Once you have purchased an investment property, you want to know it is working for you. For it to be an asset and not a liability you need to find a tenant. Of course, you don’t want any tenant. We’ve all seen the Current Affair reports of ‘the tenants from hell’ and you want your investment cared for not destroyed. You could try renting the property out yourself. Advertise for tenants. Interview applicants. Check references. Collect rent. Take phone calls if something needs fixing. A colleague of mine who rented a property he owned in the same street in which he lived once had a phone call at 10pm to inform him that the light globe needed changing!
There is an alternative … you can engage the services of a property management service.
Benefits of using a property management service
1. Tenants are a generally higher quality
Put simply, the right tenant is the most important safeguard to your investment property. An experienced property manager will have screened thousands (if not tens of thousands) tenancy applications and will know how to select the best candidates. They will have the know-how to analyse applications for potential warning signs and will have made the contacts to quickly follow up references. They will also know the laws around tenancy applications and tenancy itself, ensuring they are unlikely to be scammed or take measures likely to end in discrimination lawsuits.
2. Tenants are more easily foundand tend to stay longer
Lost rent through vacancy can be an issue, especially if it is an extended vacancy period. However, there are other costs associated with tenant turnover that can also effect the success of an investment property. Each time a tenant leaves there is cleaning, new locks and possibly minor repairs. There are also the associated marketing costs and the screening potential tenants – all of which can be time consuming and ultimately costly.
An established property manager will have a policy of tenant retention that they will have trialled and improved over a number of years. Policies such as this will consist of systematic approaches to ensure happy tenants and maximise the length of stay for a tenant as well as maintain the value of property.
Property managers will ensure the property is ready for rental and suggest and oversee any minor improvements that may need to be made to maximise revenue. Because the property manager will have local knowledge of the area, they will have access to the data on comparable rates. They are also in the business of marketing properties so they will know where to advertise your property to maximise reach. All this is essential to getting your property rented quickly.
3. Rent collection
It is likely that the rent collected each month will be an essential part of maintaining a successful investment plan. This doesn’t allow room for negotiation with a tenant about rental payment. A property manager is a buffer between you and the tenant; they know the rental law and will have established processes for chasing rental payment or taking further action if necessary. Remember my colleague with the light bulb to change? After a few months of phone calls, he hired a property manager. “Best move I ever made”, he said. “The property manager knew how to deal with the tenants from a ‘professional’ viewpoint. He taught them how to follow the agreement of the lease; that’s his job. And the tenants got the idea – the property manager didn’t have the same emotional connection to the property I did.”
Most property managers will tell you that this is the main reason it is easier to manage someone else’s rental property.
4. There are less legal issues
We’ve already mentioned that property managers know the law as it pertains to property rental. No one goers into property investment expecting problems but the future is anunknown and you need to be as prepared as you can be. Engaging an established property manager is one way of being prepared.
5. Less maintenance
It is a simple fact of life that houses wear. Weatherboards need re-painting. A roof may require a new tile now and then. A well-maintained property not only keeps tenants satisfied and happy but also maintains (and increases) the value of your investment property. A property manager may have in-house maintenance staff to take care of simple repairs. They will also have access to established and experienced contractors who will have been checked for quality and cost. If a major problem occurred, they will know whom to contact quickly to get the work done efficiently and at the best price.
An experienced property manager will also establish a program of preventative maintenance designed to eliminate complications by dealing with them early – before they become a costly problem. This will involve regular inspections of the property, reporting back to you with suggestions and feedback on anything that may need to be looked at.
6. Personal benefit
Of all reasons for engaging a property manager, this may be the best one of all. Put simply, there will be less stress. You won’t to deal with emergencies (like middle of the night light globe issues!), chasing rental payments, evictions, rental scams, lousy tenants or the mountain of paperwork. Having a good property manager also means you don’t limit investment to property near where you live; potentially you could invest in the other side of the city or even interstate. And, of course, if you are not worrying about your property and you don’t have to be tending to it you will have more time to spend do what you enjoy with family and friends.
groothelm [CC BY 3.0 (http://creativecommons.org/licenses/by/3.0)], via Wikimedia Commons.