If you’re currently stuck with a subpar property manager and asking yourself how you can change to a new property management company, you’re not alone. 53% of Aussie investors are underwhelmed with their property manager, but many do nothing about it. How come?
There are many misconceptions on when and how you can switch property managers, leading to owners clenching their teeth and bearing through terrible service, counting the days until either their agreement is over or their tenants move out.
In this article, we break down the most common myths surrounding switching property managers and answer the question of what to do with a bad property manager. If you are in this 53%, it’s important to understand what is within your capabilities when it comes to switching. We then tell you how you would go about switching property managers, using :Different’s onboarding process as an example.
Myths around changing property managers
Myth #1: “I can only switch property managers at the end of the contract”
This is a common misconception. Landlords can change real-estate agents usually at any point during the agreement with a property manager.
You’ll find the truth in your property management contract. Some agreements may have a fixed term period initially (usually between 6-12 months) but usually, giving 1-2 months’ notice is sufficient.
Myth #2: “Changing property managers won’t make a big difference since most property managers do stuff the same way”
As any experienced property investor would tell you, this couldn’t be farther from the truth!
Property managers vary dramatically in terms of how they take care of your investment property.
There are two main types of property managers:
- Traditional property management
- “New model” property management
The main difference is that traditional property managers are, well, traditional! Their way of managing properties is the same way it’s always been.
- They mostly rely on phone calls, emails and text messages to communicate with owners
- They typically have over 100 investment properties in the hands of a single agent
- Property management is one of the many services they offer. They also do sales, auctions and so on.
New model property managers are finding innovative ways to deliver better property management solutions.
For example, at :Different we use technology to automate repetitive admin tasks and to make communication easier, which lets our agents focus all their attention on areas that need a human touch.
There’s no one-size-fits-all solution, but know that property managers do things differently, and that there can definitely be better options for you out there.
Myth #3: "It's more cost-effective to wait out the contract than to switch underway"
This depends on your situation.
Having a vacant property over long periods of time is costlier than any termination fee. If you think switching property managers will help you find good tenants and end vacancies, we recommend you make the change as soon as possible.
Check your property management contract to get the full picture of termination fees. Most property managers won’t charge you anything absurd, but some might go as far as to charge you the sum of the fees they would have collected for the rest of your agreement.
Myth #4: “If I change property managers, I will lose the tenant they found.”
Terminating the property management contract only ends the relationship between you and your property manager. The lease agreement stays the same. All you have to do is transfer the details of your property and your lease agreements to your new agent, and they will take care of the rest for you. Your tenants won’t need to sign anything new.
Myth #5: “My tenants will be troubled if I switch property managers while they’re occupying the property.”
The opposite is true! If a property manager has a good transition process that considers the wellbeing of the tenants, then it may in fact lead to happier tenants. If your property manager has been lagging behind with maintenance requests, your tenants will probably be thrilled to hear that you’ve made a change.
Myth #6: “Switching property management companies means there’s a lot of work for me to do.”
Not if it’s a good property manager!
It makes perfect sense if you think about it: property managers want it to be as easy as possible for you to switch to them. That’s why decent ones will have a simple process that doesn’t bury you in paperwork and administrative tasks. We’ve included the takeover process at :Different at the end of this article to give you context.
How to change your property management company
Now that you know the truth about switching property managers, let’s go through the actual process:
1: Take a moment to ask yourself why you want to terminate your property management contract
If it’s a trivial matter you could work through together, maybe having a conversation about what hasn’t worked and what you can do together to improve it will solve the problem.
Make sure that your decision is professional and has got nothing to do with personal preferences. We’ve made another article you can read if you’d like to learn more about how to treat your property like a business.
If you’ve decided that your property manager has to go, you can proceed to the next step.
2: Find a better property manager
If you rush it, you might end up in the exact same position as now, just with a different property manager! To make sure you get it right this time around, you can read up on how to find a good property manager.
Once you’ve found a better solution, inform them of your situation and that you have a property manager right now. Some property managers have a unique onboarding process, while others don’t. If they don’t, just let them know the date you would like to start working with them, so that you don’t have gaps of time without a property manager.
3: Send the termination letter to your property manager
It’s always easier to handle these things in writing.
Send your termination letter via email and get a signed copy.
Make sure you specify your termination date as well. Remember, you don’t want to have gaps of time with no agent, so make sure that your termination date aligns with when you’ve agreed to start working with your new property manager.
The key here is to maintain correspondence records in case any confusions come up at a later date.
4: Settle termination fees, if any
We mentioned earlier that property management contracts have different terms and conditions for their termination clause. This is when that comes into the picture.
We recommend you reach an agreement with the old property manager to just pay a one-time sum immediately. For example, if their termination fee is 2 months of property management fees, each month being $210, just pay a $420 lump sum straight away. Out of monthly bank statements - out of mind!
5: Transfer tenants’ security deposits
Treat your tenants’ security deposits with care. We highly doubt any property manager would try this, but under no circumstances should money be used from the bond to cover expenses when you’re switching property managers.
Get a confirmation from your new property manager that the bond has been correctly transferred, and give a heads up to your tenants about this.
Switching property managers
Our answer to the question of "what to do with a bad property manager" will always be the same: make the change!
If your property manager just isn’t cutting it or not undertaking the responsibilities listed in your agreement, this might be your calling to consider switching. After all, it’s a two-way street and there’s no reason to pay a portion of your rental income for poor service, right?
Like what you just read? There’s a lot more where that came from.
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