To grow in life and your portfolio, taking risk is integral. In fact, according to management consultant, educator, and author Peter Drucker…
… In business, all profit comes from risk.
You’ve already taken a major step forward (and considered risk) by purchasing an investment property.
In this post, we’ll provide five examples of risks in property management and why reducing that risk is important to your investment success.
Why is reducing risk in property management important?
Reducing risk in property management is smart business and will save you in long run. Accepting a healthy level of risk in your investment property will bolster long-term gains and capital growth. But take on too much risk and you may find yourself in financial trouble.
As a landlord it’s important to understand and access each risk ahead of time. Below is the top 4 risks that landlords should be aware of:
5 examples of risk in property management
#1 Take on unknown tenants
You’ve been told that leaving your investment property vacant is possibly the worst thing you can do. It makes sense, right? No tenant, no income. So, in your desperation to avoid this happening, you say yes to the first tenant that comes along. What could go wrong? More than you can imagine!
Take on an unknown tenant and you could be taking on a whole world of problems. Will they look after your property as if it were their own? Will they pay their rent on time? Or worse still, will they pay rent at all?
You can effectively manage this risk by choosing a property manager that has a proven tenant screening process. A process that sees them meet the tenants in person, check their rental history and obtain current references.
That’s exactly what we do at ARG PM. We pride ourselves on handpicking secure and reliable tenants with an interest in staying long term to minimise vacancies. We also lease your property with speed and agility.
#2 Advertise before handover
You’re excited about securing your new investment property. The loan is fully drawn out, the ink is drying on the contract, and you want to get some tenants in as soon as possible. You know every week in downtime is going to be costly, and you can’t afford to keep the house empty for long. You want to start advertising now so you can get someone moved in as soon as the property is settled.
However, your agent won’t even think about the leasing process before the settlement date. Suddenly, you are facing weeks, maybe even months of downtime.
This is a huge risk for you. How much further can you extend yourself financially? One way of mitigating this risk is to work with a property manager who will start the leasing process as soon as possible, promote your property and screen potential tenants to ensure you have someone ready to take the keys as soon as you have them. Building new? Then you should be able to start advertising before handover even takes place.
#3 Poor property management communication
Your tenants are nearing the end of their lease and you’re wondering if they are planning on staying longer, so you try to get in touch with your property manager to no avail. You seem to be constantly chasing them on the phone and email, but they never respond. When you finally do get hold of them, you discover the tenants moved out a month ago, and there is someone else living in your property now. You don’t know who they are, what condition the property is in and you’re losing trust in your property manager. You’re feeling more stressed and concerned about why you decided to invest in the first place.
This is another big risk for you as it creates so much worry and wastes your time. No one wants to spend hours chasing their property manager for simple information. A great property manager always keeps you in the loop, so you are fully aware of what is happening with your investment property. You should work with someone who believes strongly in 100% transparency, such as ARG PM who provides clients with an online portal where you can easily access information about your property day or night. Feel at ease with regular updates and stay on top of your financial reports with ARG PM’s client portal.
#4 Know what you are paying for
You’ve been searching for a property manager for a while now and decide to go with one who charges a lower percentage fee of 4%. You feel relieved knowing you’ve reduced your costs exponentially and will be able to hand over the stress of management to someone capable and efficient.
But then the bill comes in and the cost is so much higher than you expected, with additional fees for advertising, lease renewal, government fees and maintenance. You discuss this with your property manager only to be advised these costs were never included in your management fee but are additional costs. There will also be additional costs for compiling and filing your end of financial year statements, which they normally do not include. You begin to panic as you realise, you’re going to end up paying a lot more for your property manager, and you need to catch up on the financial records if you want to ensure everything is filed properly.
This can be a costly error, but luckily it is easily mitigated by preparation. When you are researching property managers for your investment, discuss the fees and costs in more detail before making any decisions. What fees and charges are included in their management fee? What responsibilities will this include beyond rent collection and maintenance management?
By working out what is included from the beginning, you will be in a better position to understand exactly what you will be paying. You will also understand what you can expect from your property manager. A property manager like ARG PM will be up front about the costs and fees. More importantly, they do so much more than collecting the rent and managing maintenance – they can assist you with managing your portfolio, screening new tenants, and overseeing the leasing process, filing and storing comprehensive financial reports, and most importantly, keeping you regularly informed.
Risk is a part of life. You’ve already taken a risk with your investment property and you’re ready to take on further risk with a property manager. Stay in control and relax with a property manager like ARG PM who will keep you in the loop from start to finish and manage your property portfolio.
Manage the risk by investing in a great property manager who will treat your home like their own. At ARG PM, we understand the risks and protect you and your investment from these complications. Learn more about our great team and six months free property management.