3 Ugly Property Management Mistakes

If you make the wrong decision about managing your investment properties, are you aware of how dangerous it could be, or how much it could cost?

$20 a Week Can Add Up to Big Losses

Did you know that under-renting a property by $20 per week costs you over $1,000 per year? $1,000 is a lot of money, but over time for a long term buy and hold property, we’re talking about life changing amounts. Compounded for growth at 5% over a 40 year period, that same weekly rent shortfall could cost your retirement, or your children…

$125,000+

Ouch.

Should You Manage Your Own Investment Properties?

All too often, we hear stories about how some people think they can save a few dollars by self managing investment properties. So, after speaking with some of Australia’s leading property managers, I wanted to share their opinions on why this was a terrible idea.

Mistake #1 - Rent Reviews

On countless occasions, good rental managers can share stories of how when they take over from self-managed landlords that the property has been rented well under market value for an extended period of time. They rented well under market value because they simply don’t have the knowledge, resources, or negotiating skills that an agent has.

Mistake #2 - Choosing the wrong tenant

As they are in direct contact with the tenant, many owners can become emotionally attached and become lenient on issues such as:

• Small items

• Property damage

• Rental payments

• Rent increases

After time, tenants may use this to their advantage, whether deliberately or not.

Mistake #3 - Compliance

It’s almost a full time job just to keep up with changing laws and regulations and if you make a mistake, it can be extremely dangerous (not to mention costly). It’s not worth making a mistake trying yourself to ensure a property is completely compliant.

• Smoke alarms

• Water saving measures

• Blind cords

• Window laws

• The list goes on

Good Property Managers Should Give a Better ROI

Yes, a good property manager is technically an expense, though when you hire experts, you should be getting a return on your investment.

A good property manager shouldn’t COST you money, they should MAKE you money.

Don’t fall for the trap of thinking “cheaper is better”, or “more expensive means more professional” either. As an investor, your goal is to simply achieve the highest possible ROI from your property.

The Most Important Things to Manage

No matter which property manager you choose, you need to make sure that someone senior is managing:

• Rent reviews

• Tenant approvals

 These two tasks should never be left to an underpaid junior. 

Good property managers know how important it is for people in senior positions to handle the two fundamentally most important aspects of property management.

Good tenants mean less problems. Good for the property manager and good for you.

Better rent reviews put money in your pocket. Remember how much $20 a week can add up to?

Other Important Traits of Good Property Managers

The key to bringing this all together? Communication.

Does your property manager pick up the phone and let you know what’s happening? 

The number one reason people leave a property manager is poor communication and a close second is having to deal with problems as they arise, rather than having a proactive agent who understands what problems may arise in the future.

Life is so much easier when you have a good relationship with your property manager and can trust them to look after your investment property. 

Questions You Should Ask A Property Manager

Talk to any agent you are considering and ask them simple questions like:

• Who manages tenant approvals?

• Who manages rental reviews and when do they occur?

• What is your policy on communicating with owners (what can I expect)?

• What proactive measures do you have in your business around managing my property?

If you don’t get the responses you are looking for, speak with more agents. The good ones will answer without hesitation and with complete certainty.

Don’t Manage Your Own Properties

The bottom line is that if you are even considering managing your own property, my strong recommendation is DON’T DO IT!

If your property manager doesn’t keep you in the loop, do proper due diligence on tenants, or conduct regular rental reviews, you have two choices:

1. Ask them why

2. Find a property manager who will

Get recommendations from successful investors, or ask an expert for guidance if you need it. 

Just don’t be tempted to do it yourself.