Want to invest in a property for rental income, but shudder at the thought of dealing with a difficult tenant or the damage an irresponsible one may leave behind? Or perhaps you are overwhelmed by the number of properties you have, or wondering whether you can invest in a property in a different state or suburb.
This is where a property caretaker comes into the picture.
When you hire a property caretaker, who is usually a real estate negotiator, you don’t have to worry about rent collection and the outgoings, says Gerard Kho, senior vice-president of Reapfield Properties Sdn Bhd. “Somebody is doing your job, and making sure that repairs are managed. You will have peace of mind.”
The caretaker is expected to do what the landlord would have to do, Kho explains.
“This would include checking on the background of the tenant, doing up a lease agreement, handing over the keys to the tenant, ensuring that rents are paid on time, paying any bills on behalf of the landlord, ensuring that utility bills are paid and attending to all the repairs requested by the tenant. He will also conduct regular inspections. He may even attend joint management body (JMB) meetings on behalf of the landlord.”
Strictly speaking, property management can only be done by those who have a valuer’s licence. But in Malaysia, not many licensed valuation firms offer such services, say industry players we interviewed. “Most of the property management people are facility managers or joint management corporations (JMCs),” says K L See, director of Metro Homes Sdn Bhd.
“I don’t know of any valuation firm that focuses on individual properties,” says See. “If you have a unit that’s being rented out for RM2,000 a month, the firms won’t waste time on it. They’re more interested if you have a shopping mall or building.”
Very few people appoint licensed valuers as property managers, says Chan Wai Seen, director of JS Valuers Research & Consultancy Sdn Bhd. “We’re not managing any property for individuals. Some people hire their employees to do it for them, if they have a number of properties.”
Unlike managing a shopping mall, managing an individual’s property doesn’t require a lot of technical knowledge, says Chan. Essentially, the primary job of a full-fledged property manager is to optimise the returns on the property. “He has to make sure that the place is clean and well maintained, and that the tenant and owner are happy.”
Hence, individual investors tend to hire real-estate negotiators to help take care of their property. See explains, “Most negotiators are so close to the owners that they’re taking care of the properties in their own personal capacity. It’s not the real estate company that’s offering this service.”
However, real-estate negotiators and property managers have different personalities, says Kho. “Property managers love to serve people and handle problems. They have landlords who would be with them for the next five years. They don’t mind complaints, they’re used to it. On the other hand, the negotiators are go-getters. They get the deal, finish it and go on to the next one.”
See concurs that negotiators are not in the profession of taking care of properties. “Real-estate negotiators’ focus on selling and renting out a property. They’re more well-versed with transacted prices, market rental and market conditions. Some take care of properties because they want to build a relationship with the landlords.”
If your caretaker is not up to par, this is where your nightmare begins, Kho points out. “You don’t know all the issues that might arise. Is that person really taking care of the property as you would yourself? When you outsource your responsibilities to somebody else, you don’t know how the tenant would feel, having no contact with you. You may not know who the tenants really are anymore. If you don’t inspect the property yourself, you won’t know what condition it is in.”
Is it a feasible endeavour?
Enlisting the help of a real estate negotiator may cost RM50 or RM100 a month, says Kho. “Hiring agents in the Klang Valley usually costs about RM100 a month. I don’t think landlords have a lot of room for negotiation. Some negotiators won’t even do it for RM100 or RM200 a month, because there’s a lot of work involved.”
See shares a similar view. “A token sum for caretakers ranges from RM50 to RM100 a month for smaller properties, or 5% of the rent. There’s no law to govern the payment. While the sum is negotiable, it’s not viable for the negotiator if you go too low.”
When is it worthwhile to hire a caretaker? If you have four or more properties, says See. “This is especially suitable for people who have properties in multiple locations, and have to deal with multiple tenants.” People who have property in faraway places would also find it convenient to hire a caretaker, he adds.
If you dislike dealing with tenants directly or you’re one of the more traditional landlords and do not believe in having the rental transferred into your bank account each month, you may also consider hiring a caretaker, says Kho.
The rule of thumb is that your payment to the caretaker should be, at the most, 5% of your rental income. “For instance, if you are collecting RM1,000 in rental a month, and you pay RM50 to your caretaker, I think that’s okay,” says Kho. “However, if you are collecting RM500 a month and paying RM50 to the caretaker, it means that 10% of your rent goes to the caretaker.”
While purchase prices are sky-high these days, rental is stagnant, so landlords are getting suppressed yield. Hiring help further eats into your profit, and that is a reason why Malaysians are discouraged from getting a caretaker, notes See. “Your rent may not be enough to pay your monthly loan instalment.” That said, rather than leaving your unit vacant or leaving it to the mercy of a tenant, it may still be a good idea if your property is far away, he adds.
For Chan Wai Seen, director of JS Valuers Research & Consultancy Sdn Bhd, your property should generate a substantial rental of RM10,000 to RM20,000 a month to make it worthwhile. “Such properties include bungalows in Damansara Heights or high-end condominiums in KLCC.”
It would also make more sense if your property were self-sustaining. “If you keep generating negative cash flow every month, and you still have to pay your caretaker, you wonder if it’s worth it. Unless there’s something you can look forward, such as capital appreciation.”
However, you may not need a caretaker if you have a good tenant. “For instance, if you know that your tenant is a multinational corporation, you can take care of the property yourself. MNCs are used to the protocol of paying rent on time,” Kho opines. Chan agrees. “When the tenant is good, and the agent is just collecting money, you won’t be getting your money’s worth.”
Things to note
A downside is that the responsibilities aren’t usually specified in writing. “Most landlords don’t bother with this,” says Kho. “From the negotiator’s point of view, it’s almost like a favour. He has found a tenant for the property and ends up taking care of it. To the landlord, if the agent doesn’t take care of the property well, he won’t get repeat business when the tenancy ends.”
Metro Homes’ See agrees. “Most people only have verbal agreements. Have a written agreement to make things clearer. But we’re talking about a payment of RM50 a month, and it’s not so easy to get the agent to sign the paper in reality.”
Also, there’s no legislation in place to guard your interests as the owner, says Kho. “If you hire a negotiator to take care of your property, and he doesn’t do the job, you have no legal recourse. There’s only the common law to protect you.” In contrast, if a valuation firm doesn’t do a good job in managing a property, a complaint can be filed with The Board of Valuers, Appraisers and Estate Agents Malaysia.
If you’ve decided that you need help, ensure that your caretaker will be able to look after your long-term interests. “Some negotiators are very new, and they may not be around in a year’s time,” says Kho.
Find an experienced caretaker, advises Kho. “Someone who looks after 10 to 15 properties probably knows the game well.”
Lastly, don’t leave everything to the caretaker, cautions Chan. “If you’ve given your negotiator the mandate to collect rental on your behalf, monitor your bank account to ensure that it is coming in regularly.”