Puzzle Finance Blog


Landlords hold the key


Competition for rental property contracts in Victoria is razor-sharp and landlords are being offered some of the best sweetener deals in the country. For anyone who owns investment properties, it is a great time to shop around for new property management deals.

Many estate agents are trying to boost income from ''rent rolls'' to compensate for their reduced revenue from sales. To get business through the door, some are heavily undercutting the prices charged to landlords by specialist property management companies.

A growing number of buyer advocates, who provide property selection services, are also offering to find and vet tenants, collect rents and take care of repairs.

Elwood-based Advantage Property Consulting is one buyer advocate that has segued into property management. Managing director Frank Valentic says agents have been offering free management services for six months, or not charging letting fees to find tenants, and paying for landlord's insurance. Others will manage properties for 4 per cent of the annual rent, he adds.

Victoria's average management fee, at 6.3 per cent, is the lowest in Australia, according to the Real Estate Institute of Australia. Booming Western Australia has the highest, at 10.8 per cent, while in Queensland it is 8.1 per cent.

The REIA estimates 23 per cent of all occupied rental properties throughout the country are self-managed. Other industry commentators put the figure as high as 40 per cent, with some DIY landlords paying an agent a one-off letting fee to find a tenant and then going it alone.

Keeping a lid on costs is a lightning-rod issue for investors. But while paying a 4 per cent fee sounds tempting, you need to think about what is and is not included in the lower management fee.

Metro Property Management's Virginia Sear says anyone evaluating property management contracts needs to assess the quality of service and inclusions, not just price.

The communications manager of the Real Estate Institute of Victoria, Robert Larocca, could not agree more. ''In the same way that you select an agent to sell your house, you really do need to look at factors other than price,'' he says. ''We are seeing higher vacancy rates at the moment, whereas two or three years ago it wasn't difficult to ensure a very high level of occupancy.''

When selecting a manager, check out the staff and look at their experience. One of the big complaints made by landlords about property managers is staff churn. You want a stable manager who will be in the role long term.

Mr Valentic says landlords do not have to go with a firm that is exclusively engaged in property management. ''The decision always comes down to the personnel,'' he says.

Getting it right

A good tenant is worth holding on to. But watch out - if you charge less than the market rent, you're giving money to someone else each week.

A property manager should be on top of comparable properties and managing your rent reviews. Rent increases need to be regular and in line with the market.

When situations go bad, a good manager is invaluable. Tenants operating illegal drug-making facilities, for example, have led to big repair bills for more than a few investors.

A competent manager will inspect properties regularly and act as the link between the owner and the tenant, so the owner isn't exposed to uncomfortable situations.

Self-managing properties can work well. Do-it-yourself landlords need a sound knowledge of state legislation affecting rental properties. It also helps if you live near the property.

Posted by Chris Tolhurst - Domain (The Age) on 9th February, 2013 | Comments | Trackbacks
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