From keeping across legislative requirements to ensure compliance to doing regular inspections to managing complex financial accounts, property management is anything but simple.
Here’s everything you need to know.
What is property management?
Property management refers to the process of managing all aspects of a residential property.
Dr Diaswati Mardiasmo, chief economist for PRD, said property management can be done by the landlord, DIY style, or a third-party property manager, either through a regular real estate agency or standalone firm.
“Property managers are responsible for the day-to-day operations of managing a property, including ongoing maintenance, security, rent collection and upkeep of the rental property. They work on behalf of owners of investment properties such as apartment complexes and private homes,” she said.
Investors Choice Mortgages director Jane Slack-Smith explained the “important function” as looking after the many requirements of managing the asset for an investor.
“They have so many roles and ultimately, the property manager is the person who gets the 1am phone call to say the hot water is not working,” Ms Slack-Smith said.
What does a property manager do?
Property managers do much more than just collect rent and arrange repairs, they’re responsible for managing the entire “life cycle” of a tenancy.
The list of tasks a property manager does includes:
- advertising the property for rent;
- managing and attending viewings;
- screening tenants, including doing reference checks and reviewing rental history;
- managing the condition report process from start to finish;
- managing the tenancy agreement signing process and handling questions;
- collecting and managing rent from tenants;
- managing financial accounts related to the investment property and providing regular reports;
- inspecting the property regularly;
- organising tradespeople, in negotiation with the landlord, for urgent repairs and regular maintenance;
- providing suggestions and advice to the landlord;
- staying up-to-date with tenancy laws to ensure compliance.
Property management is a big job. Picture: Getty
How much do property managers charge to manage a rental property?
In Australia, a property manager costs an average of 7.5% of a property’s gross weekly rental income, but this can differ by state and region. A flat fee can also be charged but is less common.
Dr Mardiasmo said unlike percentage-based fees, a flat fee is an all-inclusive amount not determined by the weekly rental amount. It can vary widely depending on the property, its location and other factors.
According to recent data, Australia’s average property management fees are 7.5% of the gross weekly rent, she said.
New South Wales property management fees are currently the lowest in the country, at an average of 5.8%.
The second-lowest property management fees in Australia are found in Victoria, with an average of 5.9%. Also sitting below the national average is the ACT, at 7.1%.
Property management fees in Queensland and South Australia sit at the national average of 7.5%, however, South Australia has an additional “rental fee” of 1.9 weeks that has to be paid and is therefore considered higher than the national average.
The highest property management fees are found in Tasmania and Western Australia, both with an average of 8.7%, however, fees in Tasmania are considered higher due to the rental fee at two weeks compared to 1.7 weeks in Western Australia.
Lastly, the average property management fees in the Northern Territory are 8.5%, notably higher than the national average.
|Fee (as a percentage of rent)
|New South Wales
Property management fees are generally, but not always, paid as a percentage of rent. Picture: Getty
What’s the difference between property management fees and leasing fees?
When engaging a property manager there are generally two main fees payable – leasing fees, which cover getting a tenant into the property in the first instance – and then ongoing property management fees, which continue throughout the lease.
Dr Mardiasmo said leasing fees usually cost between 75% and 100% of the first month’s rent, depending on the agreement between the landlord and the property manager.
These fees cover things like:
- advertising the property;
- showing the property to potential applicants;
- reviewing all applications to find a good tenant for approval;
- preparing the property before tenants move in.
“Unlike leasing fees, management fees are a continuous fee that cover ongoing services that keep your property occupied and operating well,” Dr Mardiasmo said.
Do I need a property manager or can I self-manage my property?
While the majority of Australian property owners engage a property manager, about 33% manage their own property and it’s perfectly legal.
Managing a property without a property manager sees landlords dealing directly with tenants; vetting applications, getting paperwork sorted and managing issues day-to-day.
Adrian Wilson, founder and principal of Ayre Real Estate, said engaging a property manager is smart.
“Your property is a valuable asset and should be managed by an experienced and professional property manager that is fully equipped and focused on managing the tenants (the people) and the asset (the property) and the services (trades and outgoings) in line with residential tenancy regulations,” he said.
“If you need legal advice you seek out a lawyer, if you need accounting advice you seek out an accountant, the same thing goes for property. There are many hurdles and pitfalls and things that need to be done correctly to meet legislation, not to mention the time and resources required to manage a property.
“So, whilst it may suit a very small number of people to self-manage, typically any cost saving is lost in time or rectifying problems that could have been avoided,” Mr Ayre said.
Ms Slack-Smith said while property management fees may seem like an extra cost, “if done right it can really save you, time, money and legal fines.”
“If you manage the property yourself, you are the one getting the 1am calls about the hot water system. You are responsible for knowing all the changes in legislation. For instance, did you know that all Victorian landlords need to provide heating for the main living space by the end of March 2022? If not you are in breach.
Appliance maintenance is the responsibility of the landlord if there’s no property manager to call. Picture: Getty
“What about how you handle late rent? When can you go to tribunal? How often and when and how much notice do you need to give for an inspection?” Ms Slack-Smith said.
Bessie Hassan, a money expert at finder.com.au said although DIY management can save landlords thousands of dollars, it requires a lot of work and carries serious responsibilities.
Ms Hassan said landlords had a lot to gain by managing their properties. The financial benefit is one of the biggest drivers.
“Fees are usually charged as a percentage of your weekly rental income and can be anywhere between 5% and 12%, depending on your state. If you self-manage your investment property, these funds can remain in your pocket,” she said.
Going DIY also gives landlords more control, Ms Hassan said.
“You can screen and vet potential tenants yourself, rather than having an agent do it. Not only does this give you total control over who lives in your property, but you’ll also be able to establish a closer relationship with your tenants.”
Being more involved also means owners can keep abreast of any issues.
“You’ll be more involved with the day-to-day management of your tenants, so if something goes wrong with the property, like a leaky pipe or broken toilet, you’ll be the first to know. You’ll also be the first port of call for any neighbours with complaints about your existing tenants,” Ms Hassan said.
Things to look out for
Although DIY management can save cash, there are some things to look out for, Ms Hassan said.
“It’s important to have a deep understanding of the work involved with property management before deciding to do it yourself,” she said.
First off, landlords need to understand it takes a lot of time. “Booking inspections, vetting applications, keeping up with general maintenance and repairs – managing a property is time-consuming! You’ll also need to be available to deal with issues out of hours and on weekends,” she said.
Keeping across convoluted and ever-changing residential tenancy legislation – which differs between states – is also important.
“There can be serious penalties if you break the law as a landlord, regardless of whether it was intentional or not. It’s crucial you’re familiar with tenancy rights in your state. These can be fairly complex and tend to change frequently, so you’ll need to keep up to date,” Ms Hassan said.
Then there’s the emotional investment. “Being a private landlord means you’ll need to make some tough decisions. This includes managing disputes, proceeding with evictions and communicating rent increases. This can be highly stressful and end up impacting your personal life,” Ms Hassan said.
There’s a variety of reasons why landlords chose to hire a property manager, Dr Mardiasmo added.
“Some have an extensive portfolio of rental properties and lack the time or expertise to manage the property themselves. But if you prefer to be more hands-on and can commit to being available all hours of the day, perhaps self-managing a rental property would be more ideal,” she said.
What do I need to know to manage my property by myself?
Just a few years ago, privately-managed rentals were a novelty. But that’s the not case in the rental market nowadays, with about a third of Australia’s more than two million property investors choosing the DIY route.
Dr Mardiasmo said while self-managing can save a landlord money, it’s a big job.
“Essentially, a landlord who wants to self-manage their rental property must undertake the same tasks a regular property manager would.”
To maximise the rental income and find the best possible tenants, self-managing landlords must:
- research what similar properties are renting for in the area;
- undertake a thorough analysis of tenant applications;
- have sound accounting skills to keep track of payments and costs associated with the property;
- run inspections of the rental property;
- follow legal and legislative structures;
- be reachable by the tenant;
- have time to deal with issues.
How can I find a property manager?
Good property management is about maximising what a property owner can earn from a property while minimising the risk, meaning a good one is worth their weight in gold.
The best place to start the search is on realestate.com.au/property-management. It’ll take the guesswork out of finding the highest-rated professionals in the area.
Do your research
Kasey McDonald, the head of leasing at property management agency :Different, said research is vital when looking for a property manager.
“Jump online to read any customer reviews there might be for the property manager. This is a quick and easy way to learn about the experience other property owners have had with them and a rough idea of what working with them might be like. Google reviews and Productreview.com.au are both great websites to start with,” she said.
Nancy Navarrete, Ray White NSW business development executive, agreed online reviews can give “a good indication” of how a property manager will perform.
You can use realestate.com.au to find a property manager or even seek advice and recommendations on local Facebook groups.
From knowing the demographics of the tenant pool, the best parts of a suburb, or simply what rent to charge, local knowledge is king when it comes to managing rentals.
That’s why looking for a local property manager is always a good idea, according to Ms Navarrete. Search for agents or managers who have a presence in the suburb or manage rentals in the region.
Listen to word of mouth
Word of mouth is one of the best ways to find a great property manager.
“Speak to family members, friends, colleagues, or anyone you know who owns a property and ask them what they think of their property manager. How did they choose them? What has their experience been like and would they recommend them to others?” Ms McDonald said.
Focus on communication
How a property manager communicates is vital, so find out their approach, Ms McDonald said.
“One of the most important things to consider when deciding on a property manager is how easy they are to reach. When something goes wrong with your property or you have an issue with a tenant, you want to know your property manager is reachable and responsive.
“Also, consider how they communicate with you, be it via text, call, email, or maybe through an app. It’s important their preferred communication style suits you and your needs.”
Ask lots of questions
As the saying goes, there are no silly questions, so ask lots when looking for a property manager.
“Find out not only more about them and their property management style but also ask how their business (or whomever they work for) is structured, how they manage tasks, their policies, current portfolio, etc.
“All of this information will help you get a feel for how they like to communicate, manage properties, and approach decision making,” Ms McDonald said.
Pros and cons of using a property manager
As with any decision, there are pros and cons to engaging a property manager or going the DIY road.
Benefits of using a property manager
- It’s tax-deductible; Ms Slack-Smith said an experienced property manager “is a tool every investor should have in their arsenal” and as a cost associated with generating an income, their expenses are tax-deductible.
- They’re subject matter experts; Tenancy legislation, which differs from state to state, is full of complexities and landlords can run afoul of the law without realising it if they manage property themselves. Property managers generally have a better understanding of rental laws and any recent changes to legislation.
- They’re a third party. Dr Mardiasmo said a property manager is a “non-emotionally attached party” who acts on behalf of the owner who can have an emotional attachment to a property.
Downsides of using a property manager
- The expense; “Having a property manager acting on your behalf is a paid service, so landlords who choose to hire a third party have the potential to lose thousands of dollars per year compared to self-managed a rental,” Dr Mardiasmo said.
- It’s less hands-on; Dr Mardiasmo said because a property manager is trained to manage the property entirely, landlords aren’t involved in the day-to-day details.
- Potential for bad service; Like any service, there is good and bad and Ms Slack-Smith said if an owner appoints an “over-worked” property manager, things can be missed. “They may miss the request from the tenant to get the overgrown garden attended to, might not follow up on system alert for late payment of rent and you only become aware when you don’t see the income coming into your bank account, for example.”