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Shaking up property management

Saturday, November 22nd 2008, 10:40AM 14 Comments

by Philip Macalister

I’ve always been a bit of an advocate for property management – as long as it’s well done. However, sometimes I think my view isn’t shared by other property investors.

There is definitely a group of investors, the ones I would call landlords, who enjoy managing their properties, whether it is the repairs and maintenance or dealing with tenants.

However, for the other group, who I call investors, getting a manager to look after things makes sense.

There’s always been friction between the two groups of managers. With the licensed ones being highly critical of the other group.

However, this whole sector is about to get a bit of a shake-up; both from a regulatory angle and from competition.

As part of the real estate agents reform bill the Department of Justice is looking at how the sector operates and could well put a bigger set of rules on managers. Maybe it would even force the two groups together?

On the competition front, ran an interesting story this week on a new crowd who are offering flat fee management services.

Instead of charging a percentage of the rent (around 8%) they are offering to do the job for just under $900 a year.

No doubt people will compare this to the flat-rate real estate service, tried unsuccessfully by The Joneses. I’m not sure the two are directly comparable because of the way sales and property management operate.

I’m finding investors are showing a lot more interest in having their property managed and no doubt the flat rate option will be appealing.
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Comments from our readers

On 24 November 2008 at 12:26 pm Mike said:
A flat rate fee has appeal.
As an owner and manager of three rental properties, I've always had difficulty getting my head around property managers charging structures. Every contract I have seen charges a base fee set at a percentage of the rental income, but then list "additional services" such as property inspections, tribunal attendances, tenant selection (which at the moment tenants pay for in any event), arranging for tradesmen (again clipping the ticket for their "services") etc.
Exactly what does the percentage fee cover as it seems all the services I would expect a property manager to undertake seem to attract additional fees.
Charging 8% of a rent roll to check a bank account on a weekly basis and make a few phone calls if rent is late cannot be justified.
On 24 November 2008 at 12:27 pm Investor said:
I have to put this comment politely, but the Landlord's comment tries to differentiate between investors and landlords - a bit of nonsense really. We manage our own properties because it is very hard to find decent property managers - not only does it cost a lot but they are slower at responding to matters of maintenance and at reletting properties. We run a property business and want to provide the best service we can while still making a profit. That is easier by us doing it ourselves than using 9-5 property "managers". Leaving it to property managers just means that you want to have property and enjoy the benefits but not really prepared to work for it.
On 24 November 2008 at 12:46 pm B&A said:
We are South Islanders with two rental properties in Auckland under management and one next door that we manage ourselves. Thus far we have had a good run with the management company - no missed rents yet, touch wood. There are some issues with communications - it would be good to get occasional updates on how each property is progressing in terms of tenancy and maintenance. The managed properties are new but it is frustrating to see rather large invoices coming in for seemingly minor jobs that could quickly and easily be fixed if one was on location. We are very happy with the service provided but if costs rise again, we may rethink our management strategy.
On 24 November 2008 at 3:06 pm Evan Brett said:
I use a property manager to manage my two long-term rentals, as I prefer to use my spare time looking for new opportunities.
They do annoy me though by periodically writing to me and telling me I have made a capital gain and should sell or upgrade to better properties.
On 24 November 2008 at 11:16 pm AO said:
I read with some amusement the above blog re the "investors" and "landlords" differentiation, and wondered about the blogger's hidden agenda? We 'owners' choose to manage our own properties not because of some immense passion for the endeavour per se, but because we know,dare I say, that we generally do a much better job than property managers. And at a fraction of the cost, all things considered -that's it!

I think the other important issue to be addressed as an aside regarding this, is the proposed amendment to the Residential Tenancies Act whereby tenants will not be able to be charged letting fees. Have all private residential landlord investors given this proposal some thought? It has the potential to skew the market and give the power to letting agents particularly in a slow market, thereby forcing landlords to enlist their services if they wish to procure a tenant. Apart from the obvious paying a letting fee,this could result in other more serious consequences such as downward pressure on rents by agents, less control over quality of tenants, agreements, etc etc.

This has been my experience in the past. Now with the benefit of hindsight and experience, I successfully do all my own letting and sign up quality tenants on fixed term contracts who continue to renew. No more headaches!
On 25 November 2008 at 5:38 am Ian said:
Oh yes, the property manager.
There are two types - the one attached to a real estate company and the standalone companies. The real estate-attached ones seem, in our experience, to be failed RE agents.... (although not true in all cases!). The standalone are rather rare.
We use mangers (and have to train them) simply to spread location of property to get into greater growth areas.
The main problem we have encountered is that the 'manager' is not customer-oriented, some think they are the client of the tenant!
We are looking forward to meeting up with this 'new' fixed price deal.
On 25 November 2008 at 9:41 pm Chris said:
After having 14 properties managed by agents at some time or other, I must agree with those bloggers who say they can do a better job themselves - given that they have the time and proximity to the properties to do the letting and deal with maintenance issues. We had to take one agent to the REINZ as we found she was not honest about a lot of issues, especially inspections and tenant damage, and she cost us thousands in R&M in the long run. Most managers seem to be of the opinion that landlords have a bottomless bank account, and they get things fixed by their usual contractors who charge megabucks for very little. How about $500 just to lino the loo floor - no MDF required, all prep done! Some of these guys are really ignorant when it comes to maintenance and what is required. They have no practical experience. I suppose you pay for speed of response, but it seems over the top to me.
We rely on the honesty and efficiency of these people, but these days that is becoming more rare.
On 27 November 2008 at 3:01 pm Dave said:
My wife and I are NZ'rs working in Australia for 5-years and we employ two property managers to manage our properties in two differnt NZ locations. One manager the standalone charges 3% and employs different adminstration fees from most others. The other is tied to a Real Estate Agent and charges 7.5% every thing included. We did a lot of due dillegence and research before appointing the property managers because primarily property management has nothing to do with standalone or licenced managers. It has everything to do with the person who is the property manager. If the Govt regulates by group or on a licence type basis it will not improve property management. What we are finding in both the areas that we own property is that other investors are now taking the time to carefully select their property manager, the dodgy ones are ending up with no properties to manage and are going out of business. Although we are not members of the property investors association, they do have a list of the better property managers in their regions.
On 28 November 2008 at 1:50 pm Blog: The Landlord says… » Blog Archive » Pouncing on problems said:
[...] Blog: The Landlord says... « Shaking up property management [...]
On 22 January 2009 at 3:47 pm Antoinette Kruger said:
My husband entered into the lease from the 13th Dec for 3 months which means the lease is finished 13 March 2009. We have however came to realize that we are not in the school zone (something that we were unfamiliar with) for our kids school (the plan to attend Mt Albert Grammer), so we informed the agent that we would have to move due to
this fact, she said she would speak to owner etc and forwarded to us a sms saying that the owner agreed that we could move earlier should we (both the agent and ourselves) be able to find a tennant.

We advertized on trade-me the property and indicated that we would knock off $80 of the bond which was 3 x $360 weekly rental, we also indicated that no letting fees apply if WE find a credit approved tennant to take over our lease since we have already paid the letting fee on the current lease.

We found new tennants, we fetched the application form from the agent informing them of everything, took the application back to agent for credit check etc, and were informed by the agent that everything is fine their application was approved, then the agent asked to meet the people and we said of course no problem and they contacted the new people. At their meeting the agent asked
them for a letting fee, upon which we were contacted by the new prospective tennants. My husband then phoned and asked the agent why a letting fee is payable as the tennants are taking over our existing lease we did everything to find them and tried to make the deal attractive with paying the new tennants $8- on their bond and also because no letting fee would apply and we were willing to pay for the credit
check at least so that the agents do not have any expenses either and further to that these tennants were willing to take a 12month lease.

Today the tennants called us back saying the agent phoned them again told them she is bringing in more people to view the property and if they take it they would be paying a letting fee but if our tennants take it then there is no letting fee to them so they would rather put their
own people in the property.

We want to move out on the 01 Feb as we have to move into our new place on the 01 Feb, the tennants we found
can only move in on the 7th Feb since their notice period only expires then, we were willing to pay the 1 weeks lease that the place would not be occupied.

What is the legal action to be taken here, can someone please advise what decision would be the correct one with regards to this and we cannot get stuck with problems or additional costs as we have only budgeted on one weeks extra rent if we had to but we feel that the
agent is now trying everything to not take the people we found as tennants just because they are not getting a letting fee yet we feel
that they already received a letting fee on the current lease which will now just be taken over by the people we found so at least there is no break in the current agreements and further to that the owner now
have a 12 month lease.

Can the agent insist on a letting fee even for not finding a tennant themselves? Can they openly tell the tennants we found that they would rather put other people in there that they found to get a letting fee even though they have also already told these tennants that they are approved? What grounds could they now have to tell them they cannot move in?

We need some advise and insight here please
On 14 March 2009 at 5:49 pm Rachel said:
I'd just like to say from a tenants point of view, that private owners managing their own properties are far superior to agency property management.

We have just had some very bad experiences with a well-known agency who were supposed to be our 'landlords' in place of the owner - however the person in charge was consistently rude to us, dragged her heals over fixing anything, refused face to face meetings with us to sort out issues, and also refused to take the issues we had with the property seriously.

We have come out this the other side feeling extremely angry and helpless to do anything other than appeal to the tenancy tribunal. This may not be fair to say of all property managers, but in my experience the tenant gets completely left out and treated like cattle class, there to be milked for money with nothing in return. I can safely say we will only be looking at private rentals from now on.
On 6 February 2010 at 11:17 am Self Storage Lockers said:
I agree with Rachel. When I rent, I try to stick to the little guys. It's easier to find a cheap place if you go with the big companies, but they never seem to care when you've got a problem--not to mention that they're much worse about returning your security deposit.
On 8 February 2010 at 3:58 pm Ann Roe said:
Had to put a word in here, looking for solutions too, as the "property manager" who is meant to be looking after an adjoining place on a cross lease site has let the property go to the dogs, while the overseas Chinese owners are totally unaware,having only the agencies word and photoshopped pics to rely on.And of course extra cash in their bank because even basic maintenance requirements are not being met,naturally this impacts hugely on the other properties in the block, effectively reducing values, as well as being a total embarrassment for guests and residents alike.It also shows a total lack of respect for the tenants of the property.
We do need a body to be set up to deal with these people, also in Mt Albert, who say they create solutions not problems. They need to be shown for exactly what they are, which is simply hardened extortionists. I would never use a property manager, and tell all who listen the reasons why!
On 25 March 2010 at 7:23 am Self Storage Room said:
Flat rates are always appealing because you never have to worry about how much you're going to have to pay at the end of month. People prefer salary positions for the exactly same reason--because they know how much they are going to get every other week!
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