When you buy an investment property, you will be faced with one of two possibilities. The property is either vacant, or an established tenant is already paying rent. If it’s vacant, you will obviously need to source a suitable tenant as quickly as possible to cover the property’s expenses. You will also need to appoint a managing agent.
If the property is already leased, it will be important to ensure the tenant is paying a reasonable market rent, and that the current property manager is able to provide a level of service which aligns with your requirements.
To evaluate the likely rent for your property you should do some research first so you can talk sensibly with potential managers.
Rental Property Income Myths
There are some time-honoured, unwritten rules amongst supposedly savvy real estate investors. One such rule says you should be able to achieve around $100 per week for every $100,000 you have invested in purchasing a property. So, if you’ve just invested $350,000 in a two-bedroom apartment, they suggest you’d be expecting $350 dollars a week in rent. Unfortunately, this is not always the case. The rental market has its own set of local rules and they don’t always align with historical anecdotes. Do not rely on this type of hearsay, it’s another reason it is critical that you do your own research on what’s available on the market and then consider getting a professional opinion from a property manager.
Comparing Rental Properties in the Local Area
Start by doing an online search of vacant rental properties in the same suburb as your investment property. If it’s a house, only compare with other houses and the same goes for units. Put in the number of bedrooms, bathrooms and parking spaces that your property offers, and you’ll immediately have a list of comparable properties that are currently available for rent.
Pick out the ones that seem most comparable and then set aside time to attend their open inspections if possible. You’ll get two things out of this. Firstly, you’ll gain a genuine appreciation of how competitive your rental property will be against those properties, whether it is worth less or more and you will also notice how your property presents in comparison.
Ask for a Rental Property Appraisal
By now you will have a pretty good understanding of what seems like a realistic rental price, and a list of property managers and estate agencies who appealed to you due to their professional conduct, marketing approach, or comprehensive knowledge and advice.
When asking for a rental appraisal, a good way to assess a property manager’s responsiveness is to contact them by email or complete your rental appraisal request online. This will highlight how quickly they respond. It will show likely response times to your tenant’s enquiries and even your own enquiries later as your manager.
Asking for a rental appraisal is a good way to assess a property manager’s local knowledge and a good next step before signing a property management agreement with them.
By now you should have an excellent idea of the property’s likely rental income, it’s time to choose a managing agent.
What to look for in an agent
When you ask potential agents to do an appraisal of the rental for your property you should also ask them to include an information document about the service they offer, and the costs involved. I am a strong believer in the phrase “you get what you pay for”, but at the same time I do not want to overpay.
Firstly, look at the documents they give you. It’s usually a great insight into the culture of the organisation. Ask yourself if the documents are all coordinated, well presented, backed up by facts, and modern. I am not suggesting that the neatest and best presented entry should win, but documentation does demonstrate a level of professionalism in an organisation.
Now the content! Many advisors suggest you ask each contender for their points of difference. I find this rather silly as they are all property managers and they all manage property. I was once told that the only difference was the colour of the logo. I don’t believe that either. Look for demonstration of the company culture. Sir Richard Branson of the Virgin Group is often quoted as saying if the staff are happy then the clients will be well looked after.
Look for level of education in current and changing legislation. If they are up to date it demonstrates a formal system of education. This will benefit you in the long run. Currently Queensland is facing a raft of changes to the act and implementation of revised smoke alarm legislation.
Look for the use of up to date IT and operating systems. Do they have a modern operating system? Is it assisted by inspection and maintenance systems? It has been a long time since property managers use memory or diaries to remind themselves of future deadlines. Is there a landlord portal available 24/7? Will it show reports and the financial information? Will your property be regularly inspected, and will that also include photographs and maintenance recommendations? Is the accounting system modern and will it give an end of financial year report for your accountant? All these services are important in today’s property management, providing you with essential information quickly, so you can maximise your return with informed decisions.
What is there policy on rent collection and arears and risk management. Risk management is potentially the costliest issue facing property owners, your manager must be aware. Who are the tradespeople and are they insured and using proper work safe procedures?
Importantly, are your property managers systems secure and is your property manager properly insured. Cybercrime is already with us and your property manager is handling your money, and information about you. This is a growing threat and smart property managers have firewalls and ancillary systems to help protect the data. They also have procedures in place.
Good property managers have procedures documented and operate best practice programs to ensure good workflows so that work is completed consistently at a high standard and quickly.
Ask your potential manager how they will market your property when it comes time to find a new tenant. Where will they market the property? Will they use professional photography? It is essential rental property competes well in the marketing arena this will limit your time vacant
Finally, examine the costs. Are you being offered any flexibility in your fees? Can you choose an all-in rate, or would you prefer a pay as you use system? Look for value not extremes either way.
Rental Property Marketing Campaign Tips
There’s only one way left to find out whether you have put a fair price on your rental property - ask the market. It will tell you very quickly. Once you have decided to appoint a property manager, discuss a pricing strategy to maximise your rental income and get your marketing campaign underway as quickly as possible. Listen to feedback from your agent due to their experience in the field and enjoy your investment!
David Forrest - Managing Director