Noob - buying property with tenant
- Thread starter tempura
- Start date
If you are new to property investing you really should think about using a property manager not self managing. There are a lot of legal issues to consider and if you get it wrong you will lose money. Well worth a fee of 5-8% in my view, especially if tenant ever stopped paying and they need to go to court. Its nice to have a professional to work with and get nicely typed statements each month and at end of financial yr too!
I have pasted some sample questions below for interviewing property managers. If you do a search in the forum you will find other threads on how to choose one.
1. How many properties do you manage?
Ideally, one full time property manager working alone should have a portfolio of between 80-120 properties on their books.
2. How long have you been a property manager?
Experience may not necessarily indicate a high skill level, but time in the field (especially in the same area) reflects local knowledge and stability. Experienced managers are more likely to have efficient systems in place.
3. What services will your company be providing?
Any competent manager will not only be able to provide you with a comprehensive list of their services, but should additionally have an information package ready to send to you, listing all services and fees.
4. How much are your management fees and what is included.
For example, standard services included in the property manager?s fee generally include: quarterly inspections, follow-up reports, and payment of rates; water; strata and insurance bills.
You should enquire about postage and petties fees, advertising costs (when/if you need to pay) letting and reletting costs, tribunal fees and any other costs that are not included in the management fee.
Fees vary between managers and can generally range anywhere between 5-12% of the rent collected, depending on the area, the type of property, and the level of service being offered.
Remember too that fees are negotiable and you may qualify for more of a discount if you offer more than one property to the agency for management. Management fees can have a big impact on the net return from your properties, so don?t be afraid to ask for a better deal!
5. How do you locate prospective tenants?
Marketing is essential and advertising should be employed as effectively as possible. This may include newspaper ads, signage, window displays and rental lists. Usage of the internet is also recommended, but again, this depends on location and property type.
6. How do you screen your tenants? Do you carry out a credit check? How many references do you require, and can these be passed onto me if I want to double-check this person's credentials?
Tenant screening has become more sophisticated in recent years, with national databases available (such as TICA and TRA). A proficient property manager should also follow up on references, as well as talking to two previous landlords/managers. This is important as the last agent may be looking for a reason to get rid of a ?troublesome tenant? and so may not reveal all of the facts. Verifying an opinion with another landlord or property manager can help manage such situations.
If possible, a property manager may even use the opportunity to deliver an application form to a prospective tenant?s home, to observe firsthand the prospective tenant?s living standards.
7. What times are you available to show tenants my properties?
Only ever sign up with a property manager who attends properties personally with all tenants. Handing keys out should not even be an option.
Available times should be flexible enough to allow for tenants to view properties after working hours, including at least one day on the weekend.
8. How do you handle repairs? Who do you use for handyman jobs and what is their hourly rate?
A good tip here is to add to your management agreement, a clause which says that you are to be contacted prior to any money being spent, even if it is less than $100-200 (most agreements seem to favour this amount as being the minimum they can spend without informing you). Adding a clause such as ?all repairs to be first authorised in writing by the landlord? lets you know upfront about all maintenance issues. Of course, every landlord has their own approach, and you may feel comfortable allowing repairs up to a certain dollar value without prior approval. Not everyone wants to be contacted about every repair. This is purely a personal choice.
9. What course of action do you take if any of the following happens:
? Tenant starts missing rent or is consistently late ? and what does the property manager classify as ?late??
? Tenant doesn?t maintain the property, or causes damage to the property?
? Tenant ?does a runner??
With clear procedures in place, the property manager should be able to explain these to you clearly. Also be sure to ask for clarification of such systems in writing, if they aren?t outlined in their Information booklet.
Some landlords also like to check how often a property manager has gone to the Residential Tenancies Tribunal, as this can demonstrate experience in dealing with problem tenants. Of course, it may also be an indicator of a track-record of poor tenant selection by the property manager! But things can go wrong, even with previously perfect tenants ? so visits to the tribunal are an unfortunate part of managing properties.
10. What payment methods do you offer to tenants?
Ideally look for a property manager who encourages Direct Debit facilities, as this is convenient and generally more consistent for both tenants and landlords. This can also help to minimise late-payment or non-payment of rent, especially if a system can be set up for tenants to automatically pay their rent directly out of their bank accounts.
11. How often are statements sent out and payments made to my account?
Monthly seems to be the preferred industry standard for statements, whilst payments to your bank account can be scheduled according to individual wishes. Most landlords select either fortnightly or monthly transactions. You must make sure you regularly check the money is being deposited on-time. Engaging a property manager does not mean abdicating control of your investments. Remember that Real Estate agencies sometimes go broke and you don?t want that to happen with them owing you thousands of dollars of back-rent!
12. When do you hold rent reviews?
Regularly reviewing current market rentals and ensuring you are getting the best rent achievable for your properties is a key task for your property manager. Property managers should endeavour to stay abreast of market changes and suggest changes accordingly. Ask them when they usually carry out reviews of current rents.
I have pasted some sample questions below for interviewing property managers. If you do a search in the forum you will find other threads on how to choose one.
1. How many properties do you manage?
Ideally, one full time property manager working alone should have a portfolio of between 80-120 properties on their books.
2. How long have you been a property manager?
Experience may not necessarily indicate a high skill level, but time in the field (especially in the same area) reflects local knowledge and stability. Experienced managers are more likely to have efficient systems in place.
3. What services will your company be providing?
Any competent manager will not only be able to provide you with a comprehensive list of their services, but should additionally have an information package ready to send to you, listing all services and fees.
4. How much are your management fees and what is included.
For example, standard services included in the property manager?s fee generally include: quarterly inspections, follow-up reports, and payment of rates; water; strata and insurance bills.
You should enquire about postage and petties fees, advertising costs (when/if you need to pay) letting and reletting costs, tribunal fees and any other costs that are not included in the management fee.
Fees vary between managers and can generally range anywhere between 5-12% of the rent collected, depending on the area, the type of property, and the level of service being offered.
Remember too that fees are negotiable and you may qualify for more of a discount if you offer more than one property to the agency for management. Management fees can have a big impact on the net return from your properties, so don?t be afraid to ask for a better deal!
5. How do you locate prospective tenants?
Marketing is essential and advertising should be employed as effectively as possible. This may include newspaper ads, signage, window displays and rental lists. Usage of the internet is also recommended, but again, this depends on location and property type.
6. How do you screen your tenants? Do you carry out a credit check? How many references do you require, and can these be passed onto me if I want to double-check this person's credentials?
Tenant screening has become more sophisticated in recent years, with national databases available (such as TICA and TRA). A proficient property manager should also follow up on references, as well as talking to two previous landlords/managers. This is important as the last agent may be looking for a reason to get rid of a ?troublesome tenant? and so may not reveal all of the facts. Verifying an opinion with another landlord or property manager can help manage such situations.
If possible, a property manager may even use the opportunity to deliver an application form to a prospective tenant?s home, to observe firsthand the prospective tenant?s living standards.
7. What times are you available to show tenants my properties?
Only ever sign up with a property manager who attends properties personally with all tenants. Handing keys out should not even be an option.
Available times should be flexible enough to allow for tenants to view properties after working hours, including at least one day on the weekend.
8. How do you handle repairs? Who do you use for handyman jobs and what is their hourly rate?
A good tip here is to add to your management agreement, a clause which says that you are to be contacted prior to any money being spent, even if it is less than $100-200 (most agreements seem to favour this amount as being the minimum they can spend without informing you). Adding a clause such as ?all repairs to be first authorised in writing by the landlord? lets you know upfront about all maintenance issues. Of course, every landlord has their own approach, and you may feel comfortable allowing repairs up to a certain dollar value without prior approval. Not everyone wants to be contacted about every repair. This is purely a personal choice.
9. What course of action do you take if any of the following happens:
? Tenant starts missing rent or is consistently late ? and what does the property manager classify as ?late??
? Tenant doesn?t maintain the property, or causes damage to the property?
? Tenant ?does a runner??
With clear procedures in place, the property manager should be able to explain these to you clearly. Also be sure to ask for clarification of such systems in writing, if they aren?t outlined in their Information booklet.
Some landlords also like to check how often a property manager has gone to the Residential Tenancies Tribunal, as this can demonstrate experience in dealing with problem tenants. Of course, it may also be an indicator of a track-record of poor tenant selection by the property manager! But things can go wrong, even with previously perfect tenants ? so visits to the tribunal are an unfortunate part of managing properties.
10. What payment methods do you offer to tenants?
Ideally look for a property manager who encourages Direct Debit facilities, as this is convenient and generally more consistent for both tenants and landlords. This can also help to minimise late-payment or non-payment of rent, especially if a system can be set up for tenants to automatically pay their rent directly out of their bank accounts.
11. How often are statements sent out and payments made to my account?
Monthly seems to be the preferred industry standard for statements, whilst payments to your bank account can be scheduled according to individual wishes. Most landlords select either fortnightly or monthly transactions. You must make sure you regularly check the money is being deposited on-time. Engaging a property manager does not mean abdicating control of your investments. Remember that Real Estate agencies sometimes go broke and you don?t want that to happen with them owing you thousands of dollars of back-rent!
12. When do you hold rent reviews?
Regularly reviewing current market rentals and ensuring you are getting the best rent achievable for your properties is a key task for your property manager. Property managers should endeavour to stay abreast of market changes and suggest changes accordingly. Ask them when they usually carry out reviews of current rents.