To Self-Manage Or Not?
What’s the best approach to property management – doing it yourself or calling in a professional? Opinions are sharply divided so Miriam Bell talks to proponents of both views.
1 July 2019
Tales of chaotic residential tenancies and destroyed rental properties abound. Given the supposed carnage, the average punter could (almost) be forgiven for thinking that tenants are simply plonked in rental properties without any oversight at all.
In reality, that’s simply not true. In 2018, Stats NZ put the number of rented houses in New Zealand at 625,900 and the vast majority of the tenancies within them take place in relatively orderly fashion.
That’s because any good landlord knows that purchasing a rental property is just the first step in the investment. After the initial purchase come the joys of running a rental property. This involves everything from tenant selection and management to regular maintenance and repairs.
Key to the success of an investment is effective property management. But there are different schools of thought when it comes to the best approach for investors to take when it comes to managing their properties. One is self-management, while the other is employing a property manager.
While the property management industry has come in for some flak in recent times, and calls for greater regulation of the industry are growing, a good property manager can be worth their weight in gold. For that reason, many investors swear by them.
On the other hand, some investors have been burnt by a dodgy property manager in their past and have found that managing their own properties is a more successful option for them.
Anecodotally, there is a fairly even split between the two approaches. So we decided to talk to proponents from each side to find out what’s behind their choice as well as what the pros and cons of each option are. We also touched base with some property managers to hear what they had to say.
Taking The DIY Route
The most commonly cited reasons landlords give for managing their own properties are cost savings and maintaining control, alongside previous bad experiences with a property manager.
But for Angela Strang, who was the NZPIF’s landlord of the year in 2015, it’s actually about the direct relationship with the tenants that comes with selfmanagement. “I feel self-management gives me more control. I can fix things easily and quickly. It allows me to be right on the ground, at the centre of things. So I know what is happening and what I need to do for the tenants and the properties.”
She believes that successful management comes down to the relationship a landlord has with their tenants. “That means you have to be fair. You need to get on to maintenance as soon as you are aware of an issue. Tenants are less likely to get resentful and more likely to look after your property well if you do.”
But tenant selection plays a critical part in this and it’s the hardest part of managing a property, she says. “It could pay for newer investors to get a property manager to select their tenants for them for a few years, but do the rest of the management job themselves. So they can learn how tenant selection should be properly done.”
Strang, who has 11 tenancies and years of experience, says that landlords with one or two properties should be fine self-managing them. “Any more than that it is harder and it’s necessary to put a professional property management system in place in order to keep track of rents, inspections, maintenance and so on.”
As long as a landlord is in the vicinity of their property, self-management can be done easily, she adds. “But you have to be on to it and you need to ensure you always stay on top of things.”
For Charmaine Seccombe, tenant relationships are important but they are not the reason she manages her own properties. When she first migrated to New Zealand and bought her properties, she employed a property manager because she didn’t know much about the way everything worked here.
“But I soon found myself questioning the service the property manager was providing. Little things – like additional tradie call out costs and sloppy end of tenancy cleaning – started to really annoy me and, eventually, I decided that I could do it all better myself.”
Over the four years since, she has managed her properties herself with only a few minor issues along the way. She maintains good relationships with her long-term tenants but admits she has been lucky that she hasn’t had to select new tenants and has never had to go to the Tenancy Tribunal.
“Self-management means I am able to keep a close eye on my properties and can communicate with my tenants directly. In turn, that means I have more control over what is going on and that things are happening in the way that I want them to.”
Opting For A Professional
Those landlords who choose to use professional property managers to take care of their properties also cite several clear reasons for doing so. Prime among them are the greater level of knowledge and expertise a property manager can provide and the fact that employing one saves on time and minimises stress.
Aaron Burke bought his first rental property back in 2002 and has used a property manager from day one. He says the main reason for this is that he is time poor. “I lead a busy life and I don’t want to be dealing with tenant or maintenance issues at any time of the day or night. Using a property manager saves me time and gives me freedom.”
But he also doesn’t see a property manager as a cost, rather he sees it as an investment in his investment property business, one that ensures it is kept up to standard. For example, a good property manager will get the correct market rent rate for you so you can maximise your returns, he says.
“Property managers have access to information and resources, as well as knowledge about the relevant law, that most landlords don’t. Mistakes can cost big time and I think using property managers cuts down the risk of them.” Burke also thinks it’s sensible to have someone between the landlord and the tenant when it comes to managing rental properties. “It’s good to have a conduit between landlords and tenants. Just to maintain some distance, keep it professional and to ensure the best decisions for all involved are made.”
A property manager enables that, he adds. “Property investment is a business after all. But using a professional manager allows me to buy and forget while being sure that my property is being run effectively and well.”
Marise Lincoln, who owns several rental properties, agrees it is the additional level of professionalism a good property manager brings that makes employing one worthwhile.
“I worked out the commission a property manager costs and it equates to about one hour of my working time a week. It’s pretty reasonable. And it removes the stresses and time involved for me. That’s great, especially if you are busy with work and children and so on.”
But the biggest advantage of using a property manager is in the tenant selection area, she says. “The selection process, the quality of the tenants selected and the resulting lack of vacancy and Tribunal issues. It’s brilliant and it means I don’t have to worry about any of it.
“I’m glad that it’s not my job. It removes the potential stresses of being a rental property owner. Using a property manager just takes away all the worry that can come with being a landlord from me.”
Property Managers Speak Up
One of the major reasons self-managing landlords shy away from property managers does seem to be experience, or wariness, of the lower end of the property management sector. And this is an issue. The lack of regulation for property managers means there are huge discrepancies in the quality of the service offered.
But there’s a world of difference between a good property manager and a bad property manager. As with any expert, a good property manager can enhance the service a rental property owner provides and improve their business.
Propertyscouts director Milton Weir says the best thing about a good property manager is the high level of expertise and processes that they can offer. “Most landlords simply don’t have that knowledge, certainly not to the same degree.
“When you look after hundreds of properties over the years it’s inevitable that you have a level of experience that a landlord with just a couple of properties doesn’t. That’s because you end up spending a fair bit of time at the Tenancy Tribunal and you learn the importance of getting it right first time with tenant selection and what is needed to do that.”
It’s also easy for self-managing landlords to develop quite unprofessional relationships with tenants, he says. “It means they can find it hard to get rents up to market level and keep them there. For a property manager it is simply a business relationship and that does make a difference.”
Weir says they pick up lots of business from landlords who used to self-manage. “We usually find the processes they have in place aren’t very good. Ditto their knowledge of the relevant legislation and requirements – despite what they think. In contrast, we have clear processes in place for everything.”
In a similar vein, Wise Property Management’s Janeen Collier believes the advantage that comes with a good property manager is their high-level knowledge base and the ability to apply it effectively.
That knowledge – about everything from the relevant law and the workings of the Tribunal to tenant selection, rent setting and debt management – is absolutely crucial, she says. “On a practical level, we also have a solid network of reliable tradies and the ability to bulk buy products and offer cost savings.”
Weir adds that, ultimately, experienced property management companies are always going to have a combined wealth of experience and knowledge which is more than any individual could possibly have.