The following information may be of interest to purchasers of investment properties:
Once the purchase of an investment property has reached settlement, it is then the responsibility of the new owner to arrange for management of that property.
- On Site Manager
- Property Manager (Outside agent)
The first option, whilst the most economical in terms of not having to pay commission, can be fraught with danger as most owners are not familiar with all of the rules and regulations pertaining to the Residential Tenancies Act. The job of property management is best left to the experts, either on site managers or property managers who are trained in the legalities of the profession.
Where on site management is available, this is usually the most successful method of having your property looked after. On site managers are “johnny on the spot” and, as this is their livelihood also, they are extremely keen to keep owners happy. They also want to keep tenants in place and, hence, good on site managers will make themselves available to the needs of their tenants also. An outside agent would probably not be as available on a 24 hours, seven days per week basis.
When an investment property settles which has an onsite manager the owner will be sent a PAMD Form 20a which the on site manager will have filled out with details of appointment. This Form 20a must be completed before the On Site Manager can start to perform any of the services on behalf of the owner regarding finding tenants for the property. An owner has the right to negotiate with the on site manager regarding this agreement.
Commonly charged commission is between 7.5% & 8.5% (plus GST). This is usually made up of approx 5% Management and 2.5% for rental collection. You have the rights to negotiate fees charged & terms of your agreement with your property manager.
Fees and charges
The commonly charged letting fee (to find a new tenant) is one week’s rent.
Some on site managers/outside agents may charge a letting fee (one week’s rent) only when securing a new tenant which involves advertising, showing the property and completing an entry condition report. Others may also charge this fee on renewal of the lease and some may charge half a week’s rent on renewal only. They may always put the tenants on six month leases and charge this fee each time the six months comes around. This also enables the on site manager to increase the rent if this is warranted.
Type of Appointment
You have the option to tick just the “Single appointment” box instructing the on site manager or property manager to find and place a tenant only. We suggest you do this initially as it will give you the option to open it up to another agent if it is taking more than 2 weeks to find a tenant without any problem. If it is through an onsite management, they may not be open to this.
Once a tenant is found you will then have to complete another 20a form, ticking the ‘Continuing Appointment’ box which authorises the agent to manage your property. We recommend you then change 90 days’ notice in writing to revoke the agreement to 30 days’ notice and initial the change. We also recommend you put the following clause in Special Instructions to Agent:
“At the end of a tenancy, the listing may be given to another agent on the grounds that you rent, you manage. However, if you are successful in reletting and the client agrees, this agreement shall remain in place. I/we also give consent for MRD to obtain any rental information pertaining to this property”.
Advertising and Marketing
With on site management the complex as a whole may be advertised when there are vacancies and usually this is divided up between all owners. With an outside agent, your unit should be advertised before it was due to become vacant.
On site managers & outside agents alike will also show a charge for postage and petties per month – approximately $6-$8 (this varies with different on site managers and areas).
If these are necessary it takes the time of the Property manager and some will charge a fee per hour to attend. This will most probably also be charged by an outside agent.
Important to Remember
When comparing the charges and commission between on site management of your property and placing the management with an outside agent it is important to weigh up just what you are getting in the way of service. You may find that outside management will be a little less expensive but that will not make up for an experienced “on-the-spot manager”.
Of course, there may be a situation where the on site manager is not carrying out the management of your property in a proper and efficient manner. You then have the right to notify the on site manager in writing, giving thirty days’ notice (or whatever had been agreed to). You would then place your property with an outside agent of your choice. You can do this at any time and pay the 30 days’ commission to the on site manager. Some outside agents will waive the first month’s commission to avoid your having to pay this to both the on site manager and the outside agent.
Generally speaking, there are good and bad on site managers and property managers (outside agents). Make sure you monitor the management over the first six months. Look at your monthly statements and don’t hesitate to contact your manager regarding any charges you are not sure of. Be active, not passive – remember – it’s your property.
Other matters which will need attention
- Body Corporate fees will fall due on a quarterly basis
- Schedule - H Services - Water Charges - for any queries please check with your Property Manager
- Council Rates will fall due twice per year
It is always advisable to inspect your property yearly if possible. This keeps you up to date with the condition and allows you to keep the place maintained to your satisfaction.
This is your investment and properly maintained properties will always attract a tenant ahead of one which is looking a bit tired.
Make a point of asking your on site manager/property manager how often the properties will be inspected by them and will you expect to receive a written report on the condition.
Maintenance and Purchases
When requiring maintenance such as painting or replacement of items such as carpets, window dressings, air conditioners etc. the onsite managers and property managers will usually be able to organise all of these matters for you and provide quotes etc. Of course, you can always obtain your own quotes but you will find that because of the bulk of work carried out in complexes, the managers will usually be able to find you a very competitive price for most work. There could be a fee charged for this service, please check the Form 20a where it will be stipulated.
Maximum Value of Repairs and Maintenance to be paid by Agent with Prior Approval
The agent will put an amount in this section – sometimes $100, sometimes equivalent to one week’s rent. Please note that the Residential Tenancies Act allows a tenant to spend up to two weeks’ rent if “emergency repairs” are not attended to within an appropriate time.
MRD is able to help with this, as is your on site manager/outside agent. Allowing mrd or your property manager to arrange this for you can result in obtaining very good prices for premiums due to the amount of policies which we/they put through the Insurance Company. If you don’t have a current Landlords’ Insurance policy in place please refer to the enclosed ‘AON’ information sheet.
Telephone Numbers for Information
Property Owners Association of Qld (07) 3343 3929
Residential Tenancies Authority 1300 366 311
Unit Owners’ Association (07) 3220 0959
MRD Partners - (07) 5580 8888