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The True Cost of using a Property Manager

If you’re in the early stages of your property investment journey you may ask yourself, ‘should I hire a property manager, or should I save some money and do it myself?’

After all, a property manager will usually charge between 5% to 10% of the gross rent, depending on where your property is located.

You would think it would be wiser to do the same as over 600,000 landlords in Australia by skipping that fee and collecting the entire rent. As an investor, it makes sense to minimise your costs, right?

Now let’s put those savings into perspective. Imagine if you were to receive $450 a week in rent, and the property manager wants to charge a 7% fee. If you manage the property yourself, that’s a saving of $32 per week (or $1664 per year). For arguments sake let’s add a leasing fee and incidentals to come up with a total saving of $2200.

This amount is tax deductible, so if you’re on the average marginal rate of tax, the saving after you claim the deduction is around $1540 per year.

Ok, it’s a smaller saving than first thought, but it’s still better to have this money in your pocket and self-manage the property isn’t it? Especially if you have multiple properties.

Here’s the thing. Shouldn’t you also put a notional dollar value on your own personal time to look after an income producing asset? Let’s say you are earning an average income of around $80K – $61K net of tax – and you allocate an average of 4 hours a month @ $29.33 per hour to manage a property. Using your net hourly rate, this translates to $1408 worth of your time per year.

In the example above, your annual saving by self- managing your property is $132 per year (property manager fee minus your hourly rate). This translates to about $3 per week.

Note that work you do outside of standard hours would normally have a higher charge out rate, but we’ll keep these figures simple.

So, for a saving of around $3 per week, here are some of the tasks you’ll be expected to perform as a property manager:

  • Advertising for new tenants
  • Screen prospective tenants including tenancy and other reference checks
  • Preparing the lease agreement
  • File the condition report when the tenant moves in (and out)
  • Arranging the bond collection
  • Inspections every 3-4 months
  • Arranging quotes for repairs and scheduling tradies
  • Chasing late rent, keeping careful file notes for legal purposes (and possibly attending tribunal hearings)

This isn’t a complete list of tasks either.

Perhaps you’re a handyman with some time on your hands, live near your investment property and enjoy contact with the tenants. Self-managing the investment might work for you. However before taking on this role, we would urge you to consider what you’re committing to:

  • Are you sure you can remain emotionally detached if there is a dispute with the tenants?
  • Would you be prepared to be called at 2am about a repair that you need to attend to?
  • Are you sure you understand all of the legal obligations and administration requirements?

At the end of the day, what is your privacy worth? Do you really want the tenant to know who (and where) you are? For a shrewd investor, it’s a bit of a no-brainer to be able to remove all the emotion, and have a professional intermediary in place that really knows what they’re doing, so you can get on with your life.

Whether you have one investment property or multiple properties in different markets around Australia, it’s unlikely that self-managing your investment properties is worth it.

Instead you’ll probably do the sensible thing and engage the services of a professional property manager that’s been recommended to you by a happy client or your QPIA qualified adviser.

At Adviseable, we don’t have formal affiliations with any property management companies, however we have worked with some excellent professionals that provide a great service for landlords (and tenants).

If you would like to find out more about this or if you would just like to have a chat about your property investment situation, please get in touch with us on 1300 077 766 or email us on info@adviseable.com.au
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