Lots of us look at projects and think, 'I could do that.' DIY is apparently in our DNA, and as Kiwis we love getting stuck in and having a go ourselves, especially if we think we can get it done cheaper. An oft-quoted proverb is, 'If you thought hiring a professional was expensive, just wait until you hire an amateur.'
How good are your documentation skills? Do you really enjoy sifting and sorting through paperwork? How often have weekends and holidays been interrupted by people calling about a property that’s already been let, or by tenants informing you there’s an issue that urgently needs fixing? When thinking about investing in property, most of us think of the lifestyle rather than the time involved. Too often, when we’re elbow deep in whatever we thought looked easy on The Block we realise that it’s going to take us longer or be more expensive than what we originally thought.
How much do property managers charge? An average property management fee is between 7.5 - 8.5 percent of rent collected. The median market rent for a three bedroom property in the Auckland suburb of Mt Wellington is $530, which at the upper level of 8.5 percent works out to be a property management fee of $45.05 per week. Is it worth the cost?
The cost of finding and screening applicants
A classic Speights TV advert featuring two Southern men carried the line, “She’s a hard road finding the perfect woman.” The same could be said about finding the perfect tenant. It starts with advertising and marketing your property, showing people through, reviewing applications, verifying identities and references, and we’re still not even close to renting your investment property.
When you’re handing over the keys to your investment and retirement, you need to be sure that the tenant will take proper care. Once you’ve whittled down a shortlist, you can start screening tenants by researching their credit history and employment history, as well as performing criminal background checks and checking for any appearances at the Tenancy Tribunal.
Even if only a handful of people apply to rent your property, you’re still looking at tens of hours worth of work. A property manager could save you that time. They have access to background checking databases that the public don’t, and experienced property managers will be able to back-up any ‘gut feelings’ about people with evidence and fact. Putting the right person in your rental property is one of the most important steps of managing property. What price can you put on peace of mind?
The cost of conducting inspections
As a property owner you want to know your investment is being looked after and kept in pristine condition. A good property manager should keep good communication with your tenant and let them know your expectations as a landlord. All inspections should be documented and archived in case they’re needed later to prove a point to Tenancy Services or in a Tenancy Tribunal.
You should expect a quality inspection, documented evidence, and for that information to be stored and archived properly to provide a history of your investment over time. Time and money goes into inspections and reporting, but they can be invaluable if they can prove damage or the quality of chattels if it’s ever contested.
The cost of changing legislation
Laws change all the time and it can be difficult keeping up-to-date with the new rules and regulations. The Health and Safety at Work Act 2015 (HSWA) and changes to the Residential Tenancies Act 1986 introduce new standards for working on or around rental properties and minimum levels of insulation.
Ignorance of the law is not a defence, and non compliance can result in hefty fines that make running a rental property very uneconomic. Good property managers keep up-to-date with all law changes in their industry. They can offer you guidance based on solid legal advice, not on ‘gut feeling’ or what their mate down the pub said it meant.
Lifestyle sacrifice
It shouldn’t come as a surprise that landlords have to appoint an agent to manage their property if they’re overseas for more than 21 days. But what about over long weekends, school holidays, or short getaways around the country?
Coordinating repairs or tenant inquiries on your breaks away can be stressful, and with new HSWA regulations you don’t want to leave anything to chance. A property manager can help you enjoy the lifestyle of an investor by taking care of more of the responsibilities.
Some property manager fees are tax deductible
So if you own a three bedroom rental in Mt Wellington and charge $530 per week, and your property manager charges an 8.5 percent fee, over the course of a 12 month tenancy that’s $2342.60, out of the total $27,560. If you’re running your property like a business, certain costs and expenses, including the property management fee are tax deductible. Speak to your accountant about this and other deductible expenses.
For that price you get a property expert that finds you the best possible tenant, screens them, regularly inspects and reports on your rental, keeps up to date with law changes and handles emergencies so you don’t need to worry.
To manage a property successfully and avoid unnecessary fines, means following certain best practice procedures. Download our free guide for more information.
