Should You Be Using a Property Manager?

This is a fair question we discuss a lot with both inexperienced and seasoned property investors. After all, a property manager is another expense eating into your cashflow – let’s explore the pros and cons of the service a property manager offers.

Firstly, if you’re wanting to rent your property ‘short term’ (Airbnb or similar visitor accommodation), the answer is almost certainly yes, you do need a professional. Short term accommodation is much more complex and demanding than a long term residential tenancy. An Airbnb requires cleaning after every guest visit, laundry, more frequent maintenance from the heavier wear/tear and someone constantly available to respond to any issues your guests experience. More important than any of this, however, is the ability to get guests in your door in the first place. If you put your rental on Airbnb tomorrow you are very unlikely to get a high volume of bookings straightaway. You need what is called “Superhost” status for your property to be featured high on the booking page. Airbnb property managers handle bookings for you, and many give your property Superhost status from the start – the value of this is massive.

A Christchurch building that clients of ours have multiple Airbnb’s in, has apartments advertised with and without Superhost status. Those ‘with’ are over 97% occupied, whereas those ‘without’ have booking rates as low as 45%. For these reasons, if you want to Airbnb your property, there is really no question about using a property manager. The additional service short term property managers charge is reflected in their pricing. Usually 10%-15% of your gross revenue, but you’re paying for an intensive service, and even with their fees, your revenue is likely much better off with one.

So, what about property managers for your long-term rentals? Why would you use (or not use) a property manager to look after your rental home? Firstly, property managers know what makes a good and a bad tenant. They’ve almost certainly seen it all, and their experience makes for a good judge of character. Furthermore, a good property manager will run a thorough background check including credit checking and reference checking, something you might not want to do or have the tools to do yourself. It’s this thorough process which is going to find the right tenants who will treat your house with respect.

Secondly. many property management companies guarantee rent nowadays, which for those investors valuing certainty, is a huge plus. The catch is a rental guarantee usually

comes with a higher management fee, however you have the security of knowing that rent payment is going to land in your bank account every week.

The third reason is simply; time is money. Between inspections, ensuring rent is collected and maintenance callouts, there is a lot going on. Not everyone’s lifestyles allow for this level of time commitment, and the ability to farm this out to the experts who are experienced dealing with these issues is valuable to time poor investors. Furthermore, legislation and compliance affecting tenancies are ever increasing. Healthy Homes standards and annual changes to the Residential Tenancies Act are strong arguments to leave it to the professionals.

Obviously, the big tradeoff is cost. A long-term rental property manager can cost anywhere from 8%-12% of your rental income. This is a lot, and why a property manager isn’t right for everyone. However, for those newer investors without experience managing their own rentals or with rentals in different cities, it’s a more straightforward decision. Still not sure? Get in touch, we’d be happy to advise what we think is the best option for you or even make recommendations based on our years of experience in the property investment space.