Managing an investment property involves a multitude of tasks and responsibilities. From finding and vetting tenants to coordinating maintenance and repairs, it can quickly become overwhelming, especially if you don’t live near the property. This is where property managers come in.
A property manager is a professional third party who oversees the day-to-day operations of a rental property on behalf of the owner. An estimated 80% of investment property owners in Australia employ the services of a dedicated property manager.
Do property managers collect rent, though?
The answer is yes. Their duties also include determining an appropriate market rent rate, advertising vacant properties, screening prospective tenants, preparing lease agreements, conducting routine inspections, and ensuring compliance with relevant laws and regulations.
While the exact scope can vary, rent collection is undoubtedly one of a property manager’s fundamental financial responsibilities.
What Services Do Property Managers Provide?
As mentioned, property managers offer a comprehensive suite of services to investment property owners. In addition to facilitating rent payments, their tasks may encompass:
- Marketing rental listings and finding new tenants when vacancies arise
- Carrying out background checks and reference verifications on applicants
- Drafting and executing legally binding lease agreements
- Performing routine inspections of the property condition
- Coordinating necessary maintenance, repairs, and renovations
- Ensuring compliance with landlord-tenant laws at local and state levels
- Pursuing any rent arrears, damages, or other liabilities from tenants
- Handling eviction proceedings if the need arises
The specific services provided should be clearly outlined in a formal property management agreement signed by both parties.
For residential properties, the core focus is typically centred around tenant acquisition, retention, and rent collection. However, property managers for commercial or industrial properties may have a slightly different emphasis, such as negotiating longer-term leases with businesses.
Having a property manager handle this array of responsibilities provides significant value, especially for landlords who are inexperienced, live remotely from their property, or simply prefer a hands-off approach.
Their local expertise and networks allow them to comprehensively oversee the rental process while keeping owners informed.
For more information on the types of services offered, read ahead for whether you need a property manager for Airbnb rentals.
How Do Property Managers Collect Rent?
When it comes to rent collection, property managers employ a variety of methods to streamline the payment process for tenants. Common approaches include:
- Direct Deposit: Tenants can transfer rent directly into a dedicated account managed by the property manager. This is often the preferred option for convenience.
- Online Portals: Many companies provide secure online tenant portals where rental income can be paid electronically using credit/debit cards or bank transfers.
- Mobile Apps: Increasingly, property managers are adopting mobile apps that allow tenants to pay rent remotely with just a few taps.
Rent payments are typically due on a recurring schedule, such as the 1st of each month. If rent payments are late, property managers follow standard protocols involving sending payment reminder notices and potentially charging late fees as specified in the lease agreement.
Most late fee structures include an initial nominal charge (e.g. $50) for payments a few days overdue, with incrementally larger penalties for longer delinquencies.
In cases of rent remaining severely overdue for an extended period, the property manager may initiate the formal eviction process in accordance with the landlord’s instructions and state laws. This helps protect the landlord’s investment while upholding their rights as the property owner.
Detailed record-keeping is essential for property managers when it comes to rent collection. They meticulously log all payments received, any associated late fees charged, and delinquency notices issued. This payment history is then compiled into regular reports and statements provided to the landlord client, typically on a monthly basis.
The property manager also distributes the rent funds accordingly after deducting their own contracted management fees.
Most states have specific regulations around how client monies must be handled and accounted for by licensed property managers and real estate professionals.
Reputable firms have robust accounting practices and trust account protocols to stringently adhere to these requirements, ensuring transparency and protecting landlords’ interests.
Exceptions When Property Managers Don’t Collect Rent
While extremely prevalent, there are some situations where property managers may not be responsible for rent collection:
- Self-Managing Landlords: Some landlords choose to personally manage every aspect of their investment properties themselves, including rent payments.
- Separate Rent Collection Services: In certain cases, landlords utilise specialised rent collection agencies rather than a full property management service.
- Non-Rental Properties: For properties like social housing units where no monetary rent is paid, property managers essentially oversee the premises in other capacities.
- Vacant Properties: During periods when a rental property is vacant between tenancies, there is no active rent to collect.
Benefits of Using a Property Manager for Rent Collection
For most landlords, employing a property manager specifically to handle rent collection provides numerous advantages:
- Convenience: Not having to directly deal with tenants regarding rent payments eliminates a major recurring hassle and time commitment.
- Expertise: Property managers are well-versed in proper accounting practices, legal regulations, and establishing clear payment procedures that protect both parties.
- Objectivity: A third-party manager can impartially enforce late fees or evictions if needed, avoiding difficult personal confrontations with tenants.
- Organisation: With centralised record-keeping and reporting, rent payments remain organised and documented rather than haphazard.
While engaging a property manager does incur fees (typically a percentage of collected rent), the above benefits make it a worthwhile investment for most landlords. The costs are also tax-deductible.
One potential drawback is the loss of direct oversight if a property manager fails to diligently carry out their duties. However, this can be mitigated by thoroughly vetting candidates, establishing clear performance expectations, and requesting regular status updates.
It’s worth noting that most reputable firms have robust practices to ensure strong communication and accountability to their landlord clients.
For any breaches of legal agreements, read on to learn if you can sue a property management company.
Wrapping Up
Collecting rent from tenants is indeed one of the primary responsibilities of most residential property managers in Australia. The majority of investment property owners opt to have a third party handle this recurring financial aspect along with other leasing and maintenance tasks.
That said, there are cases where self-managing landlords choose to retain full control, as well as scenarios like social housing where no monetary rent is paid. Certain owners may also employ separate rent collection services rather than a comprehensive property management company.
Ultimately, landlords must carefully evaluate whether the convenience, expertise, and hands-off approach of using a property manager for rent collection is worthwhile for their specific situation and property portfolio.
For many, the benefits of saving time, avoiding hassles, maintaining an objective buffer between tenants, and ensuring proper accounting make it an extremely valuable service.
By understanding the typical rent collection processes of property managers, as well as considerations around fees, communication practices, regulatory compliance requirements, and potential alternatives, investment property owners can make a well-informed decision that best suits their needs and circumstances.