Picking a property manager

April 27, 2007

Finding good tenants is tricky enough, but choosing a property manager to do it for you also has risks, reports Penny Harding.

For some property investors, the hassles of finding tenants, chasing debts and organising maintenance are just not worth it. But hiring a property manager may not mean the end of trouble.

Property managers typically charge a fee of 7.5% – 8.5% of rental income and in return they will handle the messy details such as checking tenant references, inventories and dealing with tenant demands.

But before signing a contract with a management firm, property owners should make sure they know the answers to some key questions. For example:

  • Is rent held in a trust account for safekeeping? If not, your money is at risk if the management firm gets in trouble.
  • How often is the rent paid?
  • How often will the manager inspect the property?
  • What will the manager do if a tenant does not pay on time?

Property owners would be well advised to look for a management company big enough to provde cover for holidays and sickness – an overflowing hot water cylinder cannot wait.

A company should have specialists to handle the administration side and others with the sales skills to find new tenants. A jack of all trades may be master of none.

The firm should be able to email reports and photographs showing the state of properties to absentee landlords.

If a property manager’s office looks like a shambles, chance are that the management operation wil be too.

In selecting a manager, it is worth noting that firms who work through the Real Estate Institute are at lest governed by the organisations’s complaints procedures. Independent firms are not, but ther are moves within the industry to polish their performance.

In Christchurch, the Independent Property Managers’ Association is still gathering numbers, but it has a code of ethics, code of conduct and a complaints process that binds its members. The association was formed in 2003 by a group of 10 independent property manaagers and has now grown to 35 members.

Inaugural president Martin Evans said the assocition had yet to hear a complaint against one of its members.

“But we have picked up properties where there have been problems and the owner is not happy with the way rent arrears or maintenance has been handled.”

Evans runs A1 Property Management in Christchurch and is also president of the New Zealand Property Investors Federation. He says the association was formed to give members a voice and set standards for the industry.

Association guidelines say a manager should operate separate accounts for rents received, employ no staff with a criminal history and have a no-tolerance policy for rent arrears.

They should have a good accounting systems, and provide regular statements and property reports to owners.

There are moves in Auckland too.

Next month, property investor Andrew King is starting New Zealand’s first property management broking company to match up owners and managers. Matchmaker King has devised a 57-point checklist of what owners should look out for and expects to get most of his business from people unhappy with their present managers.

King, of Andrew King Property Management Brokers, is vice-president of the New Zealand Property Investors Federation, author of the 2003 Complete Guide to Residential Property Investment, and has been a property investor for 20 years. He says an owner engaging a property manager often does not ask enough questions and ends up with the wrong person – and mostly they put up with the poor service.

His firm will operate in the same way as a mortgage broker. After interviewing the investor to find out what kind of property they have and what kind of tenant they are looking for, he will look for someone to manage it. If King makes a match, his company collects a fee from the property manager.

King hopes to attract investors who are in teh process of buying an investment property and do not want the hassle of looking for a manager. His firm will also manage the transfer for people wanting to change their property manager.

“Some people don’t want the potential unpleasantness – I imagine that will be the biggest market,” he says.

But he also knows of cases where property managers have sacked owners. Such cases usually arise because the owner refuses to carry out essential maintennace, which makes the property almost impossible to let.

Helen Gatonyi, co-ordinator of the Tenants Protection Association, says a large number of the complaints they receive are about independent property manaagers, who are outside the Real Estate Institure’s complaints system.

“Many of them are working without proper understanding about the law and about the relatinship of the two parties that they are representing,” she says. “The whole market needs to be professionalised.”

Gatonyi welcomes the moves by the Independent Property Managers Association to provide a framework for managers.

“Anything that is looking at ethics and constitution and complaints procedures is a good thing.”

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