The Hidden Cost of a Bad Property Manager

The most obvious cost of poor management is a property sitting empty. Every week without a tenant is another week without rental income.

A good property manager needs to know what similar properties are renting for and where the asking rent should sit.

Set it too high and the property can sit vacant while the owner waits for a rent that the market will not pay. Set it too low and the property may rent quickly, but the owner gives up income unnecessarily.

Ask the property manager how they decide the asking rent and what comparable properties they are using.

If they cannot explain the number, you need to find out why. 

Poor tenant selection can become expensive

Getting a tenant into the property is not the end of the process. The wrong tenant can create problems long after the application has been approved.

Rent arrears, property damage, complaints from neighbours and disputes can all take time and money to resolve.

But all this does not mean a property manager can predict exactly how a tenancy will go, it just means the screening process needs to be taken seriously.

Ask what checks they carry out before recommending a tenant.

Do they verify income? Do they check rental history? Do they contact previous property managers or landlords? What documentation do they require?

You want to know what their process actually looks like, rather than simply being told they have a good tenant screening system.

Small maintenance problems can become big bills 

A leaking tap is cheap to fix. Water damage that has been left for months is not.

The same applies to mould, damaged roofing, plumbing problems, electrical faults and other maintenance issues.

A property manager is often the first person who hears about a problem. If they deal with it quickly, the repair can stay small.

If communication is poor or repairs are repeatedly delayed, the eventual bill can be much larger.

Ask how maintenance requests are handled.

Who approves repairs? Is there a spending limit before the owner needs to be contacted? How quickly are urgent repairs dealt with?

You can lose money through poor rent collection

Rent arrears are another area where management matters.

A tenant falling a few days behind is different from a tenant who has built up a large unpaid balance over several weeks.

The property manager needs to monitor payments and have a clear process for following up arrears.

Ask how often arrears are checked and when the tenant is contacted. Also ask what happens when the problem continues.

You want a process that is consistent rather than waiting until the unpaid rent becomes a serious amount.

Communication matters a lot

One of the most frustrating parts of owning an investment property is not knowing what is happening.

You should not have to chase your property manager for basic information about your own property.

If a repair is needed, you should know what the issue is and what it is expected to cost.

If the tenant is behind in rent, you should know.

If the property has been vacant for three weeks, you should know what has been done to find a tenant and whether the asking rent needs to change.

You do not need daily updates. But you do need clear communication when something affects your property or your money.

Look at how they manage their existing properties

Before appointing a property manager, ask how many properties the individual property manager actually looks after.

There is a difference between the size of the agency and the workload of the person who will manage your property.

A large agency might have hundreds or thousands of properties, but your property still needs an individual manager handling the day-to-day work.

Ask who your main contact will be and whether someone else covers the portfolio when they are away.

You can also ask how long they have been managing properties and what type of properties they normally handle.

Ask about their fees properly

Do not just compare the management percentage. Ask what is included.

There may be separate charges for letting a property, advertising, inspections, routine inspections, lease renewals, administration or other services.

Two agencies can quote similar management percentages while charging very different amounts elsewhere.

Ask for the complete fee schedule in writing. Then compare the total cost rather than focusing on one percentage.

Check how they handle inspections

Routine inspections give the property manager a chance to identify problems and see how the property is being looked after.

Ask how often inspections are carried out and what happens after one is completed. Do you receive a report and photos?

If the manager finds damage or maintenance issues, how are they reported to you? You want a process that gives you a clear record of the property’s condition over time.

Talk to landlords who already use them

One of the simplest checks is to speak with existing clients.

Ask the property manager if you can speak with a landlord they currently manage for.

Then ask practical questions.

• Do they respond quickly?
• Are repairs handled properly?
• Do they explain problems clearly?
• How long do vacancies normally last?
• Have they had issues with rent arrears?

You will learn much more from those answers than from a sales presentation.

Online reviews can also be useful, but I would look for patterns rather than focusing on one extremely positive or negative review.

What I would check before appointing one

If I were choosing a property manager, I would ask:

• Who will personally manage my property?
• How many properties do they currently manage?
• How do they set the asking rent?
• What tenant screening checks do they carry out?
• How do they handle rent arrears?
• How quickly are urgent repairs dealt with?
• What maintenance spending can they approve without asking me?
• How often are routine inspections completed?
• What reports and photos will I receive?
• What fees are charged on top of the management percentage?
• How are vacancies handled?
• Who manages the property when my usual manager is away?
• Can I speak with an existing landlord client?

I would also read the management agreement carefully before signing it. Know how you can end the agreement, what notice is required and what fees apply if you decide to change managers later.

What I would focus on

I would not choose a property manager simply because they charge the lowest percentage. I would look at how they operate.

A manager who communicates properly, screens tenants carefully, follows up arrears, handles maintenance quickly and keeps the owner informed is doing much more than collecting rent.

That service has a cost, but having someone who poorly manages your property is an even bigger cost in the end. 

The difference is that the second one usually shows up in lost rent, unnecessary repairs, longer vacancies and problems that take much longer to resolve.

Final word

A property manager has a direct impact on how an investment property performs. The cheapest fee does not mean the cheapest outcome.

Before appointing one, find out exactly who will manage the property, how they handle tenants and maintenance, what they charge and how they communicate with owners.

You are trusting them with an asset worth hundreds of thousands of dollars. The management process should be treated with the same care as the property itself.