This requires finding a competent property manager who can handle all aspects of property management, such as tenant screening and maintenance issues, says property management company Propertyscouts.
However, not all property managers are equal, and it's crucial to ask the right questions before entrusting your property to anyone.
Propertyscouts director Ryan Weir says while the company receives many inquiries as property managers, there are a few critical questions that are rarely asked:
1. What's the on-time rent payment percentage?
One of the biggest risks for landlords is rental arrears. If the tenant misses a payment, the outgoings for the landlord don’t stop. When tenants fail to pay rent on time, landlords can find themselves facing financial pressure, as they still have regular payments to make, such as mortgage payments, rates, insurance, repairs, and maintenance. It's therefore essential to ask your property manager what percentage of their tenants make on-time rental payments.
Ideally, the percentage should be more than 98%. A figure of 99% is considered very good. Asking the property manager about the percentage of tenants making on-time rental payments can help landlords prepare for possible rent payment delays and plan accordingly.
Propertyscouts, offers property owners a rent guarantee. This means that even if a tenant falls into arrears, on-time payments are unlikely to be an issue.
2. What's the occupancy rate?
Occupancy rate is another crucial factor to consider when choosing a property manager. A higher occupancy rate means fewer vacancies and more rental income for you. What's the point in saving a little on the management fee if their occupancy rate is worse than a more expensive property manager?
Let's say the rent for your property is $580 per week, making the total rent per annum $30,160 (52 x $580) based on 100% occupancy. A good property manager may achieve a 99% occupancy rate, meaning the property is empty for only one week every two years, resulting in a loss of half a week's rent per year on average ($290).
On the other hand, a cheaper property manager may only achieve a 97% occupancy rate, resulting in the property being empty for three weeks every two years, meaning a loss of one and a half weeks' rent per year on average ($870). As you can see, even though the cheaper property manager may charge less for management fees (saving you about $300 p.a.), they cost more in the long run once you factor in occupancy rates.
Ask your property manager what their current occupancy rate is and compare it to industry standards. A good property manager should be able to achieve an occupancy rate of at least 98% or higher. Keep in mind that a small difference in occupancy rate can have a big impact on your finances, so don't focus solely on the management fee when choosing a property manager.
3. How much time will you spend looking properties?
It's essential to know how much time your property manager will spend looking after your properties. This can be determined by asking about their portfolio size and the level of support (e.g. additional staff) they have. A larger portfolio may mean less time spent on each property, so be sure to ask how much time will be devoted to your property specifically.
4. What are the reputation/credentials/experience of the property manager?
There’s no substitute for experience when it comes to property management. Don’t forget to ask your property manager about their reputation, credentials, and experience. Ask to speak to current clients and check Google reviews to get an idea of how well-regarded they are. You should also find out if they own rentals themselves and what support they have. Being a member of an industry body such as the Residential Property Managers Associaton (RPMA) can be a good sign, as it means the property manager has passed a criminal check and adheres to a code of ethics.
5. What is the staff turnover rate/do they have skin in the game?
To ensure a strong and lasting relationship with a property manager, it's important to select someone who will stick around for the long term rather than having a fresh face every six months. Unfortunately, the turnover rate of property managers in New Zealand is approximately nine months, which can lead to loss of continuity and frustration for tenants.
When considering property management companies, it's essential to ask about their staff turnover rate and how long their property managers typically stay with the company. Additionally, finding out whether the managers have a financial stake in the property management business (i.e., "skin in the game") can help ensure a high-quality service.
6. What is the total cost?
To accurately compare property managers, it's important to consider the total cost of managing a property, rather than just the management rate. Property managers often charge for additional services, such as maintenance fees, inspection fees, and lease extension fees.
Ask for a breakdown of all costs and create a table to compare them to other property managers, ensuring you get the best value for your money. To ensure an apples-to-apples comparison, assume that tenancy changes occur every 1.5 years to account for the property manager's costs for re-tenanting.
The bottom line…
Doing adequate research and asking the right questions is essential when choosing a property manager.
By asking about on-time rental payment percentages, occupancy rates, portfolio size, reputation, staff turnover rates, and total cost, you can ensure that your investment is in good hands.
Remember, a good property manager can make all the difference when it comes to maximising your rental income and minimising your stress as a landlord.
(Source: https://www.propertyscouts.co.nz/about/news/the-6-essential-questions-no-one-ever-as)
