You will often see property management companies promoting their business using statistics. The most common are along the lines of "# of properties leased this week", "% of properties occupied" and "# of new management agreements signed".
At a glance these statistics sound great and seem to portray the success of the business. But let's take a minute to actually break this down and consider what each property management statistic means, and how relevant and valuable this really is to a landlord.
Number of properties leased this week
This is a statistic which is quite compelling. It certainly tells a story of the volume of property management work being undertaken. It could be seen as a sign of the success of the business in filling vacant properties.
What this figure doesn't reveal is the proportion of their rental stock which remains vacant. For example, if a business states they have leased 5 properties in the past week, you don't know whether this is 5 out of 5 properties, or 5 out of 15. The number of leases on its own does not tell the full story. There is often not a clear reference point to help understand just how great a success this number of leases indicates.
To get a clear understanding of what this figure means when you see it advertised, ask the agency how many vacant properties they have alongside the number they have recently leased.
There are many reasons a property may be vacant, and many of these reasons are not within the property manager's direct control. The agency's answer to this question will give you a feel for their level of transparency, professionalism, and immediate knowledge of their available rental stock.
Percentage of properties occupied
Enter the "% of properties occupied" figure. The aim here is to provide the missing reference point, so a landlord has an understanding of the number of properties occupied as a percentage of the number of properties the business is managing.
The first point to note here is that this is near impossible to validate, given that the number of rental properties on a business's books can change several times throughout the week, as can the occupancy status of any of those properties.
That point aside, the clever property management business will carefully choose when to promote this figure. Why? Well, as will be covered next, another popular statistic in property management promotion is "# of new management agreements signed". More often than not, a new management agreement brings to the agency a vacant property. So, as the number of "new management agreements signed" goes up, down goes the % occupied figure.
The increase in one statistic generally sees a decrease in the other. But the property management business wants both figures to appear as high as possible to help win your business.
Remember, the numbers you see promoted by property management businesses have been chosen. The promoted numbers will always tell the best story possible.
Number of new management agreements signed
This statistic provides little value beyond an ego boast for the agency. Think about it - as a landlord, what does this figure actually mean to you?
On the one hand, if the agency has signed a high number of new management agreements, this could be a sign that the business is strong and growing. But think further...
What implication does the seemingly endless supply of new properties to manage have on the agency's capacity? Are the available property management resources stretch thin?
There are several models of property management team structure. Generally the larger the agency, the more specific the tasks are that are completed by each individual. For example, business development, routine inspections, booking tradespeople, written reports to landlords, collection and payment of rents, and so on may all be completed by separate individuals in a property management team.
While this enables each team member to retain focus on a core set of skills, this can be frustrating for landlords who just want a single point of contact who knows all aspects of their investment property.
An often-referenced rule of thumb is that a property manager should be responsible for no more than 120-150 properties. Beyond this number, the level of knowledge of each property and the level of service to each landlord suffers.
If an agency promotes the number of new management agreements they've signed, ask how many properties they have now. Then ask how many property managers look after those properties. You don't want to be lost in the pack or endlessly waiting for a return phone call from the property manager you want to deal with, regardless of the matter.
When you see statistics promoted by a property management business, remember there's more than meets the eye. Statistics are often presented to support the business putting forth the information, rather than to inform others.
"Facts are stubborn things, but statistics are pliable" - Mark Twain
As a landlord, it can be difficult getting an understanding of the cost of property management in Newcastle. Most real estate agencies and service providers are comfortable providing numbers such as how many new management agreements they've signed in the past month, or the percentage of their properties which are occupied. But there is little transparency around cost.
We'll cover this in detail below, including an example comparison of typical property management costs from a Newcastle real estate agency compared with our own fee structure.
So, what does property management cost in Newcastle?
We must start by saying that cheapest is not best. While we are proud to offer a highly competitive rate significantly below many Newcastle property managers, this is not an area we focus heavily on promoting. We pride ourselves on being the most accessible and easy to work with property management business in Newcastle, regardless of the cost.
Right, enough preamble. Down to the details.
The cost you see most often communicated (if any at all!) is the property management fee or simply the management fee. This is a percentage of the weekly rent received for a rental property which is then taken by the property manager as payment for their services.
For example, if a property management business offers a 7.5% management fee, and your property rents for $450 per week, the business takes $33.75 per week as payment, and you may receive $416.25 per week in income from your rental property. However, read on. There are often additional costs ongoing which are not as clearly communicated...
To be transparent, Carnelian Property Management offers a management fee of 6.6%, even less in some instances where multiple properties are managed for a single landlord.
Over a month, the difference in management fees between various property management businesses may seem relatively minor. Also, it should be noted that the fee is tax deductible. However, these differences can mean a lot to investors carefully managing tight cash flow, and can add up to a few hundred dollars over the course of a year.
What property management costs are there other than the management fee?
Very importantly, make sure you are fully aware of any additional costs you will be charged in having your Newcastle rental property managed. While the management fee may be clearly promoted (though it often isn't), you need to look deeper. Following are just some of the areas where additional fees can creep in, beyond what is covered by the management fee:
An example comparison of Newcastle property management costs
Bringing it all together, following is a breakdown of ballpark costs from a typical property management business in Newcastle, compared with Carnelian Property Management. Cost comparison is based on a landlord renting a property for $450 per week and renewing the lease to the same tenant after the initial lease period (e.g. after one year).
In summary, you could save almost $1,000 per year having your property managed by Carnelian Property Management. Importantly, the majority of costs are "hidden" within the extras you are charged beyond the management fee itself.
Want to change property managers?
If you're not happy with the level of transparency, communication, and attentiveness of your property manager, regardless of cost, please contact us now. We'd love to meet and talk through your situation and how we can help make your investment experience as enjoyable as possible for you.
Want to take action now? Switching property management is easy, and by filling out a simple form we can take care of the process for you, saving a potentially uncomfortable conversation with your existing property management business.
So you've got an investment property you'd like to rent out or are considering putting your own home up for rent? Fantastic! But before putting your property on the rental market, there are a number of recommendations and regulations you need to be aware of.
Repair anything which is broken around the property
If you have been living in the home, chances are there are some things you've put off to fix later. The old "we'll get to that one day" phrase may have been uttered and you've carried on living with or ignoring the matter. As an owner living in the home, this is fine. But a tenant should not be expected to put up with these things, especially if they relate to safety, and making those final improvements before you rent can not only make your property more appealing at inspection time, it can assist in maximising the rent you'll get.
The time to fix anything that's broken or not functioning is prior to when you list your house for rent. This could include fixing uneven pathways, ensuring all stormwater drainage is working effectively, fixing a dripping tap and ensuring fences are solid.
Fix uneven pathways around the home
Uneven pathways could be a tripping hazard for your new tenants, especially if elderly or if they have children. You may have become accustomed to the ups and downs of where to walk, but your new tenants and their visitors have not. Cracked and uneven pathways can also diminish the perceived value of the property, decreasing the rental return you may expect.
Ensure drainage around the property is working effectively
We've seen several instances of stormwater drainage not working as it should at an investment property. Not only can this cause hassles for the tenant, their property as well as yours may become damaged in the event of water not adequately draining, leading to insurance claims and other complexities. We've even seen a backyard with a drain grate installed, draining through a pipe several metres before the pipe simply ends underneath soil. In heavy rain this caused major problems, needed repairs which also required several days of access to the property, inconveniencing the tenant. Always ensure gutters around the home are free of leaves and blockage also.
Fix dripping taps before tenants move in
Dripping taps of course should be addressed, not only to prevent the inevitable complaint from your tenants within days of them moving in, but also to save water and of course money. Dripping taps can be very costly in the long run. Consider also that a single dripping tap can send a message to the tenant (especially a new or uncertain tenant) that a dripping tap is just something to live with while they're renting. And so the costly problem continues...
Mend broken fences around the property
Fences surrounding the property should be mended if broken. Not only can a fully secure yard increase the rental value of the property, this can ensure the safety of your tenants, especially those with young children.
New investors sometimes become relaxed about the state of a deteriorated fence, believing that if there are no pets next door, it's not a problem. However, your neighbours may move out and new neighbours with an excited animal may inhabit their backyard - something you're not likely to be as aware of if you're no longer living at the property. After all, you can't control what happens in the neighbour's yard, but you can limit how this impacts your property and tenants.
Ensure your rental property complies with safety regulations
Landlords are responsible for ensuring their rental property complies with current safety regulations and guidelines. Compliance includes (but is not limited to) aspects such as:
If you are at all unsure of your responsibilities before renting out your property, speak with an experienced property manager.
Service fixtures such as air conditioning
Before renting the property out, you should service fixtures such as air conditioning. This not only ensures that the air conditioning unit is clean and working as it should for your new tenants, it gives you peace of mind of the full working condition you are leaving the property in.
Pest treatment and professional cleaning of the rental property
It is strongly recommended that you complete a pest inspection and treatment of your home before it is rented to tenants. Again, this provides you peace of mind that you're handing the keys over with the property in tip-top condition, and providing your new tenants with a comfortable start to their tenancy.
Additionally, we always recommend that the property be professionally cleaned before it is rented out. Given that you expect the property to be handed back to you in great condition, as close as possible to the way it was when first rented out, you want to set the benchmark of expected cleanliness very high from the day the tenants move in. The cleanliness of the home will be documented in the ingoing inspection report, including detailed photos, so aim very high at this point!
Carefully consider what to leave behind at a rental property
When preparing your home for cleaning, give special thought to anything you may leave behind. We've had landlords move interstate and internationally, and wish to leave behind items such as fridges, furniture and gardening equipment. This is fine, as long as it is clearly communicated to prospective tenants that these are inclusions and not burdens, and the items are in perfect working order. Such inclusions may add rental value and desirability.
Be careful however to not leave things behind simply because you don't want to take them with you or deal with their disposal. For example, hardware such wood planks, old storage containers, or undesired furniture can devalue a property and be a turn-off for prospective tenants.
Get your depreciation report done before tenants move in
A depreciation report should be completed before the tenants move in, as access is much easier to arrange before the property is occupied. This report is of course vital to assisting in minimising your tax obligations.
Arrange landlords insurance for the rental property
Landlord insurance must be secured for the property. It is likely your tenant will arrange their own contents insurance, however you must remember to let your insurer know that you are no longer living in the property (if you previously lived there with home and contents insurance in place) and that you wish to arrange landlords insurance.
An experienced property manager will guide you and make the process hassle free
In summary, there is a lot to think about when preparing an investment property to rent out. Of course, an experienced property manager will guide you in these matters and assist in applying expertise to ensure the process is smooth and hassle free for you.
If you are preparing your investment property for the rental market now, give us a call. We'd be happy to help streamline the process for you.
"How much rent should I charge for my house?" is a question asked by every landlord for every property. While there are some factors you can take as indicators of the rental value of your home, there are many aspects you won't be able to pull from an online search or rental value report. Experience in interpreting the history and trajectory of the rental market in your suburb is key - and understanding exactly where you're home fits into the mix.
Can you work the rent out as a percentage of the sale price of the house?
An often referenced "rule" is that you should expect to charge $100 for every $100,000 value in your home. e.g. if your home is valued at $450,000 you should rent it for $450 per week. While this provides a rough ballpark figure, it is completely without science and should not be considered reliable in many instances.
There are many reasons why this guide is flawed. Firstly, renters usually don't care in the slightest what the sale value of your home is. They want to know it is affordable, comfortable, and meets their personal circumstances. So why should the sale value represent what they would pay per week as rent to live in it?
Additionally, demand for properties for sale in a particular suburb does not necessarily correspond to demand for properties to rent in that suburb. For example, there may be high market growth where there is little rental demand. This is clearly evident in areas of significant housing development or in new land release areas. Property values increase as demand in the area increases, though this can be closely followed by a flood of investment properties hitting the market once the newly built homes are complete. The greater the supply, the less rental return per property.
Don't confuse the rent you want for the rent it's worth
New investors and passionate renovators can fall into the trap of thinking their home is worth more than the market will pay. After all, you've carefully planned what material to use for the floors in the kitchen, considered where to purchase and install ceiling fans and air conditioning, and maybe even made the decision to restore the old fireplace to working condition! All that care, consideration and effort has to pay off, right?
Well, it certainly can. But having the best rental property on the market in your suburb is no guarantee of superior financial return. It may just reflect the great taste of your new tenants.
Tenants will compare what's on offer from your home with what's on offer from all others in their consideration set. If your property has the gorgeous restored antique cast iron bathtub you love but the bedrooms are smaller than others in the area, you may have to park your passion at the door and drop the rent below what you'd like to appeal to a broader range of tenants.
How to start working out how much rent your property is worth
The starting point is to search for properties like yours in your local area (no more than 1km away from your home) which are currently available for rent, and get a feel for what these homes are renting for. Domain or RealEstate.com.au are great for these searches.
Then, to get an accurate indication of rental property value, you need to factor in the "state" of the properties you're comparing to. For example, consider whether any repairs are required, the quality and recency of any painting or flooring work, quality and layout of key areas such as kitchen and bathroom, etc.
It often becomes apparent that there is a wide range of pricing variation, even among homes which offer the same number of bedrooms, bathrooms, car spaces, and seem to be of similar age and features. But why?
Think about it yourself. If you had two homes of similar size and features, would you pay more rent for the one with the larger backyard, or the one with less traffic noise? Would you pay more for the one with the north-easterly afternoon breeze, or the one with the undercover area the kids can play outside when it's raining?
There are a lot of variables that are hard to quantify in rental dollar terms.
What if you can't find comparable properties as a guide to how much your house should rent for?
So you've searched the rental listings for homes like yours and you can't find anything similar. It happens all the time. Recently we were asked to provide a rental appraisal for exactly this purpose - a 4 bed, 1 bath home was going to market in a suburb full of 3 bed 1 bath, or 4 bed 2 bath homes. How do you compare?
Providing an accurate rental appraisal in situations like this is exactly where a good property manager provides value. An experienced property manager can help identify a broader range of comparable properties than you may yourself, and will have rental market history beyond the currently-available rental listings.
If you're wondering what the potential rental return should be for your investment property, even if it's currently listed with another agency, we'd love to help. Contact us for a rental appraisal today.
It can feel like a never-ending challenge to save for a house deposit while renting. The good news is that with some planning, follow-through and time, it can happen.
Many renters find that the hardest part is knowing where to start. After all, there are countless experts, blogs, and articles in the media describing ways of saving more, spending less, and tracking your progress. It's not that renters are short of ideas. The challenge is choosing where to start in a way that makes a real difference that you can see quickly.
With this in mind, here is our shortlist of recommendations most relevant for renters wishing to save for a home deposit.
1. Understand what's happening to your money now
The first step is to understand the ins and outs of your money habits as they are right now. How much income are you regularly bringing in? What are your realistic spending habits? Where does this leave you at the end of each week and month?
Take a look back through your income and expenses across all your bank accounts and credit cards, to get an overall feel for your regular areas of spending. Remember to look back a long way - 6 or even 12 months - to ensure you aren't forgetting more significant and less regular expenses such as fees or insurances paid out annually.
2. Identify the easy wins - where can you cut back spending quickly?
Everybody is different in their approach to food, drink, and socialising. However these are often the areas renters can find quick wins to help save significant money regularly.
Make social nights out an occasion rather than routine
Nobody likes the thought of missing a social catchup with friends. Some friends will even make it hard to say no and will twist your arm if they know the reason is simply to save money!
Social occasions can be a significant financial drain though, especially when considering that a hazy night out may contain an untapped spend on food, drinks and Uber or taxi fares.
Try to limit these nights out to an occasion rather than a routine event and you'll very soon see a difference in savings.
Plan your food purchases and make more meals at home
Take note of how you usually spend money on food. Do you regularly eat takeaway or meals out? With a bit of planning, many meals can be made at home and either eaten there or taken with you. Taking food to work is an easy change to make, rather than ducking out to buy lunch in the middle of the day.
Plan your grocery shopping in advance to cut down on bought meal expenses. As well as encouraging you to plan what you'll eat throughout the week - leading to less spending out - if you prepare more meals at home you will very likely see a health benefit as well as financial benefit.
Buy in bulk and save. When in the supermarket, the concept of "buy in bulk and save" is great to remember. This is easily applicable to items which can be separated and frozen in portions (e.g. meats) or to those items you always use and have a long shelf life (e.g. laundry powder, toilet paper, etc.). Price per unit on largely quantities is very often significantly cheaper, as is the choice to buy generic rather than name brands where possible.
Cafe culture crushes your savings!
It's an often-heard piece of advice - spend less on coffee out and you'll save money. But let's go a step further and break this down. Just how much can be saved? And what if you just love coffee and "can't" do without it (like us, let's be honest!)?
Well, let's say you buy a single coffee at a cost of $4 per day. Forget the likelihood of buying a little something with it, let's just stick to the coffee cost. That little expense adds up to $28 per week, $112 per month, $336 per quarter, or $1,344 per year.
So, if you can do without the coffee purchases, there's easy money to be saved towards your home deposit while renting.
But what if you just need that coffee hit each day?
In our own home we ran a calculation of the cost of making on average 2 coffees per day over the course of a full quarter of a year, using premium beans, including milk and an allowance for water and electricity. Yes, we were that interested in working this out!
The cost per cup over a full quarter worked out to be as little as $0.45 per coffee made at home. A similar take away or in-cafe coffee would easily cost $4.50 - 10 times the amount of making these coffees at home.
So, working it through, if you make coffee at home instead of buying out, your costs would be in the order of $3.15 per week, $12.60 per month, $37.80 per quarter, or $151.20 per year. Compared to spending $1,344 in buying this coffee out, the cost of a coffee machine for the home coffee addict is easily justifiable.
There is certainly a joy in a cafe-bought coffee, and it offers a cheaper alternative to the earlier mentioned social night out to catch up with friends. Limiting spending in this area is however an easy way to save regularly.
3. Minimise what you pay in rent to increase your savings
A commonly overlooked method of saving when renting is to revisit the amount of rent you're paying each week. At first this may seem out of your control, but there are a number of options to do this.
1. If your current rental property allows, consider finding a roommate to join you and reduce your share of the rent
2. Consider moving into an older or smaller home to save on weekly rent
3. Investigate rental opportunities further away from highly sought after locations. You may save in rent by living further away from your work, shops, beaches, etc. Remember, it's not forever!
Really, this is a big one. Consider that if you're able to save $100 a week in rent, that's more than $5,000 per year directly into your deposit savings which would otherwise have disappeared.
4. Become more energy efficient
Energy prices just keep going up, and becoming more energy efficient is a great way to save ongoing. Some of the common ways you can reduce your energy bills are as follows
1. Turn Off The Lights
2. Take shorter showers
3. Clean up the way you do laundry
5. Revisit step 1 - with a saving mindset, what else can you save?
The above examples are common culprits of excess spending which can be limited with a little planning. Delving further through your spending habits you'll doubtlessly find more. Be flexible and be prepared to make some calls and do some research. You'll likely find ways to save from additional areas such as:
Want more? If you're a tenant currently renting and would like further tips to plan towards an investment property, subscribe to our eNewsletter now.
Landlords and tenants alike will be familiar with routine rental inspections. From the landlord's perspective, these inspections are part of the commitment made by a property manager in promising to look after their investment. It provides a scheduled opportunity to review and document the state of the property, ensure it is being looked after by the tenant, and to address any issues which may be presented.
From the tenant's perspective, these inspections are often a good excuse to tidy up a little more than usual (let's be honest!), and show the level of care you have for the property you're renting.
Most property managers commit to completing three or four property inspections per year. In many cases, the date of the first inspection is agreed at the time of the tenant signing the lease.
In the course of a year however, it can slip the mind of the landlord that these inspections should be taking place. However, this is not the landlord's responsibility, it is the responsibility of the property manager.
Not all property managers complete routine inspections as scheduled
Unfortunately, we hear many times from landlords that their previous property manager simply didn't complete inspections as promised. Worse still, landlords often don't become aware of this issue until they choose to sell their investment property - at which time they find their property has been damaged or otherwise neglected in ways which would have been obvious had these inspections been conducted.
In addition to the financial distress this lack of action places on landlords, property inspections which fail to happen as planned are also frustrating to tenants. We heard recently of a tenant who had agreed to the date of their first routine inspection on the date they signed the lease. In their case, the date came and went without a word from the property manager. They actually presumed it must have happened. Some weeks (yes, weeks) later, they were contacted by the property manager without an apology and to arrange a substitute date for the inspection. On this second attempt, the property manager had failed to bring keys to access the property, and a third date was arranged. Each rescheduled date brought further frustration, understandably.
How should a routine rental inspection work?
A good property manager will arrange the date and time of the next routine rental inspection well in advance and communicate this clearly to both the landlord and tenant.
During the inspection, the property is thoroughly reviewed and photos are taken throughout as documentation of the state of the property. Any issues such as maintenance requirements or areas of improvement needed from the tenant are discussed (should the tenant be present) or communicated soon after to both the landlord and tenant.
In every instance, the landlord should receive a detailed inspection report including the property manager's notes and all photos. This should be received without prompting at least once every four months.
As a landlord, if you haven't seen an inspection report from your property manager within the last four months (at least), it is time to start asking some questions. It is not your job to remind your property manager of their job.
Switching property management is as easy as filling out this simple online form. Experience reliable, professional, and accessible property management the way it should be.
Local Agent Finder has been ramping up its promotion in recent times, particularly through increased TV advertising. The site promises to be "Australia’s leading real estate agent comparison service, and the only place you’ll find real estate agent fees".
From the perspective of a home owner looking to sell a property, or a current or prospective landlord wishing to rent their property, the service seems compelling.
However, what is not transparent from the excitement of the marketing is just how many agencies are using the service in your area. Or more importantly, how many agencies are NOT listing themselves on the service.
Recommendations are based on limited options
When using Local Agent Finder, you are only being offered comparisons of real estate agencies which have signed up to be listed on the service. Many agencies (including ourselves) have consciously chosen not to do so.
Why? Think of it like this. If you were buying a car (a much smaller investment than a property transaction!), would you go into one dealership and make your decision based on the small number of vehicles they happened to stock? Or would you consider your options more broadly to make sure you were making the very best decision (not just the best of a pre-selected bunch)?
Local Agent Finder will only present you comparisons of real estate agents who have opted in to use their service. The use of the service is at a cost to the agency where many other sources of leads are not. This is one of many reasons real estate agents choose not to list themselves.
Don't put time saving at the top of your investment priorities
Local Agent Finder may save you time in searching for a real estate agent or property manager. However, this should not be mistaken for providing you the best available option. The cost of this convenience is that you are presented relatively few businesses to choose from.
If ever there was a case to take time in thoroughly researching your options, this is it. Your property is the most high-value and long-term asset you own. Using an online tool to save a few minutes and compare limited options is just not worth it.
If you'd like to hear first hand how we can help with management of your rental property, and why we encourage you to consider all property management options before making a decision, contact us today.
We have the time to talk about your investment. Don't you?
Who We Are
Carnelian Property Management is Newcastle's friendliest and most accessible property management company. We respond to emails quickly. We return phone calls promptly. We'll SMS if you prefer. We are refreshingly accessible. Find out more - contact us today.
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