Running a successful property management business isn’t just about building your rent roll (the number of properties under your direct management), it also involves researching your existing relationships, both internal (owners, tenants, staff) and external, monitoring competition (what they offer), benchmarking your business against who you perceive to be the best in the business (locally, domestically and internationally) to ensure that what you offer is as close to a premium product as you can achieve and most importantly, being able to deliver, adapt and improve on that offer.
Once this balancing act has been achieved, it comes down to user choice and influencing that decision making process by developing and showcasing a “unique selling proposition” (USP), marketing that point of difference and communicating the changes to the existing client base, staff and new customers.
Growing that rent roll is a core KPI (Key performance Indicator) of the real estate industry professional and whilst much effort is placed on clever marketing tactics to achieve this, it is equally important to retain the existing client base of owners and develop relationships with them and their networks. When we examine the primary reasons why landlords make the switch it becomes evident that there are five primary reasons why this occurs.
- Poor Communication – Landlords place a great deal of trust in their property managers. They want executive involvement in their asset, to know about maintenance issues, expenses, rental reviews, tenant activity, key dates, current market conditions, relevant tax and legislative changes, achieving higher ROI. A lack of communication from the property manager is the primary reason why a landlord will change property management.
- Poor Financial management – allowing the rental payment to fall behind. Some property managers fail to understand that late rental payments result in a material cost to the owner. They are charged interest daily on amounts borrowed, so any delay must be offset by the owner. We recently instigated a process similar to a yellow card, red card which is sent to tenants that fail to make rental payments on time with notifications sent within 24 hours. The industry generally accepts a 3% threshold on rental arrears (3% of the total number of properties under management falling into arrears). We managed to get this to 1.7% but continue to monitor to reduce further.
- Expired lease – its staggering the number of property managers that allow a lease to lapse onto a periodic tenancy without the Landlords authority. It comes down to having systems in place that monitors both rental reviews and lease expiry 90 days ahead of due dates to allow time for all parties to best manage a situation and ensure that a current lease is in place at all times. It’s also about monitoring when a lease expires in terms of seasonal periods. The last thing you want is for a lease to expire prior to Christmas, knowing that most people will be away on leave and the probability of a vacant property is so much higher. This may mean setting lease periods to 5, 7, 11 or 13 months for December tenancies.
- Failure to manage routine inspections, timely renovations (ahead of vacant periods) and poor maintenance of the property. Again, this is system based. It’s not unusual in the industry to see routine inspections being run ad hock from quarterly to “when we have time”. At Infinity Property Agents, we have a found that a strict 5 month inspection process (free to owners) works best. It balances well with the tenants and provides a regular inspection communication process with our owners (a complete photographic report is sent). During brief periods of vacancy, we also recommend to our owners that any major maintenance or renovations occur to ensure continuity of rental and to achieve maximum rental potential, happy tenants and minimise any future costly damage (see our YouTube video on Preventative Maintenance)
- Unauthorised expenses – The last thing Landlords want when they receive their monthly statements is some unexpected expense that hasn’t been communicated, authorised or factored into their budget. This comes down to open communication with owners about every expense. We recently found this to be the case when we were remiss in disclosing a $9 expenses for a new key and very nearly lost the management of a property. It proved one thing; it’s not the value of the expense but the value of the communication that is more important. Lesson learnt!
Infinity Property Agents – Sydney