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The usual goal of owning an investment property is to grow its net worth over time, ensuring that rental income from tenants contributes as much as possible.
It’s all too common to read horror stories of tenants being in arrears and landlords desperately trying to evict them. We also often hear of messy or destructive tenants, and those using landlords’ properties for growing and servicing illicit business.
What can these kinds of tenant choices do to the value of your asset?
How can they affect your goals in terms of asset growth, depreciation advantages, and revenue stream?
“The difference between a great property manager who is proactively managing your investment to maximize the return and mitigate any potential risks, versus an inadequately qualified person who is just taking their monthly fees, cannot be underestimated,” says Barry Plant Norwood’s Elesa Wood.
“Would you give a high school graduate $500,000, and ask them to manage those funds, and grow that investment? What if they invested it in the wrong places and it ended up being worth half that amount?”
Up until recently, it’s not even been a requirement to be licensed to be a Property Manager. Hard to believe, given they are usually managing up to hundreds of millions of dollars worth of assets. Fortunately, licenses are now mandatory, however Elesa believes there are still five key qualities you should look for when choosing someone to manage your investment property.
Great communication skills
“Good communication skills are essential due to the need for repeated liaison between multiple parties – landlords, tenant and contractors,” she says. “Often landlords live thousands of kilometres away from their investment property. They’re relying on the property manager for all information relating to it.”
Good managers also need excellent phone screening skills to be able to assess potential tenants and check histories.
Outstanding organisational skills
Managers need to monitor rental payments, balance them with authorised outgoings like water and utilities and deal with multiple contractors. Payments to landlords need to be made on a regular basis. New tenants need to be found for existing properties and new listings, with ongoing inspections, outgoing inspections, and routine inspections, all of which need to be detailed and noted back to landlord.
“Managers need to balance all of this with daily issues that may arise with properties, and dealing with other office admin,” explains Elesa. “They need to be cool, calm and totally on top of everything.”
Elesa believes a certain level of maturity is critical to understanding a portfolio which is potentially worth up to hundreds of millions of dollars.
“Experience can only be gained through opportunities to solve problems and actually working within the field,” she says. “Experienced property managers are highly sought after and regarded in an industry which can have a very high turnover rate. Look for a manager with at least 5 years experience – more if possible. They will be able to draw on past scenarios to solve current problems. It will also mean they’re likely to have a better understanding of legislation and how it affects all interested parties.”
“This is asset management. You should expect annual rent reviews and conclusive four-monthly reporting to just happen,” says Elesa. “ A good manager will also make suggestions for current and future improvements and go out of their way to to build their relationship with you and your tenants. They should also be pro-active in their own learning in terms of upskilling themselves with legislation changes etc.”
“The role of the property manager is that of a liaison between multiple parties, so it’s vital they can be empathetic within a scenario and help other interested parties understand that point of view, whilst remaining professional and objective. Relationships are mission critical in this highly experienced client service role.”
Is it time to apply this checklist to your property management team to make sure you’re all set for the new year?
Elesa Wood is General Manager and Auctioneer at Barry Plant Norwood in South Australia.