A major cause of burnout among property managers is the bad business that gets brought into the rent roll all for the sake of 'growth'. Often, it’s what you say ‘no’ to that will determine your rent roll quality success.
Darren Hunter from Inspired Growth Training shared with us the top 7 important things that you have to watch out for before bringing in new managements. These criteria will guide you in ensuring you avoid bad business to grow a quality rent roll.
1. Annual contract value
As a fee maximiser, Darren believes in taking to account your expertise and proven track record when determining your fees and remaining firm in negotiations. If you must give discounts, set an acceptable range. “You can’t just be breaking even,” says Darren. How an owner negotiates fees with you is often a tell-tale sign on the quality of the management. Difficult owners in most cases are often difficult due to money, according to Darren, whilst owners who share the same values as you (i.e. the type of owners you want!) will be more reasonable and will appreciate the true value of managing quality properties.
Be wary of low rent properties. According to Darren, low rent usually means lower property management fees and attracts low-end tenants – both of which you do not want if you are aiming for a high earning portfolio. Determine an acceptable price range for rent and avoid going below this benchmark.
3. Location and distance
As they say in real estate: Location, location, location! Ideally, you would want to avoid suburbs and streets that are notoriously high on crime rates. The quality of your rent roll also depends on the distance they cover. Longer distances mean higher cost due to the time and expenses required to travel and service the properties. Always keep in mind that a substantial percentage of your rent roll should be located near you.
4. Extreme landlords
Be aware of extreme behavior of owners in relation to financial and emotional motives. These may include:
- Unreasonable expectations regarding tenancy laws, repairs, wear/tear, etc.
- Not wanting to spend money on repairs
- Requiring cheap fees
- Poor quality property
- Requires rent levels that are unrealistic
- Unreasonable tenant expectations and criteria
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5. Quality of the property
Be wary of properties in less than reasonable cleanliness, quality and maintenance condition. Newer homes don’t usually translate to lower maintenance cost and older structures don’t necessarily mean poor quality. It’s important to always be objective when checking out a property and not be fooled by that fresh coat of paint.
6. Property structure
To build a high-quality rent roll, you also have to be discriminating to the style and structure of the property to be managed. This usually ties in with the low rent criterion discussed earlier. From Darren’s experience, a profitable rent roll usually doesn’t include flats and units unless they are of high quality and exceed your desired rent level. In such cases, Darren suggests increasing your property management fees to maximise your income from low cost housing.
Furnished properties often require management consent due to complications associated, like wear and tear issues. Ideally, you would not want to manage partly or fully furnished long term rental properties, unless it caters to high-ended executive types.
A profitable rent roll starts with keeping a critical eye of the new managements you bring into the business. By setting benchmarks, you can determine the right owners, properties and tenants that will help you grow a quality, profitable rent roll – one that everyone can be proud of working in.
To know more about how to avoid bad managements and get a free download of the checklist, access the full webinar with Inspired Growth Training.