How to manage an investment property
Find the most convenient and stress-free way to manage your investment property.
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If you know where and when to buy and sell, investing in property can be an ideal way to grow your wealth and diversify your portfolio. But unlike some investments that you can ‘set and forget’, an investment property requires ongoing attention to ensure that it generates the rental income you desire.
There are two options for managing your investment property: doing the job yourself or hiring a property manager to take care of the property for you. Each approach has benefits and drawbacks, so let’s take a look at both of them to see which one is the right choice for you.
Hiring a property manager
Before looking at the pros and cons of this approach, let’s find out what a property manager does exactly. A good property manager will generally:
- Appraise the rental value of your property.
- Advertise the property to renters, interview prospective tenants and check their suitability.
- Inspect the property and provide condition reports.
- Ensure that rent is paid on time and in full.
- Ensure the rental bond is paid on time and in full.
- Resolve any tenant issues and complaints that may arise.
- Organise tradesmen to perform necessary repairs and maintenance when required.
- Deal with difficult tenants and attend rental tribunal hearings.
Pros and cons of using a property manager
Pros
- Time: Free up more time for yourself.
- Stress-free: Less stress than managing it yourself.
- Leverage expertise: Take advantage of a property manager’s knowledge and experience.
Hiring a property manager to take care of your investment can save you a whole lot of time and stress. From finding suitable tenants to staying on top of maintenance tasks, there are plenty of time-consuming duties associated with managing a property. When you have an agent to take care of them for you, your investment doesn’t have to be a day-to-day worry.
Property managers also bring specialist knowledge and expertise. For example, they will have contacts with trusted local tradies when a maintenance task needs to be performed, and they understand all the ins and outs of tasks related to managing your property, such as setting the rent and sorting out problem tenants. In other words, they have all the necessary tools to help you get the most out of your investment.
This approach also eliminates the risk of emotional involvement on your behalf, such as giving problem tenants another chance when you’d be better off giving them the boot.
Cons
- Costs: Hiring a property manager may be expensive and time-intensive.
- Management risk: You’ll have to relinquish control to someone who may not manage the property to your standards
The major downside of hiring a property manager is the fees involved. You’ll have to factor the agent’s ongoing fee into your investment plans and cash flow, and you’ll need to be satisfied you’re getting your money’s worth. Fees vary from state to state, but they are generally calculated as a percentage of the rent on the property. The fees for managing an investment property are usually tax deductible.
Another disadvantage for some property owners is that you need to be willing to take a back seat or ‘hands-off’ approach to managing your asset. There’s every chance an agent won’t manage your property the same way you would, so handing over control to someone else can be a difficult proposition.
If you choose to hire a property manager, meet a few different agents and find one you like before handing over any money. Check for references and get details on the level of service you will receive for peace of mind.
Pros and cons of DIY property management
Pros
- Save money
- Greater control
- You can give your investment all the attention it needs
Some investors prefer to take on the task of property management themselves and save on agent fees in the process. The cost of maintaining an investment is always a crucial factor in the measure of its success, so saving yourself the expense of an agent’s fees is a win in anyone’s book.
If the investment property is located close by to your own home, and you know and trust the tenants, a DIY property management arrangement can work well. Rather than being one of many properties an agent has to manage, your investment is your top priority and gets your full attention. Because you have emotional stake in the property, you’ll ensure that every aspect of its management is looked after just the way you like it.
Cons
- Time-consuming
- Can be stressful
- You may not have specialist property management knowledge
- Emotional involvement can be a risk
If you choose the DIY approach, you’ll need to be willing to take on many of the duties a property manager would take care of. This includes providing a residential tenancy agreement and a condition report, chasing up rent payments, and responding to any repair or maintenance requests as quickly as possible.
Another important part of being a landlord is maintaining a good relationship with your tenants, which is not always an easy thing to do. The property management process can be a breeze if you have good tenants, but it can quickly turn into a nightmare if your tenants start missing rent payments or even damage your property.
Finally, remember that you probably won’t have the specialist industry knowledge a property manager has, such as details on current rental market performance or a tenant’s rental history. So make sure you’re aware of all the duties required before overcommitting yourself.
Choosing a property manager
There’s a lot more to property management than just chasing up rent payments, so it’s important that you hunt around for the right property manager for your investment. The majority of property managers are licensed real estate agents. You may be able to get in touch with one via the agent who handles the sale of the property you purchase, or you may prefer to do your own research to track down reputable property managers in your area.
Once you’ve found a few property managers, ask for more details about the services they offer to see how they stack up against each other.
Here are a few useful questions you can ask a prospective property manager:
- What services do you provide?
- How much experience do you have?
- Are there any other properties you manage in the local area? Can you provide any references?
- How many properties do you manage at any one time?
- Will there be one person in charge of managing my property or will it be managed by a team?
- How will you determine the rental value?
- How will you find and assess potential tenants?
- If a matter concerning difficult tenants is taken to court, will you represent me?
- How often will you contact me about my property? What sort of communication will you provide?
- How much does your service cost?
When you find a property manager who provides satisfactory answers to your questions, it’s time to think about handing over the keys.
The choice is yours
The right way to manage an investment property is up to you. In the end, your decision could come down to something as simple as how close the property is located to your own home or how willing you are to pay an ongoing fee.
Weigh up the merits of each approach before making your final decision. This will ensure that your property is managed effectively and efficiently, giving you the best possible return on your investment.
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