Property Management: A Step-by-Step Guide

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Investors own 27% of Australia’s 9.6 million dwellings and a property manager is often employed to look after these properties.

With these 9.6 million properties being worth a collective $1.4 trillion, property management and the role of the property manager is of utmost importance. The property manager can significantly impact the value and the returns an investor achieves.

A good property manager will find quality tenants and ensure repairs are carried out quickly and professionally (preserving the asset value) and keep the property occupied and increase the rent regularly (maximising the rental yield).

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In the current market it is a role that is particularly important. According to figures from the Australian Tax Office, a staggering 62% of property investors claimed a net loss on their investment.  Relying on capital gains and negative gearing tax benefits to offset these losses is an increasingly challenging strategy.

What is a Property Manager?

A Property Manager is a real estate agent specialised in sourcing quality tenants and managing lease agreements on a day-to-day basis.  They are also often referred to as a rental agent or leasing agent.

What does a Property Manager do?

A Property Manager helps safeguard your investment.

They are responsible for finding a suitable and trustworthy tenant, and also managing the lease on a day-to-day basis to ensure your property is looked after. Below is a list of some of their primary duties:

  • Advertise your property for lease, conduct inspections
  • Process applications and conduct necessary checks
  • Lodge and collect bond payments
  • Prepare a tenancy agreement
  • Negotiate and collect an appropriate rent
  • Carry out regular inspections
  • Arrange for repairs and/or maintenance
  • Provide relevant notices and financial statements to the landlord
  • Pay council rates and taxes (from the rent)
  • Issue termination notices to difficult tenants

What does a Property Manager cost?

Property management is generally divided into two main fees: a letting fee and a management fee. Fees are determined by the agency and vary dramatically from city to city. Generally speaking, you can expect to be charged a management fee of 5-12% of the weekly rent for the ongoing management of your lease and a letting fee of approximately 1-4 weeks rent for sourcing a new tenant.

The level of inclusions will also vary per agency, so it is crucial to receive a full list of potential charges before appointing a Property Manager.

For specific property management fee information for your city, see our list of property management fees by city. You’ll also get a full breakdown of every fee associated with property management, so you know when you’re getting a good deal.

How to find a good Property Manager

A good property manager will select high-quality tenants who will take care of your investment property, and will also seek to maximise your rental income.

In addition to being highly-trained and skilled, one of the main things you should look for in a property manager is experience in the industry – specifically in the area that your property is located. They should be able to provide examples of recent properties they have leased where strong rents have been achieved and the kinds of checks they used to assess applicants. In all of your dealings with them they should be professional and have superb communication and organisational skills.

You should aim to meet with at least a few property managers before signing with one. The Real Estate Institute of Australia recommends you ask questions like:

  • What are your processes for choosing quality tenants?
  • Can you explain your charges and exactly how much I will be paying?
  • How will you assist in maximising my return and optimising capital growth?
  • How much would you suggest we market the property for, and why? (Ask for comparables)

In addition, you may find value in asking some of the questions below to help you make an informed decision.

  • How many years experience do you have in the industry?
  • How many properties are you currently managing (and how many support staff are in your team)?
  • How do you handle repair requests?
  • What are your processes for handling rent arrears?
  • How often do you generally contact landlords?

Benefits of Using a Property Manager – Why Do I Need One?

It’s a common question asked by property investors in Australia, “do I need a property manager, or can I manage it myself?” Paying property management fees obviously eats into your return on investment however the everyday ins and outs of maintaining a leased property can be time-consuming, especially if you have more than one investment property. Engaging the services of a property manager can be a worthwhile investment, to not just help protect your asset, but also saving you considerable time and stress!

The list below covers some of the key areas where a quality property manager can provide significant value.

Attract quality tenants – Firstly, a property manager can provide advice on how to prepare the property for lease to ensure the maximum rents can be achieved. They will also interview potential tenants and conduct reference checks including speaking to employers and investigating their rental history.

Protect your property – In addition to sourcing quality tenants a good property manager will be proactive with routine inspections and bringing any small maintenance issues to your attention. This allows them to be repaired early, minimising the chances of further damage or the need for significant repairs.

Maximise rents – An experienced property manager will have in-depth knowledge of the current market in your area and will manage the rent review process for you, ensuring rents are increased when possible. They will also have policies in place to ensure rent arrears are dealt with swiftly.

Save you time – The property manager deals with all tenant communication. If the need arises they will deal with any complaints (including those from strata). Where necessary, they will obtain quotes from local tradespeople and provide access for repairs and maintenance to the property. They can also take care of other time-consuming tasks, like paying your council and water rates using the collected rent.

Minimise vacancy rates – With a database of prospective tenants a property manager can potentially source tenants more quickly to reduce your vacancy rate when old tenants move out.

Alternatives to Using a Property Manager

It is not a legal requirement to use a property manager and landlords do have the option to self-manage. According to the Real Estate Institute of Australia (REIA), property self-management is not uncommon. Despite 54.3% of occupied rented properties in Australia being managed by real estate agents, 22.7% are self-managed by landlords.

The main reasons someone may wish to manage their own investment property is to avoid paying the property management fees and the thought that they may be able to more closely manage the property to their standards and keep a closer eye on its condition.

If you feel that you would like to self-manage your investment property, it’s important that you keep yourself up-to-date with relevant legislation and regulations in your state. This can relate to requirements regarding lodging of bond monies, tenants rights or landlords responsibilities, just to name a few.

It is also worth remembering that there are options regarding the services that you can employ an agent for. You could use a rental agent to source the tenant and manage the bond lodgement and then manage the ongoing lease yourself. In this case, a letting fee would apply but you would avoid ongoing management fees.