Self-managing your investment property might seem simple but there is a lot more involved than just collecting the rent. Three-quarters of all landlords opt to have a professional manage their rental. What are the benefits and how do you choose the best PM?
Unpaid rent… absconding tenants… damage… As landlord insurance providers we often deal with the fall-out from poorly managed rentals. While good management can’t prevent all mishaps at the rental (we all know how unpredictable Mother Nature, people and life in general can be), it plays a part in minimising many of the risks associated with leasing investment properties.
When it comes to managing rentals (whether it’s a single property or an entire portfolio) landlords generally fall into one of two camps – self-managing or engaging a property manager (PM).
Self-managing may be an option if you live near your rental, and have the time, inclination, knowledge, mindset and skills to devote to seeing to the day-to-day management of your investment property and tenants. Around 75 per cent of all landlords, however, choose to contract a real estate professional – and that’s a decision generally supported by landlord insurers too. Why? Because having a professional involved can help minimise certain risks, like poor tenant selection, rental losses, tenant damage, and maintenance and repair issues. In fact, some landlord insurers (including EBM RentCover) will only cover properties under professional management.
So what are some of the benefits of using a PM?
- They will take on most of the responsibilities of managing your tenants and property (see list below).
- They can advise you on your rights and responsibilities and those of your tenants.
- Their fees are generally tax-deductible.
- You save yourself the time, stress and hassle of managing the property yourself.
- They manage rent collection, follow up on late payments and are on top of appropriate record keeping.
Some of the responsibilities your PM may take on (depending on the contract) include:
- marketing the rental
- sourcing and screening tenants
- preparing a tenancy agreement
- collecting and lodging bond payments
- keeping and arranging records (including trust accounts) and other paperwork
- negotiating, collecting and remitting rent monies
- taking care of tenant enquiries
- carrying out regular inspections
- managing the condition report process
- arranging for maintenance and repairs
- providing relevant notices and financial statements to the landlord
- paying council rates and taxes (from the rental income)
- reviewing legislation and lease paperwork
- renewing rent and leases
- managing and adjudicating disputes
- managing tenancy breaches
- issuing termination notices
- representing the landlord at tribunal or court
- arranging landlord insurance and assisting with claims.
If you are looking to engage a PM, there are a number of questions you should ask to help select the right one.
It’s important that you ask prospective PMs a whole range of questions to cover off things like fees and services and here a few which can impact insurance cover.
What are your qualifications?
Rental properties are subject to legislation, rules and regulations and it’s important that the person managing the property is a full-bottle on these – and keeps up-to-date with the ever-changing regulatory environment. You can find yourself in hot water (e.g. courts or tribunals) if you breach tenancy legislation or other laws (like privacy or discrimination). You can also jeopardise your insurance cover if you don’t meet legislated requirements (e.g. safety) or follow the right procedures (e.g. for eviction). Real estate agencies need to be licenced and you should check the PM is qualified and holds the required certifications and registrations (which vary by jurisdiction).
How do you screen prospective tenants?
Getting the wrong tenant in the rental can have serious ramifications down the track – like rent default, a broken lease, denial of access, damage, illegal activities on the premises (e.g. drug labs) or theft. It’s important that your PM has a proven methodology for vetting tenants, which includes carrying out income and employment checks, reference checks and searching tenancy databases. Having a good tenant is not infallible. Circumstances can impact even the best renters, like unemployment, relationship breakdown, illness or death, but installing a good tenant in the first place can reduce the likelihood of tenant-related issues at the property, which can often lead to insurance claims.
How do you manage rent payments?
Collecting rent might not be the only thing your PM does, but it’s a vital task. Your PM needs to be on top of rent payments and have a system in place to deal with rent arrears. There’s an obligation under landlord insurance cover to act to minimise losses, so it’s essential that the PM addresses rent issues before they spiral out of control.
What’s your process for dealing with maintenance and repairs?
It’s not only a condition for building insurance cover that the premises is adequately maintained, there are legal and possibly insurance ramifications if urgent and emergency repairs aren’t carried out within legislated timeframes. Be sure to check how the PM deals with maintenance matters and have a procedure in place for arranging urgent repairs. It’s also a good idea to make sure the inspection regime includes notifying you, as the owner, of any issues, including those that may pose liability risks.
Your investment property is likely to be one of your biggest assets, so be sure to protect it with good management and the right landlord insurance.
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