Hiring a property manager vs. doing it yourself
Property management: it’s something that causes confusion.
What does a property manager actually do?
Could I do it myself?
How much do they charge?
Should I just hire a family member to look after it?
These are all great (and common) questions. Most people don’t understand what it takes to manage a property – until they start the process, of course. That’s not to say it can’t be done but, first, it’s important to educate yourself about what a property management company does and how they advocate for you, the landlord.
First thing’s first: a property manager is trained to maximise your Return On Investment (ROI). This is their focus, as well as attracting great tenants, receiving rent, organising utilities and lowering your income tax. It’s not as simple as buying a property and looking after any repairs when they arise. It’s an investment. It requires ongoing work. By having a property manager, it’ll never go neglected.
Let’s go through a few questions to help you decide whether you should hire help or self-manage.
Are you time poor? Would you prefer to save money?
The more time you spend managing the investment property, the less you have on your own house, job, and family time. If you have all the time in the world, then managing the property could be an option.
You’ll need to do things like;
- arrange & attend open inspections
- organise repairs
- collect, record and receipt rent
- lodge bonds with SACAT
- market the house to prospective tenants
- resolve any issues
- attend to maintenance - inspect, site visit & completion
- manage of routine inspections
- understand the law as it relates to renting
Developing a good rapport with your tenants is a must. Knowing how much you should be charging for rent and how often to raise it requires self-education.
If this all seems too much and you want your investment to run in the background without any work, you’re best off hiring a property team and paying a little bit more. They’ll do all these tasks for you, as well as much more – screening potential candidates through databases, running reference checks, paying council rates and bills on your behalf, and making sure your investment is operating lawfully.
However, a big advantage, if you use a managing agent to look after the property, the management fees you'll pay are tax deductible.
What's your personality type?
This might seem like an odd question at first glance, but the reality of life is a factor to consider. For example, when KingsCoin hire a professional property manager, one that we think will be the best in the business, we look for particular character traits as well as experience.
We look for a personality type that has attention to detail, is very structured and methodical in their work, is a people person, has good emotional intelligence and a work ethic that is prepared to take calls late in the evening and drop off keys in the middle of the night. These people are not easy to find.
While it may appear easy to look after your own property, the reality is it's a tough and demanding job, and it doesn't stop because you are on holiday or you don't have the time.
Do you have enough to cover the full mortgage if the property is vacant or the tenant refuses to pay?
The financial impact of weeks or months of not receiving rent is enormous. Even with Landlord's Insurance, you still have to cash flow the mortgage until the issue is resolved. By fostering a good relationship with your tenants, the likelihood of this happening is reduced.
Our property managers have a procedure for periodically determining interest in extending the lease, handling relevant documentation and dealing with issues, fast.
Can you offer the same level of service? And, if the house was on the rental market for months, would you be able to meet your mortgage needs? Your property manager does not have the emotional attachment that you have to your property, and this is a great advantage. This allows your property manager to give you good advice, tell you what you need to hear in terms of reducing rent, getting items repaired, or pay the mortgage yourself while you wait with a vacant property.
A core part of what property managers do is find the right tenants for your space and communicate with them regularly to keep them happy. Re-advertising and re-letting is an expensive process which will affect your ROI.
How much does a Property Management company charge?
Realistically they all charge in and around the same fee once you add everything up, and it's typically around 8% of the rent collected. So if your unit rents for $300 per week, then the manager will charge $24 management fee per week. So for doing all the above, for $24 bucks...
Don't be fooled by some headline grabbers promoting 3% or 4% management fee, this is the cheap airline business model, everything is extra and the service is poor.
However, a big advantage, if you use a managing agent to look after the property, the management fees you'll pay are tax deductible.
Remember why you got into property: to make money and carve out a financially-free future. It’s an asset that needs 100% focus. What you do now makes a big difference. Maximise your ROI from get-go, whether that’s by yourself (if you have the capacity) or through a professional team like KingsCoin.
