As a property investor myself, my husband and I know all about the frustrations people experience with property managers.
You know what I am talking about...
Not getting called back by your property manager for 2 or 3 days when you call with a question... tardy service to your tenants which means they're more likely to leave your property and increase your vacancy costs... bad tenant selection which can mean damage to your property... long vacancies and not making sure your rent increases are in line with the market value of your property. I had a property manager took her always at least 4 days to get back to me and she new I owners a property management company!! does not make sense to me. All these examples of sloppy service directly or indirectly lose you money. And there is a reason why property management standards have been so low which I will explain in this report. Yes sometimes it may be a small genuine mistake but how do they deal with it, do the put it right at their expense?
But the bottom line is that this situation has left many of us property investors wondering what we are paying for in regards to property management.
However of course the alternative D.I.Y is a poor option, unless you want to spend your free time unblocking drains and fixing door handles!
It was because of these frustrations that so many property investors face that I started consolidated property management I wanted to give our clients a person who would look after them and help their investment grow , I spoke to some friends in the industry who are great achievers and told them what I wanted for our clients and this is how I have built this business.
Ultimately we're about making you greater wealth via property - without the time wasting hassles.
We deal with property investors every day and we hear about the horror stories and problems they face with their previous property managers.
This report is to warn you about 10 of the biggest property management mistakes - and how you can avoid them.
Let's get started...
Biggest Mistake #1
Underestimating what it takes to properly manage an Investment property.
For a new property investor who has just gone through the process and incurred the expense of buying an investment property, the actual management of it is often an afterthought as all you do is collect the rent!! Wrong.
At first glance, it may seem to be quite straightforward - just advertise the place, install the tenants and receive the rent every month - right?
Wrong, like so many things in life, it's not as simple as that. In fact, there are multiple steps to go through, each can be costly in both time and money if not done properly.
These steps will become clearer as you read this report, and it's important to bear them in mind if you are tempted to undertake the management of your investment property yourself.
Equally, if you're considering (or are already using) an agent, it is worth asking yourself whether the agent is equipped to handle all these items effectively.
If not, it will almost certainly be costing you money - maybe a lot!
As one of Perth's expert specialist property manager, Consolidated property management, manages a portfolio of over $135 million. We know property management inside and out.
Biggest Mistake #2
Not being sufficiently selective about tenants.
After your home, your investment property is most likely your largest asset, and people you probably don't know very well will have access to it 24 hours a day. You therefore need to be as sure as you can be that they are trustworthy and will respect the agreement that you put in place between you. The protection afforded by the law when things go wrong is a poor substitute for leasing to the right tenants in the first place.
CPM understands this, and we take tenant selection very seriously and utilize a multi-step vetting process. We receive a lot of tenant enquiries every month so we can afford to be selective about who we place in your property. It does not make sense to put a tenant in just to get it rented.
We also have good tenants and we look after them as valued customers. When they need to move (for example, if a property is being sold), they are our first choice for placement into a vacant property, with obvious benefits for your as a landlord.
Over the 20 years in real estate I have many tenants become our property investors and we now look after their investment, I have asked why they said you were always firm but fair so we know you would look after our investment property as if your own.
Biggest Mistake #3
Forming a direct relationship with tenants.
Some investors fall into the trap of forming a direct relationship with tenants. While they may feel that they are just being friendly, these property owners are opening themselves up to significant problems.
Remember, you should view your property investment as a business, and if a landlord has a direct personal relationship with the tenants it can sometimes make it very difficult to follow through on the right business decisions, particularly with regard to rent rises. Your tenants then may also sometimes play on your 'good nature' and not to worry too much if they are 'a bit' late in paying their rent - while this can play havoc with your cash flow and ability to meet mortgage payments etc.
I have seen owners who have come to me to help them, with rent over 3 months behind and never a breach sent to them. I have owners also said they had a good relation then they asked them to do something as they were not looking after the property and they have been threatened by the tenant. Tenants don't do this to us as we are the third party they don't know us personally, and we will take legal action against them with a zero tolerance approach.
Even some property managers fall into this trap. It's not uncommon for the property manager to have more contact and a closer relationship, this does not happen in our office as more than one person looks after the property the property including myself the business owner.
Clients of CPM avoid all these problems thanks to our initial selection and rigorous training of our property managers. Every member of the team is very much aware of the fact that their primary responsibility is to you, the property investor - with the mission of ensuring that you receive the greatest return on your investment and that your asset is protected. The relationship with tenants is kept courteous but purely professional.
Biggest Mistake #4
Lazy Rent Rises.
This is one of the biggest areas where many property investors lose out.
Setting rent levels is all about fairness to both the landlord and the tenant in relation to market rates. Yet all too often, property managers just recommend a 'nominal' increase, perhaps 5 to 10 dollars per week yes there is some that is ok for but some need to be a lot more especially in an increasing market. I have took over properties that are $100-150 under the rental value.
This bears very little relation to what the market is actually doing and what the property is worth.
It is sometimes only when there is a change of tenant that a proper assessment is made and a 'catch up' increase is applied - but in the meantime, you may have lost thousands of dollars of income.
Alternatively, if a significantly larger 'catch up' increase is applied after years of inadequate raises, there is a risk that the tenant will be 'shocked' into moving out.
Part of the reason that these problems occur is that it takes time and effort to monitor the market and know the correct current rent levels. Many non-specialist property managers do not have the resources - or perhaps the inclination - to do this essential work properly.
At CPM, things are different. As Perth's specialist property manager we have our finger on the pulse of the rental market - we know what's happening out there, not only with the properties we manage but also those managed by our competitors. You can therefore be sure that we are increasing the rent on your properties to ensure that you get the highest return on investment, we always write to our owners and suggest a increase we this is a fair market increase, this is on periodical and fixed leases upon the lease renewal or after 6 months if the rents have increase a lot, we have standard in out leases that there may be a rent review after 6 months.
In addition, because of the professional way in which we manage properties, we are able to apply the equivalent of 'change of tenancy' rent rises without losing a good tenant.
Biggest Mistake #5
Not receiving rent money promptly.
As a property investor, your cashflow is crucial - and timing plays a big part in it, especially when you have regular outgoings such as mortgage payments. The last thing you want is to be late or default on a mortgage payment just because the expected monthly income has not reached your bank account yet.
Therefore you should always ask any prospective property manager about their payment processes and cycles.
At CPM, we strongly encourage all tenants to pay their rent by Direct Debit - meaning that they don't have to remember to do it, so late payments are greatly reduced.
Biggest Mistake #6
Not being aware of the 'vital statistics' of current and past lettings.
When you engage a property manager, you want things taken care of - but you also want access to information about your property when you need it. Information like a copy of the lease, rental receipts, outgoings on repairs.
Once a lease is signed it is emailed to the owner so you always have a copy.
Statements are emailed to our owners at the end of the month so they can view it straight away.
Land lord insurance and all the other things which make up the running of an investment property.
With most managing agents, this information is supplied on paper with or as part of the monthly statement. It's up to you to collate and keep track of all this data and find a way of accessing the running totals.
This is tedious - but manageable - for a single property... but when you have several, it starts to become more difficult. At CPM you get a monthly statement and a end of financial year summary that puts it on one sheet of paper for your account, making it easy for you and you accountant.
Biggest Mistake #7
Accepting infrequent or inadequate communication from your property manager.
This might sound like rather a strange 'mistake', but in fact it reflects one of the most common complaints I hear when I talk to property investors: they feel that they never hear from their property manager, and in fact wonder whether that person is in fact devoting much effort to looking after their interests. In some cases, they find themselves having to chase the property manager for information or for action - maybe you've had this experience?
If you feel frustrated by the lack of timely communication, bear in mind that it may not be the fault of the individual property manager. In a typical non-specialist agency, each property manager has a portfolio of in excess of 200 properties to manage with little or no support, and so they are often stretched and tend to be focused on finding new tenants.
By contrast, at CPM we average around 50/70 properties per person in the property management team and our training emphasises that regular communication with our clients is essential. We never allow the situation to arise in which you have to "manage the manager" and I am always on the end of a email or phone any day of time. We also do a newsletter for our owners.
Biggest Mistake #8
Not using a specialist property management company.
More often than not, this single mistake is the cause of just about every problem affecting the management of investment properties.
The fact is that many people who buy an investment property take what seems to be the 'easiest' option and place it under the management of the real estate agent which sold it to them.
STOP... This means that their property is being taken care of by a single individual or at best a very small department within a larger organisation whose prime focus is on sales rather than property management.
These property managers tend to be on the lower end of the career ladder within the real estate industry and are often the 'poor relations' of their sales colleagues who are bringing in the big commissions. Lack of experience and high staff turnover is all too common.
Think of it another way: You could take your broken laptop PC to a general household electrician and s/he might be able to take a stab at repairing it. But wouldn't you feel much more comfortable trusting in the skills of a dedicated computer repair technician? And wouldn't there be a much higher probability of a good outcome?
Professional, dedicated property management is a very modest monthly expense which is normally fully tax deductible - and using a specialist property management company typically costs no more than inferior service from a general estate agent.
CPM was created by myself a property investors who were frustrated by the poor level of service they were receiving from general estate agents. We are dedicated to continually raising the bar on service which we achieve through a blend of high quality people, systems and technology and a passion for investment growth.
Biggest Mistake #9
Going for the cheapest fee.
Why would you risk half a million dollars or more to save a few hundred a year, could cost you thousands just by getting no advise or the wrong advise. Here at CPM we look after your property as if it were our own and help owners buy the right property. I help owners before they buy, advising the rent what it is offering would it suit a tenant.
Biggest Mistake #10
Buying an investment with everything they want in it.
You have to look at a property on what tenants are looking for in that area, some areas are great for renting out furnished a lot of areas are not. Look at who you want to target, students, families, business people etc.
Then you can look for the property you want, most tenants today are looking for air-conditioning, alarms, nice size bedrooms, double garage, easy care gardens, secure and easy commuting to work.
Yes some like a pool but if not heated a lot complain they have to maintain for 9 months of the year and don't use it, running a pool is not cheap for the tenant and also if things break down expensive for the owners.
Gardens are becoming a big factor these days, no one wants to pay the high water bills to look after and water a big garden, people are getting water bills of $600+ so more people looking for less gardens or alot of paving. If you want one with a lot of lawn and garden it may be advisable to pay towards the water bill in summer.
With Consolidated Property Management, you can expect: