Working with Property Managers: A Guide for Investors

This guide covers what to look for in a property manager, how their fees work, and strategies for getting the best results from your property management relationship.

Self-Managing vs Using a Property Manager

Before exploring property management, consider whether you want to self-manage or outsource. Each approach has pros and cons:

Self-Management Advantages

Self-managing saves on management fees which typically run 7-10% of rent. You have a direct relationship with tenants and complete control over decisions. You also have immediate awareness of any issues that arise.

Self-Management Disadvantages

Self-managing requires a significant time commitment and you need to understand tenancy law. You must handle difficult situations personally and may lack the systems and processes that professional managers have developed. Self-management also limits you to investing near where you live.

Property Manager Advantages

Using a property manager frees up your time and provides professional tenant screening. They bring knowledge of tenancy law and compliance, along with established systems for rent collection and maintenance. A manager acts as a buffer between you and tenants and allows you to invest anywhere rather than being limited to your local area.

Property Manager Disadvantages

The main downsides are that ongoing fees reduce your returns and you have less direct control. Quality varies significantly between managers, and they may not treat your property with the same care you would.

Understanding Property Management Fees

Property management fees vary between companies and regions. Common fee structures include:

Always get a clear breakdown of all fees before signing. The cheapest manager is not always the best value if their service is poor.

What to Look for in a Property Manager

Experience and Local Knowledge

A manager who knows your suburb well can price your rent accurately, find tenants quickly, and recommend reliable tradespeople. Ask how many properties they manage in your area.

Portfolio Size

Find out how many properties each property manager handles. If they are managing too many properties, your property may not get the attention it deserves. A reasonable load is typically 80-120 properties per manager.

Communication

Good communication is essential. Consider how quickly they respond to enquiries and whether they provide regular updates and reports. Check if there is an online portal for accessing information and whether you will have a dedicated contact person.

Tenant Screening Process

A thorough screening process reduces problem tenancies. Ask about their reference checking procedures, credit check processes, income verification requirements, and tenancy database checks.

Maintenance Handling

Understand how maintenance requests are managed. Find out their response time for urgent issues and whether they have preferred tradespeople. Clarify their approval threshold for repairs and how quotes are obtained for larger jobs.

Questions to Ask Before Signing

1. How many properties do you currently manage?
2. What is your average vacancy rate?
3. How long does it typically take to find a tenant?
4. What does your tenant screening include?
5. How often do you conduct inspections?
6. What is your process for rent arrears?
7. Can I see a sample management report?
8. What is your notice period if I want to leave?
9. Are there any fees not listed in the agreement?
10. How do you handle after-hours emergencies?

Setting Clear Expectations

A successful property management relationship requires clear communication about your expectations:

Maintenance Thresholds

Agree on spending limits. For example, the manager can approve repairs up to $500 without contacting you, but must seek approval for larger amounts.

Communication Frequency

Specify how often you want updates. Some landlords prefer minimal contact unless there is an issue, while others want regular check-ins.

Decision Making

Clarify which decisions the manager can make independently and which require your input. Be clear about tenant selection, rent adjustments, and major repairs.

Red Flags to Watch For

Warning signs that you may need to change property managers include consistently slow responses to your questions, unexplained vacancies or frequent tenant turnover, and maintenance issues not being addressed promptly. Inaccurate or late financial reports are a concern, as are tenants contacting you directly because they cannot reach the manager. Watch out for a lack of regular property inspections and unexplained fees appearing on statements.

Changing Property Managers

If your current manager is not meeting expectations, you can switch. Most management agreements have a notice period (typically 30-90 days). When changing:

1. Review your current agreement for notice requirements
2. Find and sign with your new manager first
3. Give written notice to your current manager
4. Ensure smooth handover of keys, bonds, and documentation
5. Inform your tenants of the change

Managing Multiple Managers

As your portfolio grows across different areas, you may end up with multiple property managers. Keep a master spreadsheet tracking all properties and managers, and standardise your expectations and processes where possible. Consider consolidating to fewer managers if practical, and compare performance across your portfolio to identify which managers are delivering the best results.