As a consultant when I come across a property management team that is obviously stressed, and just can’t seem to get on top of issues and crisis, what you will read below usually uncovers what I call the ‘ball and chain’ effect in the rent roll.
Firstly, if there are no strict criteria for taking on a new property and if the reason they say ‘yes’ to new business is that the property simply has a roof and front door and not much more – a lot of new business can be problematic.
Too much of this type of business and the department will struggle. The cause, however, isn’t always easily identifiable.
Print off your property report.
Let’s get started. First, print off your property list, sit down with the team, and place these letters next to identified properties.
S- Low Socio
Identify areas that are classed ‘low socio’. Usually associated with higher social problems, cheap housing, drug-affected areas. If a good tenant is not likely to want to live in these areas, then give them an ‘S’. In a city, it could be certain suburbs, in regional towns it could be certain streets.
(If you’re reading this article and you’re from the USA, please ignore this factor due to USA discrimination legalities).
R- Low Rent
How low do you go before you start attracting only low-grade tenants? The lower the rent the lower your fee income and, more often than not, the more difficult the workload due to the type of tenants attracted by these rents.
T- Property Type
Certain types of property can bring a predictable result. Apartments, for example, may attract a single or working couple, and you might be happy with those results. It’s predictable. But other property types might only bring you trouble like multi-story units and flats or former government housing that is now a private investor. So give a ‘T’ to property type that is not desirable or that is very predictable in giving you less than desirable results.
D- Distance
If a property is a 30 minute or more drive from the office and you’re not charging higher fees to compensate, then taking on too many of these properties will burden the property manager. The end result is them driving around in a car part-time while trying to manage a full-time workload. This causes stress and issues and usually one that the property manager or manager cannot identify.
Sure, I hear you say “what about multiple property owners that have some close properties but one long-distance?”. Quite simply, you’re running a commercial operation and you should be charging accordingly with the extra driving hours required each year.
F- Furnished
Unless you’re dealing with high-rise apartments or holiday rentals or anything that does actually require furniture, then stay away from it! Typical residential property in the suburb dictates that the tenant pool attracted to your property all want unfurnished. If an owner needs to move away and it’s easier to rent it out furnished, that does not mean that you need to say yes! It’s just one big headache with no real upside!
Q- Quality
Basically, if it’s run down and the owner won’t fix it, it means the owner’s mindset is also run down when it comes to their obligations. It’s not good for business considering all the complications, issues, and the risk attached to it!
C- ‘C-Class’ Owners
By now you’ll be starting to see a pattern. Place a ‘C’ next to all properties that have an owner that has most or all of these qualities. They’re unreasonable and over-demanding, take up too much of your time with requests and communication, won’t fix the property, want above-market rent, and generally have a bad property that attracts a bad tenant.
Look for the ‘alphabet!’
Starting to see a pattern emerging? You should do it by now! If certain properties start having the ‘alphabet’ next to it with several letters then this is telling you these properties are not good for business. The more letters, the worse they are!
‘Worst-first’ strategy!
Make a list of ten properties, the worst first. Now for every 3 properties that you gain in net growth, remove the worst on your list. You will improve the quality and profitability of the rent roll for every property you remove.
Keep on doing it and you will have a business that everyone will enjoy working in.
All the best!