Peter McRae once had a property manager who failed to look after one of his properties in the United States.
Then the tenant stopped paying the rent because he was frustrated that the issues with the house were not being addressed by the property manager. Eventually, the tenant abandoned the property and even took the air conditioner with him.
To make matters worse, a water leak in the property caused $10,000 worth of damage. Looking back, the property manager’s communication was poor right from the start, says McRae.
“What eventuated was that I lost contact with him – it was a very small operation being just a husband and wife team,” he says.
“Later, I was informed that he became very ill and stopped working.”
Dealing with property managers is something that McRae has plenty of practice in, owning more than 20 properties across different states in Australia, in addition to the US. For him, it is a challenging, yet enjoyable part of property investing.
“It is quite a task, however I enjoy developing good working relationships with all my property managers,” he says.
The first step to finding a good property manager is identifying what characteristics to look for.
ATTRIBUTES OF A QUALITY PROPERTY MANAGER
The best kind of property managers can be defined by what they are not. In essence, too many companies rely on young, inexperienced school leavers who do not appear to be well prepared for this demanding role, and often don’t last long in the business, says Ian Hosking Richards, CEO of Rocket Property Group.
He says that a characteristic they often lack is attention to detail. One example is that they may fail to remind you when a lease is coming up for renewal, which then turns into a periodic tenancy (where there is no set finishing date).
They might also not inform you that a tenant is vacating, with you only finding out when you get your monthly rental statement and see there is a lack of income.
Hosking Richards says that quality property managers tend to be the more experienced and professional types.
One such professional is Rachelle Pitt of Professionals Belmore, who also achieved Runner-Up Property Manager of the Year in Your Investment Property’s Readers Choice Awards for 2014.
She identifies five characteristics of a good property manager:
1. EXCELLENT COMMUNICATOR
Firstly, property managers require excellent communication skills. Everyone must be on the same page in order for the team to be successful and to function. For landlords and tenants, they need to know that they can get a hold of the property manager when they need to. That means answering the phone, responding to emails, returning messages and keeping the lines of communication open at all times.
2. KNOWLEDGEABLE AND EXPERIENCED
A good property manager knows all aspects of the industry. They must be able to create and interpret reports, including financial reports, and stay up-to-date on all of the laws relating to property ownership, landlord/tenants and other real estate-related regulations.
These rules change constantly, and many of them are quite intricate.
In order to do this job successfully, it’s critical that the person at the helm have a firm grasp on these important matters.
3. IMPECCABLE PEOPLE SKILLS
The most successful property management professionals place people as their highest priority. In order to do this job well, they absolutely must be able to deal with people.
They have to be able to maintain composure and be a trusted advocate, both for their clients and the tenants. When people feel that they have someone they can trust and come to with any issues that may arise, they are much happier.
There’s a fine line between being personable and being professional. They must be kind but firm, particularly when dealing with sensitive business matters that may seem personal to those they are affecting, such as raising the rent.
Property managers must also feel comfortable interacting with other professionals on a regular basis, such as accountants and attorneys.
5. HIGHLY ORGANISED
In this role, they will inevitably find themselves being pulled in a dozen different directions on any given day. It’s imperative that when things get busy, they are still able to stay on top of their to-do list and remain focused. Organisational skills are among the most important traits of those that are successful in this industry.
Technology and tools like property management software can help property managers stay focused and on task so nothing important slips through the cracks.
SELECTING THE RIGHT ONE
For both McRae and Hosking Richards, they have found it helpful to choose their property manager based on recommendations. For example, investors can ask other landlords in the same suburb to get an honest opinion of what their property manager is like and whether or not they would recommend them.
This is very effective for many property investors; however, it can be difficult if you don’t know anybody in the neighbourhood you can ask. Additionally, you may be unsure whether or not to trust the person who is supplying the recommendation.
One way to get around this is to do your own research which helps you find a property manager who is tailored to your specific needs. This is important because you want your relationship with the property manager to be hasslefree and enduring.
“Once you have shortlisted a few potential property managers, you should meet with them individually and ask them some key questions to make a more informed decision,” says Pitt.
11 questions to ask your property manager before hiring them
Pitt outlines 11 questions that investors can ask property managers before settling on the right one
1. What experience do you have?
Does your potential manager have plenty of experience in managing rental properties? If not, you could face the problem of an inexperienced manager being taken advantage of by tenants. Another issue could be that your manager turns tyrant with your tenants.
Many property managers are members of larger agencies, with sterling reputations and a history of success to draw upon, but it’s also important to find out more about the individual agent who will be handling your rental property. The right agent will have a love for property management.
2. How many other properties do you manage?
If the property manager manages lots of properties, will they be able to devote the necessary time to you and your property? Your property manager needs to have the time to address issues that may arise and to help you or your tenants when needed.
3. How much support do you have in your office?
You should look for a property manager with a good support team that is knowledgeable in all areas of real estate including sales, administration, financing and leasing. I would recommend asking how the team is structured as well as additional questions, such as: who will be organising the maintenance and who will be doing the regular inspections of my property?
4. Does the agency’s owner or principal have a role in the everyday functioning of the property management team?
How focused is the agency on property management? The more important property management is to an agency, the more successful they are likely to be at effectively managing your property. When an agency’s owner has an active role within the property management team, this often serves as an incentive to make the team work harder and with greater professionalism. Having a principal who isn’t afraid to get involved in their business’ success is also a sign that the agency will work harder for you.
5. How did you determine the rental value of my property? Can you show me some comparable rental properties?
An experienced and knowledgeable property manager will be able to benchmark comparable rental properties on the market and advise you of the optimal rental return you should receive from your property.
6. What methods will you use to market my property?
This is an important question to ask. The last thing you need is an agent who hands out your keys to prospective tenants to view your property on their own. Instead, your property manager should be present whenever a prospective client is viewing the property.
Ask your agent how many days they are available to show the property to tenants.
Remember that many prospective tenants work during business hours or may only have limited time for viewing. Therefore, the need to be flexible with inspections is important. A good agent will be available to show prospective tenants on weekends and after standard business hours.
7. How often do you communicate with the landlords and how is this done?
The right property manager needs to be in regular contact during the management of your property. They should communicate with you regarding monthly rental statements, routine inspection reports, open for inspection reports, market updates, rental reviews or lease renewals. It’s necessary for your property manager to keep you updated about anything that occurs with your rental property, such as rental payments, maintenance issues or if the tenant has given notice to vacate.
8. Do you have a strategy for finding the best tenant for my property?
This is a really important question because you certainly don’t want a property manager to let just anyone become tenants to your property. A good property manager will take into consideration the appropriate demographic for your property and focus on getting a tenant that fits that segment, particularly via methods such as internet advertising. They will also have a significant database of quality tenants that are already looking for somewhere to live.
9. How do you check prospective tenants with regard to their credit history, past rental history and their current employment?
To help protect your investment, ensure that your property manager subscribes to a major tenancy database and screens all prospective tenants carefully. Each tenant should complete a detailed application form which takes into account their current and previous rental history, current and previous employment history and character references. Each tenant should inspect the property before being accepted on a property.
10. What procedures are in place to take care of any issues that might occur?
Find out when the property manager will contact you if the tenant has a problem paying the rent or if there is a repairs or maintenance request. These items need to be fully discussed with you even before a tenant is selected and the management of your property begins.
This should include how many inspections they carry out per year and whether or not they forward a written report to you that includes photos and recommendations of works.
11. What can you do that another property manager can’t?
Find out what point of difference each agent offers. For example, do they have a dedicated leasing team, operate six days a week, have an excellent knowledge of the local market or a strong market share?
UNDERSTANDING THEIR SITUATION
As just about any property manager will tell you, it can be a challenging job at the best of times. McRae is one landlord who understands this.
“Property management seems to me to be a highly stressful job where complaints come frequently from both tenants and landlords,” he says.
“Treating them with respect and being understanding is therefore important.”
It’s also important to not assume that just because something has gone wrong with the property, it is automatically the property manager’s fault.
In fact, often landlords can approach the problem in entirely the wrong fashion.
The other good thing about having a positive working relationship with your property manager is that it often translates into a positive experience with the tenant.
“As an investor, you need to be responsive and willing to work in partnership with the property manager to ensure you secure and retain good tenants,” says McRae.
Attracting quality tenants is particularly important, considering that finding new tenants can cost a lot of time and money, says Pitt. This is especially true if the property becomes vacant for a long period of time. With happy tenants, issues such as late or non-payment of rent, or damage to the property is minimised.
Most importantly, a property manager should speak politely and always listen to the tenants in order to keep them happy, she says.
WHEN THINGS DON’T WORK OUT
There are certain things investors can do to protect themselves in the event they have chosen the wrong property manager.
For starters, when signing the managing agent’s agreement, they should always nominate the shortest possible notice that is legally required to terminate the agreement, says Hosking Richards.
“Agreements are typically pre-filled by the managing agent before you receive them, and they may nominate a much longer termination period than is legally required.”
One thing McRae has found through his experience is that if the relationship does not work out early on, then it generally does not work out at all.
“If my calls aren’t being returned, rent is not arriving on time, or I get the feeling my property is not being looked after, I know it is time to make a change,” he says.
“This is business, and at times you have to be prepared to make the necessary changes to ensure you get the results you need. Thankfully, it has been rare for me to have to do that.”
For McRae, the best way to tell the property manager that their services are no longer required is to do it in an understanding yet businesslike way.
This involves explaining why you are leaving them by focusing on business reasons, as opposed to the company’s shortfalls.
An example of this is when McRae had a property management company telling him that they were doing all they could to get one of his properties tenanted.
This involved spending a large sum each week advertising in the local paper, without success. The property was located in a small town outside a larger regional centre.
“When my patience ran out, I contacted other property managers in the small town and found that 98% of potential renters ‘walk-in’ to agencies, rather than look for listings in the larger town’s paper,” he says.
“With that, I was able to explain that I appreciated the work that was being done for me, however, I needed to take a different approach and use the local agent for my investment to be profitable.”
BUILDING RELATIONSHIPS FROM A DISTANCE
As somebody with property in a number of different states and countries, McRae knows more than most about long distance communication. He has found that when investing from a distance, the reassurance that someone you trust is managing your property is vital.
“Despite what some people tell you, I have found it possible to build strong relationships over the phone and by email,” he says.
In fact, the best property manager he has ever worked with is somebody he has never met face-to-face, yet he has been working with her for the past eight years.
Overall, his experience with investing in the US has made him appreciate the standard of property management in Australia.
Generally, he finds that communication is not as consistent in the US, and payments are often delayed or need to be chased up. Evictions and vacancies are more common, and therefore the need for good communication only increases.
Peter McRae’s tips for dealing with property managers
● Property managers respect a calm, businesslike approach.
With strong communication, sensible negotiation and at times an ability to compromise. I have always found working with them this way brings out the best in them and creates a strong working relationship.
● Be organised, and respond immediately to requests.
Do this even if you are unsure how to proceed by discussing your ambivalence with the property manager. Delays lead to unhappy tenants and a property manager who doesn’t think you care about your property.
● Expect to have ongoing repair issues
, particularly when owning a portfolio of properties.
● Focus on building a supportive relationship
, and ultimately they should have your best interests at heart. Remember that good relationships with the property manager make them want to go that extra mile for you.