FOR MANY people, being able to make money without lifting a finger is the dream. This is largely why real estate investing has become so popular with everyday Australians. This gives them the chance to succeed financially while enjoying life outside of work for nine to five years.
But a lot of effort, time and money is invested in the process of buying a property, which is why savvy investors, especially those who are looking to build a portfolio of multiple properties, are looking for property managers to help them manage their rentals.
This is often a favorable arrangement for both parties. Many property managers are investors themselves and are therefore very experienced in how to handle tenant concerns, maintenance and other delicate aspects of renting a property.
They are also able to devote the time necessary for everything to go smoothly, allowing you to devote yourself to all the other tasks that take up your time: work, family, social commitments, sports, budget balance … the list keep on going!
However, hiring a property manager does not always work in favor of an investor.
In some cases, a property manager fails to communicate effectively with the owner, passing the power to call himself. This can lead to rather unpleasant discoveries at the end of the owner.
Enjoying property without sweating is not always easy. For this reason, it is important that each investor is prepared both legally and practically for the less common, but still possible, risks of working with a less experienced or ineffective property manager.
With great power comes great responsibility
According to the Real Estate Institute of Australia (REIA), the usual duties of a property manager include advertising the property (if it is still on the market), keeping the owner abreast of market trends rental, selection and selection. tenants, collect rent and take care of repairs and maintenance. In the event of a dispute with the tenant, the property manager can also act as a representative of the owner before a court.
These responsibilities should generally be stated in writing so that there is no confusion as to what your property manager should do for you. It is essential to remember that you are giving them a lot of power, so you need to be alert to the ways in which they can abuse that power.
Although an effective property manager is one who basically ensures that minimal involvement is required of you, that does not mean that he does not have to communicate with you (and vice versa) for the duration of the lease.
Remember that you are giving a lot of power to a property manager, so you need to be alert to the ways in which he can abuse that power
When your property manager doesn't give you regular updates on your property, it should sound the alarm. Either they pay no attention to the property at all, or they even fled with the rent they were supposed to collect on your behalf.
It is a good idea to have an agreed frequency of updates by your property manager on the status of the property, whether or not there is something major to report.
They say that no news is good news, but in the property world, all news is good news, because at least you know what's going on. And if you do not receive them within the deadline, it is your responsibility to contact them. It is advised that you also make surprise visits to keep your property manager on guard.
When things go wrong
Repairs and maintenance are crucial elements of the work of a property manager. In the absence of the owner, it is the property manager that the tenants will contact when something needs to be repaired. In some cases, the solution may be urgent, for example when the pipes burst, the ceiling or roof leaks, electricity is drawn or serious damage is caused by a calamity. At other times, it may be a fault that does not seriously interfere with the tenant's standard of living and therefore does not require immediate action.
So, while property managers should make decisions on repairs, it is important to set a limit on the extent of their enforcement powers.
"Whenever repair or maintenance work incurs costs for the owner, written approval must always be requested," says Tamara Dunstan, director of Advantage Property Management. "From a legal and professional point of view, there should be written quotes describing the scope of the work and the associated costs."
This highlights the importance of drafting a global contract when hiring a property manager. You can seek help from an experienced investor to help you prepare the terms of the contract; and obtain the assistance of a legal expert to ensure that there is no loophole and that the agreement can be enforced by a court .
The contract may specify details such as the extent of repairs that a property manager is authorized to carry out independently of the owner. Nevertheless, Dunstan believes that property managers should be willing to involve the owners whenever the work needs to be done, in order to avoid problems in the end.
"Whether I have an amount allocated for maintenance or not, I always keep the owner informed of the circumstances and I give him a strategic action plan. I like to provide three comparable quotes for review and consideration by the owner, ”she explains.
"Whenever there is a cost to the owner as a result of repair or maintenance work, written approval should always be requested"
She also warns the owners against verbal agreements when it comes to authorizing an action, since they will not be used as evidence in the event of a problem.
"Before continuing with the work, there should be at least one email from the owner authorizing it," she said.
If you encounter a situation in which your property manager has exceeded his limits to your detriment, the most common solution is to take the matter to your local court, which will then make an official decision on the responsibilities and the consequences.
Each state has its own organization dedicated to responding to the concerns of tenants, owners and property managers. As long as you have everything in writing, there is usually no need to worry!
CASE STUDY: WHEN OWNERSHIP OCCURRED
Jim * bought a property, renovated it and leased it, hired a property manager for manual labor and set a budget limit so they could do non-urgent work if necessary.
Shortly after the rental of the house, the tenant complained about the garage and the property manager brought in a craftsman to do expensive work without Jim's knowledge. Jim only received the invoice for the work after several months. Upon investigation, Jim noted that the work in question should not have been considered an emergency and confronted his property manager with the reasons why he had exceeded the agreed budget without notifying him in advance of the situation. However, the management of the property confirmed that Jim had consented to the execution of the work via a verbal agreement and that the case should be brought before the local court.
Scenarios like Jim's illustrate the importance of good communication between the owner and the property manager. The property manager was responsible for informing Jim of the tenant's complaint, as it involved significant costs. Had he done so, they could have worked together to find a solution that appealed to all parties.
The property manager should also have different options for the trades and let Jim make the final call on whether to make the requested improvements.
This situation also highlights the importance of putting large transactions in writing. If the property manager was unable to provide evidence that Jim had given his verbal agreement to continue the work, Jim would have been given the upper hand in this matter.
