Man investors get into real estate initially because they are excited about the potential to grow their wealth. They study the market, do their due diligence and aim to invest in the right places so they can sit back and wait for the returns to flow in. However, many discover that it’s not that easy.
Everyone wants the dream tenant who is conscientious and responsible, pays the rent on time, and treats the property as if it’s their own.
That’s not always what we get. Sometimes a tenant is placed who messes up a property, doesn’t pay the rent on time, and will only alert you to a leaky faucet weeks or months after the issue began, leading to a much more expensive repair.
It can be enough to make an investor wonder if it’s all worth it, as owning investment properties can be an exhausting experience. And this is where property managers come in.
A great property manager can do much of the heavy lifting for you where rental management is concerned. They will be the one who takes those late-night complaints and deals with flaky renters on your behalf.
They will also be the one screening potential tenants, to minimise the chance of renting your property to irresponsible tenants in the first place. With their experience in the industry, they generally maintain an excellent database of resources for repairs and are familiar with landlord-tenant regulations, especially in relation to major incidents like evictions.
However, it stands to reason that, if there can be nightmare tenants, there can also be nightmare property managers.
If you’re concerned that your property manager might be causing more harm to your property than good, it’s time to re-evaluate your contract with a view to replacing them with someone with more experience and expertise. Following are some of the signs that it’s time to replace your property manager.
1 When your property manager is MIA
One or two texts that don’t receive a reply may not be a cause for concern yet. But when you’re blowing up your property manager’s phone and you never hear back, it’s time to check on your properties ASAP, because something may be wrong. There’s a chance that your property manager is overwhelmed, has taken on too many listings, or is just poorly organised. Regardless of their reasoning, it’s time to investigate further.
2 When your tenants are blowing up your phone
Getting enquiries from tenants about problems your property manager is supposed to handle is another serious indicator that they may not be doing their job. One of the major reasons why you hire a property manager is so that renters don’t (and shouldn’t even need to) know who the property owner is. When your tenant actually looks you up, this suggests that your property manager may have been ignoring their complaints.
3 When your property manager fails to address problems
Has your property manager been maintaining the property regularly? Are broken fixtures and malfunctioning appliances being repaired? If the answer to these questions is a big fat no, then you may have a lazy and unprofessional property manager on your hands. Your property manager should be providing you with regular reports (at least every six months), so if you haven’t heard from them in a while, consider reaching out for an update.
4 When your property manager doesn’t update you
If your property manager isn’t giving you regular reports on your tenants, their intentions to stay/move, and updates on repairs and maintenance, then they’re doing something wrong. Alternatively, your property manager may be providing the necessary reports, but they’re always light on detail. Your property manager is there to act as a conduit between you and your property, so they need to be on the ball about even the smallest issues (before these snowball into big ones).
5 When you have compliance issues
Regulatory changes can impact your investment, and it’s your property manager’s role to ensure that you are abreast of the latest changes, while also keeping your properties above the law. Particular areas of concern can be smoke alarms, window-covering cords and swimming pools, as they are often governed by specific regulations. As the property owner, the buck ultimately stops with you, but you should be able to rely on your property manager for advice and guidance along the way.
6 When your cash flow is poor
Is your property staying vacant for months on end, with no prospects of gaining a tenant in the near future, thereby causing you major cash flow issues? This may be a sign that your property manager is doing a terrible job at marketing it effectively to potential tenants. Even in the slowest property markets, an effective property manager or leasing agent can guide you towards a tenant – even if that means reducing your asking rent.
If any of the above red flags ring true for you, then don’t wait to boot out a bad property manager, otherwise the impact on your portfolio could be disastrous.
When you sign a contract, it’s important to include the clauses specifying how you can end your arrangement with a property manager, as this can help you manage a graceful exit.
Once the partnership has been terminated, you need to ensure that you get all the tenant records from the property manager so you can contact tenants to let them know of the change and clear up any residual issues. Make sure all uncollected rent is paid, check for anything that needs repair, and conduct a thorough inspection to settle any compliance issues.
Ideally, you will have lined up a new (and betterquality) property manager to help you with all of this! When finding a new property manager, be clear about your expectations. It wouldn’t hurt to schedule an on-site meeting and inspection, and be sure to put everything in writing.
– Knows the fair rental rate to charge tenants
– Screens tenants carefully through background checks
– Conducts regular inspections of the property and gives reports
– Addresses issues with the property in short order, using the most cost-effective method
– Ensures that tenants pay rent on time
– Aware of governmental regulations that may affect rentals
HOW TO GIVE YOUR PROPERTY MANAGER THE BOOT
Leanne Jopson, Metropole’s national director of property management, shares these tips for landlords who want to end their agreement with their property manager.
There is currently no minimum notice period for a landlord wishing to cease the arrangement with the current managing agent for their property (for leasing you need to refer to your managing authority). Once you have engaged a new managing agent, they will send the relevant notice to your old agent and handle the necessary paperwork. Your former agent will need time to prepare the file, though, so we recommend that you allow three clear business days.
The notice period for ceasing a management arrangement in NSW is dependent on your management agency agreement but is typically 30 days’ written notice, and can be as much as 60 or even 90 days’ notice.
The Property Occupations Form 6 or agent appointments for leasing and managing typically allow for continuing appointments, therefore you must give your current agent a minimum of 30 days’ notice in writing.
Unless otherwise stipulated in your management agreement, the notice period is a minimum of 30 days in writing.
The notice period will be stipulated in the property agreement. Typically, a notice period of 60 to 90 days is required, and cancellation fees may also apply.
Most management agreements are for a fixed term, which means you can’t appoint a new managing agent without paying a penalty (50% of the management fee for the remainder of the period) unless done so by agreement. If you are approaching the end of your fixed management period or it has lapsed, and the agreement has changed to periodic, you will need to give your agent a minimum of 28 days’ notice.
Australian Capital Territory
The system is very similar to Western Australia’s, except that where there is a fixed term agreement the penalty is the full management fee for the remainder of the period. If the period has lapsed, you need to give 30, 60 or 90 days’ notice, depending upon the termination agreement in the managing authority.
Details of notice of termination will be set out in the Residential Property Management Agreement, but otherwise 30 days’ written notice is required from either party. However, in the case of the landlord giving notice, they may be required to pay an early cancellation fee to the agent, which is equal to 50% of the agent’s remuneration, payable for the balance of the term of the current tenancy. If there has been a breach of the agreement though, this notice can be reduced to seven days.