REAL COST OF PROPERTY MANAGER

[orion]

Most things have been said already, but will just add a couple of things.
It really is an individual choice, there are pros and cons of each, as there are good and bad property managers.
One guy I used was an independant manager and ripped me off $1600 on the one property he managed, someone else he ripped off $27,000. I was going to put quite a few properties with him, luckily I didn't. Many people are after him, his name is John Pomana if you ever come across him, and was living in Hawkes Bay. He said he was moving to Auckland, but with the number of people after him, he probably went overseas. This is obviously a rare case - he was keeping bonds unbeknown to us, also had the rents credited into his account and paid us monthly. By the time I got the tenant to cancel the payment to him 6 weeks after the last payment, he had another 6 weeks rent. He managed one of mine plus about 40 others for investors in Hawkes Bay for several years before doing a runner.
I do use a manager for 3 other properties a couple of hours away and they are fine. I prefer to manage the others myself as it only takes me a very small amount of time each week. When re-tenanting, you generally have more people to choose from as there is no fee to pay to the property manager. I actually have used Ed above in one Napier property to re-let a few times and he has been great, although I do still manage it. Sometimes can depend on how much time you have available at the time. You can get a manger to find a tenant, then still manage it yourself.
I don't think there is a case to state that everyone should always use a manager, or no-one should use a manager as all investors' needs, wants and desires are different.

Regards
Graeme Fowler

[murray-spi-investments]

Any service is going to cost money. How come we service our cars and pay $500 for it (ok ok it depends on the the car, I know) and think little of it, but when you pay your Pm $20 per week or $1000 per yr we all get concerned about it.

Each investor has their own desire or lack thereof when it comes to manageing their own place or having it managed on their behalf and I think that when you look at $20 per week ( for a place rented at $250 pw and 7.5% mngt fee excl gst) that is really not much for the time , effort and potential angst you can save. Remember you made you money when you brought the place if you brought well and your time is best spent looking for your next investment not losing focus by getting bogged down in the detail of management. You have experts for that like Glenn in Nelson or me in Auckland.

When as Ed said it is all tax desuctable then the only question is is the PM any good and like most things else in life it can take a while to find a good one.

[orion]

As I say Murray - it depends on the situation. You can't generalise.
If you are a manager yourself, you will be biased towards using a manager as will be Glenn in Nelson and Ed in Napier. Again - who benefits?
For me, I manage 40 of my own, the others include 3 that are managed and another 15 or so wraps which take care of themselves - ie the occupiers look after maintenance etc.
With the 40 I manage myself, it takes me on average an hour to an hour and a half a week. This year I have had 2 tenant changes, last year was about 5 or 6, the previous year there was none. It takes 5 - 10 minutes to check the rents on line on a Saturday morning. So, I would say an hour or so a week is all it takes - including taking any calls from tenants and writing a couple of cheques to tradespeople, that's about it. If those 40 were managed, it would cost about $800p.w. or $40,000 a year. This of course is deductible, but I still prefer to do it myself. If I value my time at $500 an hour, it is still time well spent. Another deciding factor for me is, from what I see and hear from other investors' around town about local property managers - I know I can do a far better job myself.

Regards
Graeme Fowler

[170plus]

For many people, using a PM is thr only way, especially if you are overseas.

Through bitter experience I have learned a couple of useful things:

1. Don't pay more than 7.5%, and many charge 7. (10% in the UK).
2. Keep and eye on what they do.
3. Use a PM who is also an avid investor.
4. If you find a good PM, stay with them when they move companies or setup independantly - this is the biggest 'right move' you can make with a PM.
5. Don't be afraid to change if you don't like what you get.
6. Test what they tell you.

OSP

[fitboy]

Hey everyone

I've found that it all depends on the tenants that you get in the property. I manage 4 of my properties which take up hardly any of my time but the other 1 has a person who is a good tenant, pays the rent etc..., but is a pain is the ass as a person. I decided to use a manager on this one.
If you can get the right tentant from the start there isn't much work involved. Although that can be a big 'if'.

Fitboy

[Glenn]

Good on you do it yourselfers.

I often try my hand at brain surgery also. Far cheaper and quicker than waiting on the hospitals. Any failures are just buried and written off to bad luck or hopeless cases.

You know I have been doing this job for ages and handling all sorts of rubbishy properties and difficult tenants. Despite this I seem to keep learning new things. Many people tell me they have managed their 5 to 10 or so properties for years and have never been in the tribunal. Well I have perhaps 5 times that many properties that I have never been to the tribunal with either.

What a good property manager should be doing is maximising the rent and minimising the down time between tenancies.
I aim for 1 hour between tenancies. I am on the job the minute the tenants are out fixing things and getting ready for the new tenant that should be coming in that or the next day.
When you are doing it all yourself you do not have time to get there during the week. I am always hearing about landlords taking several weeks between tenancies to refill. Now sure it is a bit harder at the moment and obviously if you have an eviction then you can not show people through before then. But despite this I have for some properties had people walking up the drive to view a property as the evicted tenant was carrying their stuff down it.
Sure call me a mean bugger but that is what people pay me for.
So I believe with few exceptions that I am able to put more money into the pockets of my clients after paying me than they could do it themselves.
And you know what I have two commercial properties I own managed for me. I could do one of them myself but I beleive it is in my financial best interest to have that seperation from my tenants.
Been there done that.
However I am not too sure how many more I can handle. Perhaps I should charge more.
What do you folks think about me charging more.
Glenn

[orion]

Good on you do it yourselfers.

I often try my hand at brain surgery also. Far cheaper and quicker than waiting on the hospitals. Any failures are just buried and written off to bad luck or hopeless cases.

Glenn, I am sure you do a great job for your investors, but it is no reason to make such outrageously ridiculous comments as the ones above.
Are you trying to justify to you own clients that you do a good job for them? If you are doing your job well and they are all happy - there is no need to.
It doesn't mean that everyone who manages their own properties is doing it wrong, or doesn't know what they are doing.

Regards
Graeme Fowler

[Glenn]

I took this comment from a comic character.
No reasonable person would believe it.
Obvious over statement of a case is mearly one way of making a point.
That is a common way of expressing one self in English and in many other languages.


I see nothing that I have said that suggests people are not capable of managing their own propeties. In fact why would I bother giving "good" (well I hope so) advise freely to members of property investor associations and readers of this forum if I did not believe people are capable of managing their propeties.

The point I am trying to make as apposed to advertising my services is that often do it yourselfers do not work out all of the costs and the net income at the end of the year.
Lost rent between tenancies is a real cost and for do it yourselfers is often not taken into account.
I was given a vacant property to manage this week. The owner says he was managing it himself. He has owned it for two years. The tenant owed him over $2000. The owner could not bring himself to evict a family so put the property on the market for sale. He initially contacted me to see if I could help him sell it. Obviously I could not do that but offered to manage it.

Now this owner is not incompetant, uninformed, or what ever. It sounds as if he is a decent fellow.
Now if he had had the property managed by someone sure he might have lost a bit between tenancies, and a bit for management but in the end he would have had more money in the hand.

This is what property managers are all about.

Doing the job that others might be able to do but do not want to do.

Glenn

[cashed4crash]

This is what property managers are all about.

Doing the job that others might be able to do but do not want to do.

EXACTLY

[LeanneS]

To all the people who have related bad experiences with property managers I would say that's a reflection on that property manager, not on having property managed altogether.

My NZ properties are managed by a *wonderful* manager who I am v happy with. I do my UK ones myself because they are in my area and I am unlikely to find someone of an appropriate standard over here.

Very much horses for courses - if you are a new investor with more time than money then managing them yourself will save your cashflow. If you are a more experienced investor with more money than time then odds are you'll want to outsource it.

Cheers,
Leanne

PS Graham - please don't think I'm calling you a newbie :-)[/i]

[Glenn]

Well yes Leanne. There is one other aspect that people usually over look.
I have people all the time telling me that they have "this " many properties and have never had this problem or that or even worse been to the tribunal. As if making an application to the tribunal was some sort of failure. It is a reasonable fact that some properties are in such a state that you can only attract a certain class of tenant. This implies that one needs to take a bit more "risk" with them. With this risk goes the likelyhood that rent and other problems will result.
Now until the owner or manager has been down that path it will take a bit of learning to figure out how to deal with the problem.
The experienced, on to it, managers or owners will act in such a way that the cost of the problem is minimised. Other nice people will give the tenant the benfit of the doubt that might result in a loss.
Most people will put these sorts of problems down to experience and some owners might even sell the property to get rid of the problem.

Now I sometimes suggest to new young people it is not a bad idea to buy a higher risk higher return property first.
This is all very well in the early days. But it does not mean that it is a good idea to buy lots of properties at the bottom of the market in the early days before the new investor has learnt how to handle drug dealing mentally deficient, violent, dog owning, unpredicable, institutionalised, mutant, desperate, dirty, unpleasant, young, and perhaps believable tenants.