sell it to renters, as well as which price will give you the right balance between being competitive and generating good returns.
Check to see whether they manage other properties close to yours, and whether they have done so in the past.
A reliable property manager is a true asset. They can be depended upon to respond quickly to all matters requiring their assistance or intervention.
Whether repairs are needed at your property or your tenants have questions or concerns about monetary issues, sorting these out quickly could be critical.
This is because even if you have a top-notch property, if your tenants get fed up with the service provided by their property manager, they may well start looking elsewhere.When checking out property managers, find out how many properties they are responsible for.
How quickly do they aim to respond to tenant concerns? Where are they located in relation to your property?
This is an important factor and could be the difference between holding on to good tenants instead of seeing them move on when they tire of an inactive or unhelpful property manager.
As the property owner it is natural that you should take an interest in how your investment will be managed.
Some owners will want to manage their own properties; others will be happy to entrust this completely to professionals.
It needn't be this cut and dried, however. You may choose to handle some aspects of the role yourself and pay an agency to look after others.
It all depends on how involved you wish to be and how many of the responsibilities of a landlord you wish to delegate.
DIY Property management?
Many landlords have asked themselves at one time or another if they would be better off self-managing their investment property. It's a question that's especially likely to have come up for consideration if a landlord has had a negative experience with a supposedly professional property manager who failed to deliver the good service they initially promised.
But recent data from The Australian Landlords Panel 2012 shows that landlords who manage their properties themselves are also significantly less likely to have adequate insurances, compounding the very real risks of self-management.
According to the study, around 77% of all Australian investors currently use a professional managing service with an agent, or have used one in the past. Yet while 88% of those investors have Landlord's Insurance, just 54% of private landlords had the same insurance.
Interestingly, the Landlords Panel study also revealed that landlords received higher rental yields and profits when a property manager was used and generally had better experiences.
Of course, it is possible to self-manage and some landlords do it quite successfully.
Critically, if you do make the decision to self-manage, you must be prepared to dedicate the proper time and attention to finding a good tenant and regularly attending to inspections and maintenance issues. A legally binding lease agreement must be in place with the tenant and the landlord must also have good awareness of all relevant legislation, much of which is different in each state and is regularly updated.
Failure to take these steps significantly increases the likelihood of problems, including tenants falling behind in rent, malicious or accidental damage to the property, or disputes resulting in a legal liability for the landlord.
The case for doing it yourself
Being professionals, property managers charge for what they do, and their fees will come out of your rental income.
As a property owner, you will therefore need to assess the short and long-term benefits of paying for property management.
You may decide that you don't mind taking the reins yourself simply because it means you don't have to give up a percentage of your rental profits.
The other main argument against hiring a property manager is that you may not want to relinquish control.
Some investors like to be involved in the day-to-day management of their properties, and enjoy dealing with people and helping to resolve issues that arise.
Tips for first time investors
Just as you would compare investment loans, it is a good idea to seek out several property management companies for comparison if you are thinking about hiring one to look after your rental dwelling.
By going to see them in person, you can do a bit of homework to find out what is included in their services, what you can expect as an owner when dealing with them, and most importantly, how much they charge.
The potential costs of property management are something more to take into account when planning for your rental investment.
Just like other costs such as insurance and renovations, be sure to discuss these with your mortgage broker so that they can help you find an investment loan structure that is the right fit for what you hope to achieve.