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Andrew Mirams (AM): Thanks for joining us for our latest podcast. Sitting here with me today is Shannon Davis, Director of Metropol Properties in Brisbane, and we want to talk today a little bit about the importance of property management. We deal with lots of investors. Tell me a little bit about the importance of a good property management and what to look for in that.

Shannon Davis (SD): I think that’s a good point Andrew. A lot of people really research their buying and selling costs but holding costs make a real difference to an investor and one of the best ways to minimise your holding costs is through property management. Sometimes investors will be tempted to choose property management on their fees but I would suggest they look at the 52 week figure because the cheapest manager will be the one that gets you the most yields back and minimises your expenses and vacancy and they’re often not the cheapest agent on the market.

AM: So, you’re talking a potentially proactive agent whereas someone that just collects the rent each month?

SD: Exactly. One of the ways agents become cheaper is they give their property agents more to manage so your property gets less attention and you hit it on the head with proactive as well because things like, if there’s a couple in an investment property, you see a rental reference come in for one of them, that should really prick your ears up because it means that one could be moving out soon and therefore the affordability of that couple to keep paying the rent in that property has been compromised.

That’s one of the differences that a proactive agent would be as well as maintenance. If you keep on top of maintenance you can really keep your expenditure down and, of course, a property manager earns their money when a properties vacant. If you’re getting 2 or 3 or 4 weeks vacancy every time it might be that your agency still gives out the keys or they still ferry one agent, one buyer around at a time and that’s going to make a big difference to your return.

AM: Okay. Are you suggesting, not too dissimilar to buying a place, when you’ve got a vacancy that you have an open home and get people to the property?

SD: Open homes at convenient times where there’s multiple groups through creates some buyers urgency and that’s a much better way of getting the property rented sooner than perhaps doing, you know, 10 or 15 individual inspections. We’ve got to remember, like a person paying $500 a week rent, that’s a $25,000 buying decision so we need to make sure that our property managers are professional in how they let our properties.

AM: Okay and you also mentioned about maintenance and things like that. What are some of the things a good property manager will do avoid the urgent repairs that are obviously more costly versus actually going in and being proactive in terms of while this starting to wear and tear? What are some of the things that you do in your business to actually be proactive in trying to avert, you know, a disaster and having to pay potentially more?

SD: We try and we get to the property before time and fix things in the most efficient way and sometimes that might be replacement not repair. There’s no use really repairing an old dishwasher. The prices have come down and you’d be better off getting extended warranties on something new rather than paying a technician to come out, look through it, charge it and not be able to fix it. Another example is, if you get leaking in taps and the chipboard swells and then doors can’t close, before you know it you’re up to a new vanity rather than fixing that washer. It might have alleviated that problem…

AM: Might have just masked the problem.

SD: Yep.

AM: Don’t mask actually be proactive and deal with the property as you would if you were living there yourself.

SD: That’s correct.

AM: Yep and it’s fair to say that if you do that with an appliance, obviously, for an investor as all our investors will know, you get instant depreciation on that anyway. Sometimes rather than repairing an old, getting a new and potentially that gives you a rental increase, obviously, that’s going to help your rental yield performance.

SD: Definitely and when maintenance isn’t kept up, when it comes time to sell, the owner might have like a $50,000, sort of, build to get it up to market appeal whereas if maintenance is done proactively your cash flow will be less lumpy, but if you ever had a change of circumstances and you needed to sell, it would be far less of an investment for that owner to put that property onto the market.

AM: Great point and so that’s a bit about the property manager. Tell me what a property manager looks for on behalf of me your investor. What do look for in a really good tenant then?

SD: Definitely affordability. We don’t like 30% of the take home pay to be more than, the rent be more than that. We like to look that they’re a good fit for the property. We prefer long term commitment rather than short term, so one year leases where possible and rental references are essential, more than one especially, because a leopard doesn’t change their spots. Why I mention more than one, if you only get one rental reference it could be that you get a disingenuous agent or landlord who’s trying to offload their problem tenant onto you.

AM: Yeah, great point. No one wants the problem tenants you all want good tenants because that helps you’re ultimate yield and the capital growth of your property.

SD: That’s the biggest part.

AM: Well, there you go. I think there are some fantastic tips from Shannon. Thanks for joining me today Shannon. Shannon Davis from Metropol Properties in Brisbane.

SD: Thanks Andrew.