How do you choose a Property Manager?

[Zeon Roderique]

Being a Property Manager myself I often ask this question of potential Landlords. The most common answer I get back which scares me is fees especially when the fee differences are only a couple of percent.

Why you would pick on fees is beyond me as an example $350pw property, the difference between each percentage increase is only $3.50 per week. Which also when you take into account the tax deductability of fees for managing a property I really don't see why you could do this?

I always advise people to look at the other associated costs and the service expectations and then pick a PM you feel confident in on ability and experience. We are talking in most cases peoples biggest investments. You wouldn't give your keys to your Ferrari to a 13 year old so why would you risk something of similar worth to a step up from a high school graduate with no experience?

 

[newlywed1311]

I'd like to know what questions you think we should ask of our PM
I asked our potential PM's what their process was when someone starts to default on rental repayments. I wanted to see if they had the systems and processes in place to chase up overdue rent. I also asked about their selection of tenants, inspections, etc. Our PM is an investor herself, so that made me feel a bit more reassured. Price certainly comes into it, especially when they all seem to have a similar process. Experience or 'years on the job' does not necessarily indicate a good PM, just one whose been in the job for a long time. Number of properties managed by each PM is also not a good indicator of how good the PM is because there are different skills that each bring to their job. Also, some have admin support, some don't, etc.
We also looked at associated costs, after hours access, types of properties in demand (and whether our 'type' was one of them)...
We spoke with people who rented and people who were investors to get their recommendations too.
It is a really difficult choice to make because until something goes wrong, you don't really know what the capacity of your PM is.

 

[rugrat]

Fees may be a deciding factor in some situations because, when looking at pm's, without having employed that particular pm's service before, it can be near impossible at times to see any other difference. When I am looking for a pm, I can ask all the right questions, but anyone can give me the answers they know I want to hear. If I don't know anyone else who has used them, and everything else 'appears' equal, then I am going to go the cheaper option. unfortunately, unless there is something glaringly obvious to distinguish between the competitors offering the services, then why would I pay more?

My first IP won't be completed until the begining of next year, but I have started to look around now to get an idea of who I may look at using as a pm. Alot of the information I have gotten from various REA's has been very standard. Most of them charge between 9% - 10%, some charge other fees on top of that. There are a couple who charge only 7.9% and one I have found who only charges 5.6%. They all 'seem' to offer the same services. They all present well. I do not know anyone who i can ask about first hand experience of these services. How else do you propse I choose between them? ( I am serious - if you have any suggestions I am open to hear them, I am very new to this game).

 

[Just RentSydney]

You cannot compare apples and oranges.
We recently came across an owner that had previously been paying 4% management fee and was shocked that she had bad tenants that trashed her investment property and caused over $30,000 in damages to the property. When we asked if she had received property updates over the past year she said "i didn't think property managers did that". Had she had just one regular inspection she would have potentially saved thousands of dollars.
So before deciding on a PM, ask them what there services offer, not just what their management fees are! A good property manager will save you money.

 

[cgw]

You can ask all the questions you want, if they are good they will have all the right answers for you. Ask them "What makes you better than the rest"

Property Management is quite easy if you have good tenants and they pay on time, therefore the most important thing the PM should have is excellent people skills and referee checking.

If they are good they should be confident enough to guarantee their services, so if you the LL are not happy with them, you can cancel the contract within 48 hours - 7 days.
Make sure you read the contract cancellation time and change it to suit you.

 

[poppy]

It's usually not so much how I choose a PM. Rather, I start with a number of PMs and then gradually eliminate them until I am only left with one or two options.

The number one reason for eliminating a PM is a failure to respond to my enquiry either at all, too slowly or with obvious disinterest.

In fact, I find at least half of PMs do not respond to a website/email enquiry asking them to send me some information on their PM service (ie the standard brochure spruiking their agency and fee structures etc). If they don't respond to email from a potential new customer, they are not going to respond to my emails when they are managing my property.

Recently I was looking for a new PM for one of my IPs and thought I had found a great local PM. I was ready to sign up and just wanted to ask a couple of things. I tried to call the PM twice and left messages and they didn't respond (they still haven't weeks later). Obviously, the PM did not get my business.

 

[capitalEyes]

Hi Zeon,

I have about a 50/50 split self vs property managed on my props. The properties that are managed by others are remote and I’ve had a vast range of experiences – from amazing pro-activity, professionalism and customer service (high school graduate in Victoria) to ‘forgetting’ to let me know that a new tenant had moved in (experienced commercial property manager in WA).

In general I’d say it’s a gamble when you sign them on. On the one hand (if they’re professional) this is what they do for a living and should have the systems & processes down pat. On the other, from my research, on average a single employee with not too much experience will be managing over 100 props. How special do you think you look signing the standard form contract coming in at # 115?

I’d have to agree with the other posts here in that a PM will tell you exactly what you want to hear, much like a Ferrari salesperson. I’d recommend combining cgw & poppy’s approach. Interview as many as you have time for, collect their contracts, take them home and cross out the bits you don’t like, and see who will sign up with you then. Watch out for:

Exit clauses only on gross non-performance by the PM, and exit fees.
Increases on the % fees charged. I.e we currently charge 8.8% of your ever increasing rent but we will increase this percentage also during the agreement term.
Open ended expense reimbursements

At the moment for our PM’s the correlation between fees and service is actually inverse (our best PM is our cheapest) but I’m not suggesting this will generally be the case. I am suggesting that the best way to choose a PM is to cycle through them (on your terms where possible) until you find the ones that actually care for and manage your property, not charge you for being a halfway house for your rent.

 

[mja]

There's a great article from Michael Yardney's newsletter about this topic:

"11 Questions to Ask Your Property Manager"

http://www.propertyupdate.com.au/articles/183/1/11-questions-to-ask-your-property-manager/Page1.html

 

[Zeon Roderique]

Great Link

Thanks MJA. Great article.

Really positive stuff I can draw from the previous posts. Always looking to improve.

 

[Zeon Roderique]

Sooo True!

You cannot compare apples and oranges.
We recently came across an owner that had previously been paying 4% management fee and was shocked that she had bad tenants that trashed her investment property and caused over $30,000 in damages to the property. When we asked if she had received property updates over the past year she said "i didn't think property managers did that". Had she had just one regular inspection she would have potentially saved thousands of dollars.
So before deciding on a PM, ask them what there services offer, not just what their management fees are! A good property manager will save you money.

Always make sure that the inspections are being done. They can be so crucial even if the tenant has been a great tenant for the past 5 years. I had a situation where I had good tenants, always paid rent on time and house was always tidy and well presented for 3 years. The owner had suggested that we move the routine inspections to 6 monthly at the tenants request and I talked him out of it because it fitted in with the group of properties near by anyway so it was not a hassle to do. Long story short, the tenants had a messy separation and she left leaving him to loose the plot in the house and none of this was communicated to the office. I believe that if I had waited the 6 months for the next inspection the property would have been in a very very poor state.

 

[Xenia]

Business relationships are important and can make a difference between a problem turning into a solution or remaining a problem.

Go with one you feel good about!

If you treat people well in business they will do well by you.

Property managers also choose their clients

I certainly didn't go into business to get treated like dirt by anyone and can't stand people who just have to have a win/lose outcome. We have written criteria for what sort of landlords we don't want business from. That's the other side of the story!