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Property management: balancing price with performance

Monday, 5th Oct 2015

balancingIt might be tempting to engage the cheapest property manager you can find, but it could prove to be one of the most costly decisions you’ll ever make.

For serious property investors, choosing a property manager based purely on their fees carries significant risk.

You wouldn’t choose the cheapest stock broker to manage your shares, so why would you choose the cheapest property manager?

At the end of the day, if you engage a cut-price property manager you’re likely to receive a significantly lower standard of service.

This is because the property managers at these agencies are forced to oversee a higher number of properties – sometimes hundreds of properties for each manager.

Consequently, these property managers are swamped with work and can’t provide an adequate level of service to each customer.

With cheaper agencies you’re also likely to encounter a higher turnover of property managers.

This is because they simply can’t cope with the huge workloads, become burnt out and have to change employees.

In other cases, some agencies might offer a cheaper upfront fee, but then charge for additional services.

Eventually, the fees with the budget agency start to add up and might be the same, or more, than with a premium property management firm.

Even worse, if owners don’t opt for these additional services, such as property inspections, the condition of the property may suffer and rents won’t be optimised.

Another area that suffers is staff training. If profits are marginal, there is no budget to provide adequate education and keep staff up-to-date with legislation.

As a property investor, you need to weigh up the importance of potentially saving a few hundred dollars each year at the risk of harming the performance of one of your most valuable assets.

Remember, property management fees are a tax write off meaning you’ll pay less tax and recoup some of the cost.