In order to generate that income, your property will need to be let (rented out). In order to maximise that income, the property and its rentals will need to be managed efficiently and cost-effectively.
Strangely, the decision as to how you are going to let your property is one of the first that you are going to have to make when you consider buying. This is because, if you decide to use a professional management or letting agencies, it will probably alter (or, at least, expand) your target market and, therefore, the area in which you ought to be buying and the type of property to buy.
This guide deals mainly with property management for short-term lets, which are the most common type for international investors.
Do it yourself, or use a professional?
This depends, mainly, on the type of property owner you intend to be. To manage a property well, you need to put a lot of time and effort into it. You can’t be hands-off, or averse to travelling out to your property on a regular basis.
Most people do not have the time, skills or inclination to successfully manage a property and its rental. More on this below.
The problems of distance
Tenants, reasonably enough, will expect the same level of service from the property owner whether you’re around the corner or on another continent. You have to expect call-outs if you are letting a property.
Short-term lets generate the heaviest load: tourists are only around for a couple of weeks, so they want to be able to enjoy all of the facilities all of the time. You won’t have a couple of days’ grace if the pool is unusable. People who aren’t used to the property are also more likely to call with general queries about how the equipment (air conditioning, hot water, security systems) work.
All tenants will generate a certain amount of call-outs, though: longer-term tenants will call when the internet stops working, the shower starts dripping, or they’ve lost their keys.
This is true wherever you own and let property, but if you’re a long way away it’s obviously far more difficult to deal with. For a start, the time distance might mean that you’re receiving the calls at 4am!
Another thing to consider is language differences: will the tenant speak the same language as you? Or if you need to call a local plumber, will you be able to effectively communicate the problem?
Profitable property management
Property management involves looking after the fabric of your property. This includes everything from routine maintenance (painting, cleaning the pool etc.) to replacing the boiler or making structural repairs.
Some properties require a lot more maintenance than others. A quirky period property might be more prone to damp; a villa with a large garden and pool comes with obvious maintenance needs; an apartment you’ve furnished with loads of gadgets will need regular tweaking.
(If you buy in a condominium, or community of owners, you might find that most of this is arranged and paid for centrally by the community administrator. Even then, you will need to make arrangements for internal repairs and redecoration.)
Property management also involves dealing with some administration: paying bills, arranging insurance, filing tax returns and so on.
Some or all of this work can be delegated to others.
Who should manage the property?
International property owners usually have three main choices:
1. Managing the property themselves
This has to be supplemented by a local person you can call upon for help. This could be a neighbour willing to help out for cash, or an ‘odd-job’ man. It can even be a property management company called upon on a more freelance basis.
2. Using an ‘unofficial’ (i.e. unlicensed) property management company
Don’t do this. It can be cheaper than doing it properly, in the short-term, but there are a lot of dangers that negate that benefit.
What happens if it goes wrong? Will you be able to call upon consumer protection laws to help you?
Additionally, will you be able to deduct their charges for tax reasons?
3. Using a ‘proper’ (i.e. licensed) property management company
Do you need a property manager?
Probably, yes. As I said above, few people have the time and ability to successfully manage a property, let alone a property in another country.
Even if you are used to managing properties in the country you live in, there are challenges that you will not have had to face:
- Language difficulties: As mentioned above, it is difficult to efficiently cope with problems in your rental property if you can’t communicate fluently with either the tenant or the locals who will be fixing it.
- Lack of local contacts: You are unlikely to have the network of trusted tradespeople, suppliers and friends-who’ll-do-you-a-favour that you rely upon at home.
- Business culture: If you haven’t got experience doing business in the country your property is in, there will be a lot of invisible barriers for you to navigate. Some countries expect a certain indirectness in speech; some will be less (or more) punctual than you’re used to; advertising methods may differ (being more or less subtle) from your own country.
- Different ways of building: Law or culture may dictate methods that you are unfamiliar or uncomfortable with.
- Different administrative requirements: This is often the main challenge that leads to people hiring a professional. Trying to navigate a foreign tax and administration system, fill in official paperwork in a language that is not your own, and deal with the quirks of local bureaucracy is stressful and time consuming for even the most experienced of international property investors. For newbies, it’s a killer.
Choosing a manager for your international property
Most popular investment destinations will have a lot of property management companies to choose from. The main question is, “do you feel comfortable with them?” You’re going to have to be talking to these people a lot if you want to make a profit. You’re trusting them with an incredibly valuable possession. If you have a bad feeling, then listen to it. Apart from that, here’s a good checklist:
- Reputation: Obviously, a good reputation is a good sign. It might be harder to tell someone’s reputation from a distance, but you can source personal recommendations from fellow expats, or your lawyer or accountant.
- Testimonial: You can also ask for contact details of the company’s current customers (preferably foreigners like you) – any good firm will be happy to supply them for testimonial purposes. Make use of them.
- Communication: Do you understand each other? Are they good at responding to your emails or phone calls?
- Technical skills: Do they employ well-qualified tradespeople? Can you see some of the properties they maintain?
- Price: Remember that cheapest isn’t always best. There’s a balance to be found between cost (and corner) cutting and overpriced.
What paperwork will you need for a property management service?
In most countries, you will require a proper written contract to enter into a deal like this. Even if it’s not legally required, it’s a very good idea. The contract should set out the rights and obligations of both parties, including:
- Exactly what work they will be doing, and will be expected to do in certain circumstances
- The frequency of this work
- The cost
- Payment for ’emergency’ work
In most countries, you can request and expect to receive a dual-language contract: laid out in your language and in theirs. It’s a good idea to get this checked over by your lawyer, especially if you are unfamiliar with contract law in the country. See our individual country guides on contracts and read our Guide to Choosing a Lawyer for International Work.
You should also check that the property management firm has proper insurance, and whatever licensing is required in the country.
Paying foreign property management firms
Most companies will expect an advance payment. The size of this will depend on several factors: the size of the property, the amount of maintenance it’s likely to need and the type of tenancy you will be seeking (constantly changing tourists will require more maintenance than long-term tenants).
They will then bill you monthly for the work they’ve done.
Three top tips for international property management:
1. Choose a sensible property
A low maintenance cost will usually improve the performance of your investment – but sometimes the extra cost is necessary.
- Air conditioning, though expensive, is now pretty much essential to let a property in a hot country.
- A pool can bring in enough extra interest to make the cost worth it – indeed, some villas might be very difficult to rent out if they don’t have a pool – but they are very expensive, and need to be maintained year round whether your property is let or not. Are you confident that you’ll find enough tenants to make the expense worthwhile?
- Something like a tennis court is, with the exception of very high-end properties, simply not worth the time and effort it takes to maintain.
Think carefully before deciding to buy a ‘character’ (this usually means ‘old’) property. Some of these properties will get you a higher rental return due to their unique features, but this will rarely balance out the extra cost of maintenance.
Consider a property in a condominium. Maintenance becomes much easier if most of it is organised centrally.
2. Use a good management company
Do this for a while, at least. This will give you time to learn what needs doing, and find out what you can do yourself.
3. Keep a very close watch on what is happening
Ask for – and make sure you receive – monthly reports of what work has been done. Examine these and query anything that looks out of place.
Pop into the property when you’re not expected (when it’s empty: don’t burst in on your tenants!). Speak to tenants after their stay (or during, if possible) about their happiness with the property’s maintenance.
Rental management of an international property
What is rental management?
Rental managers deal with your tenants. This usually includes:
- Finding tenants (this is optional but very common)
- Doing the letting contracts and other admin for those tenants
- Receiving payment
- Meeting and greeting
- Checking the property between tenants
- Cleaning the property between tenants
- Dealing with any tenant-related issues
In some countries (e.g. Turkey, currently) you will need to disclose your tenants to local authorities. A rental management company should also deal with this.
Do you need a rental manager for your international property?
Probably, yes. As with property management, rental management requires a skill set that not many people have.
Also like property management, it’s much more difficult from a distance. Even if you are used to managing your rentals where you live, you will need someone in this foreign country to meet and greet, deal with emergencies and find local tenants (should you wish to target locals).
Again, you have the choice between doing it yourself with some local help, hiring an ‘unofficial’ company, or hiring a ‘proper’ company. In some countries, rental management needs to be done either by the property owner or by a licensed rental management firm. Even if this isn’t the case, we highly recommend that you hire a licensed manager.
What does international rental management cost?
This will depend on a number of factors: prices are different from country to country (and even region to region), firm to firm, and between different sorts of tenants.
If you are looking to go into short-term lets, you can easily pay 35% of your income to the management firm. This sounds like a lot, but the time and stress saved are well worth it to many investors.
You can sometimes reduce costs by dividing the overall fee into fees for finding a tenant (including an “admin fee”); fees for meet-and-greet; and fees for cleaning. You can agree to only pay the admin fees if the company found the tenant – i.e. you didn’t find them yourself. Make sure this is in the contract if you agree to it.
How do you choose a rental manager in another country?
Many rental management firms are honest, diligent and proactive. However, some are not. It’s up to you to appoint the good kind.
- Take recommendations from people you know
- Seek testimonials (speak to them yourself!) from current customers of the firm
- Visit the office – do they seem organised? Active?
- Look through the website – would you book a rental property through this firm? Does it appeal to your target market?
- Get your hands on a rental pack from the firm (the stuff they give out to new tenants). Does it fill you with confidence?
- Make sure the company is willing to provide full, detailed, regular accounts
Once you’ve chosen a firm, you need to have a good contract (see above).
You also need to keep a close eye on what’s happening with your property. There are various ways of doing this: getting a friendly neighbour to note down when tenants arrive and leave; calling the property weekly to see if anyone picks up; or even visiting without notice.
If what you discover does not match what the company is telling you, then you have a problem. I call this the “Friday afternoon in August” situation: a tourist turns up at 16.00 on Friday afternoon, during the height of the holiday season, looking to rent a property on short notice. For a dishonest manager, the temptation is to put the tourist in your property and pocket the cash himself.
You should also be careful that you don’t have the sort of manager who will find tenants using your money and put them in his own property, or that of his friends.
Weaning yourself off the property manager
Lots of people are quite happy to use a property management firm for as long as they rent out their property. It is a weight off their mind, and that is worth the money to them.
Some people have to continue using a manager: long-term rentals or commercial properties especially.
But many people prefer to begin with property management companies and, as they learn, start doing more and more themselves.
Obviously you will still need local help if you go down this path: meet-and-greets and emergencies need someone on the ground. But the bulk of the expense – finding and managing the tenants – can be saved.
Most countries in the Mediterranean (which is where most of my clients invested in buy-to-let property) have a holiday season of only 12-20 weeks per year. But those 12-20 weeks need to be almost filled with tenants if you want to make a good profit.
How do you find tenants for a holiday property?
The first source of tenants is usually your family, colleagues, friends, friends-of-friends and so on. Be careful not to give in to too many pleas for discounted rates, or you’ll soon see your profit margins narrowing!
Next is the more difficult method: finding tenants online. You will need a good, clean, easy-to-use website. If you don’t have the technical skills to create one – and please try to be honest with yourself here – you must pay someone to do it for you.
Prominent on the website should be:
- Pictures: Lots of pictures, of the house and all the rooms, in high-resolution. Nobody wants to rent a property that they can’t picture themselves in.
- Your contact details: Please don’t make prospective customers hunt for your email address and telephone number. Most of them will simply give up.
- Features of the property: List all of the great things about the property – it’s near the airport, it’s full of mod-cons, there are lots of good restaurants nearby etc.
- Travel information: Make it easy for people. Let them know which airports fly direct to the local one, and tell them the best ways to get to the property once they arrive (hiring cars, taxis, public transport, etc.)
Once you’ve had your first few crops of tenants, things should start getting easier. If you’ve done a good job choosing and maintaining the property, welcoming the guests and making their stays as enjoyable as possible, many of them will return. Some of them will recommend you to friends.
Make this easier by supplying a visitors’ book (which will help you see which tenants had a great time) and keeping in touch with your customers. Repeat business is the best business!
Should you start doing it yourself?
Getting rid of the rental management company can sometimes double your profit… but only if it works.
Our clients who made the most money out of their international property are those who have managed the property themselves.
However: our clients who made the least money are those who managed it themselves… and did it badly.
Hopefully this guide will have given you an idea of whether you can manage a property well – and an idea of how to pick someone to do the best job for you.