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James sits down with Adrian Zaccaria to talk about building management, body corporates, renting and so much more.
In this interview James and Adrian chat about:
- What drew him to building management
- The benefits and drawbacks of onsite management
- Different types of leases including permanent, short term, holiday and more
- Body corporate and property managers
- Plus so much more!
Read on below for the full transcription of our interview:
– Hi. G’day everybody. James from www.mrkts.com.au here. And today we are privileged to be in the presence of a Mr Adrian Zaccaria. Adrian is a solicitor and a property manager and today we’re gonna talk about building management and all the things that you should be looking out for in your day to day. Adrian, how are you?
– Good thank you, yourself?
– I’m good thank you. Thank you for your time today,
– Okay, so a little bit about Adrian. Can you give us your CV in under a minute?
– Certainly. So as you said, I started out as a solicitor with Short Punch and Greatorix Lawyers which is a law firm on the Gold Coast. Worked with them for what was in total seven years with a two year break living overseas,
– And then, came back and joined the family business which is Management Rights, which is a combination of building management and property management.
– Excellent. For the people at home, we thought we’d go over a couple of the definitions of what they’ll encounter when looking at leasing or…
– Or building management in general. So, what is onsite management?
– So the onsite management is pretty much what the name suggests. It’s the onsite manager who’s there and as a part of that he’s, normally they’ve got two jobs as the building manager and the property manager for those unit owners, that want to use the onsite manager as their rental agent.
– Understood. And then external agents?
– So external agents are separate to that. Owners at all times have the ability to use an external agent if they choose to or the onsite management in any building they choose to be in.
– So external is more off site…
– Exactly right.
– for lack of a better term.
– No no, well exactly. Whether it’s offsite agent or external agent, it’s exactly that so your Ray Whites, your Harcourts, professionals any one that any real estate agent that is doing your sales and things they also normally have a rent roll that they do and you can choose them to look after your investment if you want to.
– Okay. For a landlord, what would you say would be the benefit and the drawback of onsite versus offsite for example?
– Sure. Well, obviously I probably have a bit of bias in this, being an onsite manager,
– Yeah. Understood.
– But um, in looking at the benefits and drawbacks I guess I’ll start with what I consider would’ve been the only drawback for using onsite management.
– Uh hm.
– which I don’t think exists anymore but that would’ve been the ability for the onsite manager to advertise as well as real estate agencies who had a better, uh larger ballpark or what’s the word I’m looking for? A larger area of people to get, but now with the Internet, you’ve got www.realestate.com, Domaine and the like, that is easily available to onsite managers just like real estate agents,
– And that’s really all that tenants and prospective tenants look at these days. They don’t, in my opinion, really go anywhere else. They’re not looking at your shop window anymore, or walking in. They’re looking at www.realestate.com and they’re going from there.
– Or word of mouth.
– Or word of mouth. So in terms of what was the drawback for onsite managers as to external agents, I think that was the only one.
– I otherwise think that onsite managers are in a far better position to manage your unit investment if you have a unit, than external agents. The reasons are as follows I guess. The onsite manager has a vested interest in the building as you know,
– And maybe many people don’t. The building manager has to buy the business associated with the building which is the care-taking and the letting of the building. So there is actually in these buildings, if you’ve got a couple of hundred units, you’re looking at a million, millions of dollar purchase for these businesses, so they’ve got a very vested interest in making sure they look after investments, look after their own investment, and the only way they can look after their own investment, is to look after the units that are in their rental pool.
– Cos they’re co-existing.
– Exactly right. You can’t do one without the other.
– So that’s that there. In terms of the little bit more hands-on, they are more hands-on so they’re there when your, if you’ve got a problem with a tenant, they’re there and they can be called. They’re meant to be there after hours and in most cases as well, so they’re there for you straight away. They can easily attend to problems, they don’t have to call and get the, speak to the agent, then send someone out and they can save you money in maintenance. This is one thing a lot of people don’t realize. If there’s something silly like a light bulb or a smoke alarm that’s beeping, your agent, if they’re on site, can go up and check that and maybe determine that it’s a null issue
– A quick fix.
– A quick fix,
– Not have to wait for someone… to come on site.
– Any outside agent will just have to because they don’t know, they might, they don’t have any clue, like myself in a lot of cases, you know, how to fix a smoke alarm or whatever the case may be but they would just simply send someone out cause it’s not part of their duties as a day to day property manager
– for an external agent, an offsite agent. Whereas with me, I can duck upstairs, check it out, have a look at the unit, say okay well that was just a battery or it’s just this or it’s just that
– It doesn’t require a call-out charge,
– So minor maintenance.
– Minor maintenance can be covered …
– Generally you can be covered. Some buildings may have a maintenance charge on top of that–
– which the landlord would have to have a look at when signing the appointment of an agent–
– on a Form 6.
– But what yes, that’s a really good point. What I was trying to say as well was that that maintenance charge is going to be less because you can always send yourself up or if you’ve got maintenance man on site, as a lot of these buildings do,
– they send him up, they can charge you a lot less than the call-out that you’re gonna get with the agents.
– And they’ll save you time because if the maintenance man exists, even though he may be a party you’re probably paying an outside contractor, it will be fixed within a day instead of say it’s over the weekend…
– And you have to do the waiting.
– Exactly right.
– So there are quite a few there in difference understanding–
– that you being an onsite manager
– Yeah look I am an onsite manager but really there is a bit… there is a, there’s good and bad onsite managers, like there’s good and bad real estate agents, property managers and the like, I would say that they are in a better position, if you get along with them, if you like what they do, they have to obviously be good at their job and know what they’re doing, that goes in any business, in any industry, but if they’re there I think they are in a better position to look after your investment.
– And always…
– if you’re a unit owner.
– Always a tip with us building relationships so make sure if there is an onsite manager, that you go down and you speak to them and get to know them and try and build that relationship because once again, if you’re in a position where you may need something done, they’re in the better position to assist you with that.
– Exactly right.
– Excellent, thank you for that. So a little bit about definitions now I think. When we look at leases and trying to explain the length of time, you hear permanent leases and short-term and holiday letting and I just wanted to give the guys at home a bit of an idea as to what are the differences of leases and what are the options in the lengths of time that you can pursue.
– Yeah. I think the terminology sometimes just gets people a little bit unnecessarily confused because it really is fairly simple.
– Any lease that is a general tenancy agreement, so a lease that’s signed up under the RTA forms and everything that you have to do as a property manager,
– irrelevant of the length of time, but obviously they’re not gonna be shorter than 3 months,
– in most normal circumstances
– Cause it’s normally a commercial interest
– Exactly right.
– Yeah, so whilst they’re not gonna be longer than a normally about 3 months as a minimum, there’s no set time that a general tenancy agreement has to be.
– Uh huh.
– So when people say permanent letting, that’s what permanent letting is. The length of time is then determined by the unit owner who may want a six month lease, an eight month lease, a three month lease depending on.
– Short term leasing I would more describe as what people think of as holiday letting
– Short term length, so week, day, you know three days, seven days, two weeks holiday et cetera. That’s what I think the distinction is when I talk to most people,
– Uh huh.
– so that’s basically the distinction there. Permanent leasing is a set period of time governed by the RTA leasing,
– And anything else is the short-term letting that the onsite manager can do as part of their holiday provisions that they provide.
– So we would break it into permanent leasing being everything and then holiday letting would be the shorter term, little stays,
– depending on how the owner or the landlord wants to dictate.
– Exactly right.
– Okay. Lets discuss the benefits and drawbacks then of permanent leasing versus holiday letting. What would be sort of in bullet-point form, what landlords would look for–
– in either situation.
– Sure, so bullet-point form if I can do that,
– If we can…
– If we can yeah.
– But bullet-point form um, Consistence of rental income that you receive monthly.
– Yeah. For permanent.
– For permanent. So we’re doing permanent.
– Knowing who the tenant is. Not that’s can be good and bad, it could be a bad tenant but certainly you’ve got a consistency of tenant and if they’re looking after the unit, they’re gonna look after it well on a consistent basis.
– Uh huh.
– And that’s the main two things you’re probably looking at from a permanent… Holiday, holiday is flexibility for yourself if you wanna use that unit as a holiday, you wanna come up and that’s the point, part of the point of the investment rather, and two, is the ability to get greater returns, depending on, there is an ability at greater returns depending on the unit and the holiday investment.
– However, as a side point I will say, with permanent holiday you generally find that a lot of the time you’re working on about the same income so if you do wanna have your unit in holiday depending on where its located of course, if it’s located in Surfer’s Paradise for example, you will generally find that you can get close to the same income or stronger returns in the holiday.
– So then, it could be broken down into risk profiles where it’ll be the permanent is lower risk
– Less income, but the short-term is a bit of a higher risk but you have the opportunity for higher income and flexibility.
– Excellent. Let’s explain some terminology now. So we’ll just do a very brief little explanations of some of these terms. Just shoot out whatever answer–
– comes to your mind. So the body corporate. What is that?
– So, that’s a very good one because the body corporate is actually the collective of owners, so if you’ve got 200 apartments in a complex, the body corporate is actually the collective group of owners.
– So stemming from that that–
– Is the collective body corporate then chooses a body corporate manager. That body corporate manager is there for the administration assistance for the body corporate. Issuing levies, body corporate invoicing that needs to be done, paying contractors that needs to be paid. So that, they’re your body corporate manager. You then have your caretaker,
– And your caretaker is what I am. So that’s the person that’s onsite, looking after the day to day of the building so organizing those contractors for the body corporate,
– Generally on site, not always but the majority of cases on site?
– Yes. The majority of cases onsite. So that’s the quick definition. So the caretaker looks after the day to day operation, the buildings the one on site, they may or may not have office hours in the agreement,
– As much as you probably like those bullet-point and the quick definitions, it actually can get a bit involved,
– Of course.
– in terms of what the caretaker does do, but as a general grouping of those three terms, you’ve got your body corporate which is the collective of owners, then you’ve got your caretaker which is the onsite or the person who looks after the day to day
– To care-take the building
– To care-take the building precisely, and then again, to reiterate the body corporate manager who’s the administration assistant and support the body corporate.
– And then the body corporate manager and the caretaker enforce the bylaws. I know that we’re looking at leases and then when purchasing even an apartment, you get a disclosure statement and in that disclosure statement is contained bylaws.
– Now, can you explain what the bylaws are for the people?
– Yeah, I can actually explain that pretty briefly. The bylaws are a set of rules that the building goes by.
– Uh huh. There are set rules in the legislation that do, that are already set for the building.
– They’re … what’s the word I’m looking for again… They’re proforma bibles that are put in place.
– The body corporate then can put in additional ones on top of that and of course, they normally always do. So the general ones that you always have are your noise or nuisance, damage to common property, the keeping of animals which is obviously becoming a bigger and bigger thing for a lot of unit owners, and the appearance and alterations to lot for example putting up shutters, a body corporate will have generally rules about the type of shutter that can be installed, the width, the blade length et cetera.
– Yeah, yeah,
– The color of white, just to keep it uniform, a uniform look to the building. The big thing in all of this is that bylaws are meant to be regulatory, not prohibitory.
– Not prohibitive.
– Uh huh.
– So, that’s what the legislation says about what a bylaw can be.
– Okay. Understood. Now when people are entering into a lease or a landlord is appointing an agent to manage their property, what are the applicable forms when entering the building, let’s say as a landlord, what is your form?
– Sure. Landlords a simple one, it’s a one form, it’s the Form 6 under what’s now the Property Occupations Act,
– In Queensland?
– In Queensland. So yes, that’s in Queensland. And if you simply looked at that form you’d see that there are certain things to discuss about commission, other charges that a property manager would charge you for looking after your investment, and these days they can all be discussed and negotiated with the property manager of course, they likely have some set ones that are involved,
– And what they, how they operate
– But they can all be discussed.
– And then they can dictate, for example, if they want a pet in their apartment then they’ll set a certain amount of rules…
– Yeah, that’s actually not generally in the Form 6,
– That’s just more of a, of what the owner then tells you
– to do as property manager.
– So that’s a negotiation…
– And then, the tenant. What is the tenant filling out?
– The tenant’s filling out the tenancy application, obviously to apply for the unit and then following that, they’re filling out the RTA forms which your property manager should obviously all know about and will do for you, but obviously the lease, the bond lodgement form, any entry condition report being the main ones.
– So, when the tenant is filling in that document, how important are the references that they put down?
– So the references come back at that tenancy application stage.
– They are very important because as much as you can meet someone obviously you don’t know a lot about them when you’re first looking at tenants, so you have to make, as a property manager, or any property manager, you have to make a bit of a judgment call, so any information that they can add to assist them with that, obviously only helps and references and showing the ability to pay rent of course, are the two things hat you need to really look at.
– So for a landlord, if a reference is supplied, what technology exists for the property manager or the building manager to then check that reference?
– So a lot of the time–
– or that tenants history.
– A lot of the time, we’re getting privacy consents signed off to say that we can go to that rental agent and actually can go back and we as a rule for us, ask for the last two property agents that they’ve used when they’ve rented, and we try and go back to both of those and get references from them.
– Uh huh.
– The other thing is, I think you’re referring to things like TICA,
– Yeah. and the online websites now that are registered that people can register bad tenants. Now property managers have to sign up to TICA,
– Uh huh.
– and a lot do and a lot don’t still, so what that gives you is the ability to log on to TICA and put someone’s name in there and check if they’re blacklisted or they’ve got a mark against their name for rental history,
– But that’s um, completely arbitrary up to the property manager that they had. That’s not looked or governed by any particular industry body.
– So a good question for a landlord when they’re referencing or sorry, when they’re going through which agent they wanna appoint, maybe they should ask that as a question.
– Yeah. Exactly right. I’d ask what they do because your property manager in all the things we’re talking about, and saying landlord, the property manager is doing most of the legwork for you as they should be so they’re getting the application, they’re checking the references, they’re checking the rental history or getting the rental ledgers supplied, that’s one of the things when I say rental history and previous ledger from their past tenancies. They’re getting all that supplied and if they’ve got all that documentation in or the form, they can also send it to them. We have a practice of sending that form to our owners and saying this is someone who’s applied, we believe they are of good standing, we’ve met them, from what we know of them they’re decent but of course more than that, here’s their rental history, here’s their references, we think they’re gonna be a good prospective tenant.
– Excellent. So when a tenant moves in, are they able to alter the lot in any way?
– The general…
– The general answer is no. They can ask but there is this section in the lease which obviously, there’s a section now fails, I can’t recall the exact section, but there is a section, they can’t make any alterations or fixtures or fittings to the lot.
– Uh huh.
– They can put up, we’re generally flexible in them putting up paintings and things like that, but other property managers may have their own position.
– There are some changes that are circling about around that at the moment
– and giving the tenants more ability to make the unit their homes and as much as that may annoy some unit owners, if it goes that way that may be the case, and when I say that it is the ability to put up pictures, the ability to paint a wall if they want to, but of course with any fixtures and fittings currently that they are approved, they have to make good at the end if you require them to.
– So you have to bring it back to the standard in which they moved in originally.
– Exactly right.
– Understood. When the tenant is moving into a new property, what generally have you experienced that they’ll be paying for?
– Oh alright. Obviously the main one is rent.
– Yup. Number one .
– Number one. With that they require and there’s, I don’t think there should be any property manager that doesn’t do this, up to $700 it’s a maximum of taking a full weeks bond.
– Uh huh.
– Over 700 you can actually as a property owner determine the bond you wanna receive from the tenant
– Interesting. Okay.
– But there the two main things, of course more than that is water and electricity are the main two but both of those have to be individually metered. If they’re not, you can’t pass them on to the tenant.
– So a current… one of the current buildings we manage is the water, both water is individually metered and that’s charged at just council usage rate. They can only charge for usage, what they use, they can’t be charged for sewage just um, service fees
– et cetera that you see on your rates as owners. They can only get pass from that $4 a kiloliter service charge, this is the Gold Coast
– The Gold Coast yeah.
– I’m talking about at the moment, $4 a kiloliter,
– That’s the lawyer in you.
– Yeah fair. Service charge sorry usage water charge,
– that they use for.
– And the heating of the water?
– Well the tenant pays for the water they use but in terms of heating, if you’ve got electricity and gas supply and it’s a gas hot water,
– they would pay that as part of their electricity and gas consumption.
– Okay. So it’s tied into the electricity bill you pay.
– Yes exactly, if you… yes.
– Understood. As a definition, what is the RTA? You mentioned it before.
– So the RTA is the Residential Tenancies Authority,
– And in Queensland they are the governing body that governs, to use the word again, they’re the body that governs all leasing in Queensland or what’s called general tenancy agreements.
– And then, where does your bond go? Who owns it?
– So as a property manager, once you get that bond from the tenant and they sign the bond lodgement form, you have a requirement to send that bond to the RTA and they hold that bond for the length of the lease.
– What are the requirements, what training is required for you to be a letting agent whether it be onsite or offsite, or is there a difference between the two?
– Alright. No not really, that comes back to the whole, covered by the whole real estate agent…
– Licensing. Thank you. And that’s done by REIQ, Real Estates Institute of Queensland,
– Yeah, or their independent body state by state.
– Or their independent body in state by state. So of course as always we’re talking about Queensland here. Under the Property Occupations Act, which is the legislation, there’s different levels of agent that you can be, so as an onsite manager all I’m required to have is a resident letting agent’s license,
– Uh huh.
– To be an onsite manager.
– Which gives you the ability if I understand it–
– Which gives me the ability to let units only in the building that I manage and that my license is attached to.
– Okay. And operate a trust account.
– And operate a trust account which is one of the big things about the license
– Very important.
– Of course you can still be a fully qualified real estate agent like a lot of people are, just to have that qualification, and then you can operate the building as well.
– A distinction for those out there who are onsite managers, is that you do need a separate license for each, each building that you would manage or you have, is in a corporation then an individual attached to that building, needs to have a separate licensee.
– Uh huh.
– So that involves a course, that involves a course that you pay as normal with all courses,
– And you complete and then you get your licensing. As for a general property manager, you actually don’t need any qualifications to be a property manager.
– So a bit of an advisory question now. What would be your top three tips to renters when they’re applying for a property?
– To be honest I can probably frame that in two.
– And that would be have your documents in order. That comes with both your rental history and showing rental ledgers of previous rentals that you’ve had to show consistent payment of rent, and then, or bank statements or anything that you can provide to show consistency of payment,
– If you haven’t been renting before for whatever reason, provide that explanation to the property manager together with the information showing that you can service the rent,
– And number two, is your references, make sure you’ve got them all in order so that you can basically just hand them over when you’re applying for a property. Because that’s what the property managers are interested in. One that you’re gonna pay rent and one that you’re a good tenant who’s gonna look after the property.
– So what would be your top three tips for landlords trying to chose the right property manager?
– Alright. Top three tips would be general competency, and you get that obviously from talking to them, but that leads into the more specific things of their understanding of the RTA and making sure they know what they have to do with tenants. Two, what systems do they have in place in terms of your arrangement, when they’re gonna pay you, how they pay it for your own benefit and understanding, and the third one would be, what systems they have in place when they’re checking tenants. Everything we’ve discussed previously but checking tenants, making sure they’re good and making sure they’re gonna look after your property correctly.
– Yeah. Beautiful. Well thank you very much Adrian. You’re very informative. If you need any further videos or information, make sure you join the group of www.mrkets.com.au or go on the Facebook and join the group. Thank you very much for your time.
– Thank you.
– Beautiful. We’ll talk soon.