When to fire your property manager?
That is a question posed in the latest Your Investment Property magazine and we quiz editor Sarah Megginson about it and why she says property investing cannot be set and forget.
Listen to the interview now:
Kevin: As you would no doubt be aware, issue number 134 of Your Investment Property is out on the streets now. There is a separate podcast coming out as well that will give you a lot more detail about that. But there’s a story inside this edition that I wanted to talk about specifically with Sarah Megginson who is the editor for Your Investment Property magazine.
Sarah, thanks very much for your time.
Sarah: Thanks for having me, Kev.
Kevin: I’m just curious about this article about knowing when it’s time to fire your property manager. What are the signs? What are the signals?
Sarah: We put this story together based on some feedback from readers. We often have stories about how to build your portfolio, but once you’ve got your properties, you also need to be able to manage them – and that’s what this story was kind of born from.
It’s the idea that once you pass your property over to your property manager, you can’t just set and forget; you do need to stay quite actively involved because some of them can be less experienced than others. They can be – how would you put it politely? – less proficient than others, and it can really end up costing you thousands of dollars if you don’t get them into line.
Kevin: That can happen after a period of time too. There might be an initial flurry where a BDM or business development manager has brought your property on to the rent roll, therefore they’ll be paying particular care and attention to it in the first month or two, and then the service starts to fall away.
What are you recommending in terms of someone monitoring it? Should there be something in the clause to say if they’re not happy, they can terminate?
Sarah: Yes, absolutely. This is often part of the standard contracts that you fill out. You’ll have a clause in there or a period in there that you can give them notice to not be your property manager any more. But it’s really about being clear about your expectations up front.
And I know, personally, some of the issues have come about when there’s been a change of property manager. The person who I was dealing with was giving a great level of service and that changed when we got the new property manager who just didn’t approach things in the same way, didn’t keep me in the loop, they did repairs without approvals and that type of thing.
I think if there’s a change of property manager within the agency you’re using, then make sure you have a conversation with them so that they’re on the same page as you.
And then in the article, we go through a number of different scenarios of “If this is happening then it’s a bit of a red flag and it’s time to either have a conversation with them or consider moving to someone else.”
Kevin: Yes, and therein lies the problem because when you give notice to an agent you’re going to make the move, one, you have to know the time period, but then you’re in that land of never-never. When you give them the notice, they’re not going to take really good care of you, unfortunately.
But you know, there is a solution to this and I’ve recommended this to a number of people. And that is that when you give notice, you can actually take the property away immediately, give it to the new property manager as long as the original property manager is paid their fee.
Let’s say, for instance, that you’ve got a 30-day notice period. Then make sure they get the commission for that 30-day period, and you’ll find that the agency you’re taking it too will agree to that because they’re getting a new management.
Sarah: Yes, exactly. It’s not always about the actual dollar value. It can cost you a lot more in problems down the track if you haven’t got this all sorted out. There’s so much emotion involved in investing. It’s a very people-driven business, so you have to address these things on a case-by-case basis.
Kevin: Yes, you do. Remember there’s always a solution. It’s a great article. It’s inside the current edition of Your Investment Property. It’s out right now. It is actually the September edition even though it’s coming out in August. It just shows how far ahead of the game you guys are. Issue number 134: “How to fire your PM and to know what the signs and signals are”.
Sarah, thanks for your time.
Sarah: You’re welcome. Thanks, Kev.
With thanks to Real Estate Talk
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