Should you hire a property manager or manage your new investment property yourself?
It’s tempting to consider cutting out the management fees for a property so that 100% of the rent is paid to you.
But, if you remove the fee and the service – is it worth it?
First things first,
What does a property manager do?
Essentially, a property manager will be the middleman between you (the landlord) and the tenants in your property.
Although agreements may vary, the property manager will generally handle –
- Finding tenants when the property is unoccupied
- Determining the prospective tenants suitability for your property including reference checks
- Arranging inspections for potential tenants to see the property
- Collecting rent payments from tenants
- Conducting regular property inspections to check on the condition of the property
- Managing the tenants, including answering their queries, arranging repairs or maintenance with tradespeople, and looking after any other necessary communication between tenants and landlords
What are the advantages of managing your own property?
The biggest advantage is the bottom line; by managing the property yourself you will save the management fees you’d be required to pay. This increases the profitability of your investment property.
By conducting your own inspections, you will be able to see the condition of the property first-hand.
When maintenance is required, you can manage your own quotes and the logistics for tradespeople. You can use people that you know and are completely comfortable with.
What are the advantages of using a property manager?
The biggest advantage by far is the time you will save.
A property manager is a professional who knows the legislation, regulations and the local market of your investment property.
This knowledge is only built by being on the ground and being immersed in the local market.
You benefit from this knowledge when advice is needed on things like –
- keeping your weekly rent attractive to tenants
- sourcing cost-effective and quality focussed tradespeople
- making changes to your property (upgrades, additions, etc) to ensure your property is appealing to tenants
Unlike you, a property manager isn’t emotionally attached to the property and is better at making impartial judgements and decisions.
One of the benefits of using a real estate to manage the property is their access to a pool of potential tenants. They’re also supported by systems and permissions to access the financial records and rental history of potential tenants.
How much does a property manager cost?
Management fees are usually calculated as a percentage of the weekly rent. This can vary between 6-10%, depending on the value of the rents.
Sydney rental prices are high, so management fees can be as low as 6%. Somewhere like Queensland or Western Australia with lower rent will have higher management fees between 8-10%.
When rental prices are high, you have better chances of negotiating a lower management fee.
The real estate agent collects the rent from the tenant, takes out their fee and sends the remainder to you at the end of month.
The leasing fee is payable when the initial or first tenant is found for your property. This is usually charged at 1.5 – 2 x the weekly rental amount.
This fee is taken by the agent from the tenants rent payment and the remainder of the funds are released to you.
There is usually a fee to re-lease the property if tenants leave and a replacement must be found.
Marketing fees are usually separate to a leasing fee (or a re-leasing fee) and can be charged for premium advertising like priority listings on real estate websites.
Can I negotiate with my property manager?
Yes, you can! Do your research to find out what the general pricing and expectations are in the local market. Don’t be afraid to ask for a better price.
When you’re issued with the agreement, ensure you read through it thoroughly and understand it. Ask questions if it doesn’t make sense to you and don’t pay for services which you don’t need.
A local property manager has in-depth knowledge of the local market
Disclaimer: All data and information provided on this site are for informational purposes only. AssetBase makes no representations as to accuracy, completeness, currentness, suitability, or validity of any information on this site and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. All information is provided on an as-is basis.
By Nathan Lewes
Nathan Lewes is the Managing Director and co-Founder of AssetBase. He has 12 years of experience in the industry, in a range of roles from local residential to high-end property marketing. Nathan has a close relationship with the Australian Defence Force and the NSW Police Force and has assisted many clients to build their wealth in property while being conscious of their busy work schedules.