You only get out what you are willing to put in
When it comes to business, I have always been a bulldog for getting the best deal.
Ticketed price? Forget it, I would always find a way to pay less.
In my teenage and young adult years, this mentality seemed to serve me greatly. When I had cash to splash, I liked to indulge, but I could stretch it further than most people I knew.
As a young adult, I had a bigger bank account than most of my friends, but I refused to touch it. My relationship with money was so unhealthy that until I was 25 years old, not only did I refuse to spend anything, I preferred to hoard my earnings over investing them, costing me dearly in hindsight.
Now, I can safely say that money should never be hoarded. It will always come and go, but the older I get, the more I am beginning to understand that the more you give, the more you will receive.
This is by no means an instruction to go out and spend more money or be more generous. This is a lesson I learned from dealing with a cheap investment management firm, instead of one who actually wanted to get the job done.
In 2013 I purchased a one bedroom flat and resided there for a few years, before eventually moving out and self managing the property while rentvesting.
When it came time to leave my home land, I set sail and left my beloved asset in the hands of a property manager.
The main difference between the sales and leasing of property is the way agents are paid. Sales agents earn commissions, while most property managers receive the same monthly salary, regardless of their performance. The guaranteed pay cheque often leads to complacency in the workplace and the issue of poor communication that is widely recognised throughout the industry.
Before appointing a property manager, I set meetings with numerous local property agents. My mindset at the time was find the best deal.
I set meetings and collected advertising material from a number of local agencies, but the choice was simple.
One firm stood out with by far the lowest management fees, which was exactly what I was looking for, so I signed an agreement appointing Raine & Horne Brisbane West as the guardians of my asset.
The first twelve months went by without any significant issues, but communication began to diminish shortly after this point. Communication is the most important factor in effective property management, so this was the first big red flag.
Around Christmas, just shy of two years into the partnership with Raine & Horne Brisbane West, my air conditioner died. This was a problem for the tenants, as temperatures often exceed 40 degrees celsius during the Australian Summer and cooler weather was still months away.
I requested the immediate replacement of the air conditioner, but found myself having to monitor the process to ensure it was being completed. A new unit was not installed for another three months, which upset both myself and the tenants.
When raising my concern about the lack of communication, I was met with hard defences, as opposed to an apology or promise to do better. Another red flag.
It was only weeks later that I found charges on my rental income statement for emergency repairs from a company I was unfamiliar with. This greatly upset me, as I have a nominated company to complete maintenance, who would have charged me only a fraction of what I had involuntarily paid.
What made this infuriating is that I found out about the unapproved charges from an income statement – as opposed to a courtesy call or email from the agency. The final red flag.
I reached out to Raine & Horne Brisbane West to raise my concerns about the negligence shown and breach of contract, but I was met with the termination of our management agreement from by the company director.
When I received the email from the director of Raine & Horne Brisbane West, terminating our management agreement, I felt nothing but relief and optimism for the future. A fresh start with a company that cares about their clientele.
That afternoon I spoke with a few contacts in the industry, requesting some referrals and reaching out to the top candidates.
At 8:30pm I received an email from an agent. The rapid response impressed me, as many Australian property managers have a no email policy outside of business hours and I often waited days for a response from my previous property manager.
The agent, from a large and reputable firm, requested a time to make contact during business hours the following day, before promptly reaching out when the time came.
Normally, a respected agency’s name comes with a higher price tag on services, but this was no longer a concern as I had learned a valuable lesson from my previous property manager.
You get what you pay for in business.
The new agent brought a welcome change to my daily schedule. While living in a different time zone, I no longer feared the emails that I may wake up to and I was quickly able to relax knowing that my asset was being managed by someone who cared about the work that they were responsible for completing.
You cannot put a price on peace of mind, but there are a number of other reasons that illustrate the importance of appointing a proven property management firm.
Effective property managers will often achieve the best rental prices through having:
- Brand name recognition (prospective tenants already having confidence in the company)
- The confidence and determination required to achieve exceptional results (the best agents never give up on a prospect)
- Experienced and efficient company management behind them (agents looking up to the right people and having an efficient admin team)
Effective property managers see the importance in communication and relationship management, ensuring:
- Regular communication, resulting in all parties always being on the same page (parties understand each other’s decision making process)
- Happier tenants, resulting in a higher chance of lease renewals (constantly looking for new tenants is expensive, try to keeping the ones you have)
- Good relationships with contractors and priority for work orders (fast repairs when something goes wrong)
Effective property managers pay attention to detail, avoiding issues such as:
- Appointing the wrong company to complete jobs (expensive and frustrating)
- Ignoring stipulations within the contract (illegal and/or unethical)
- External parties not receiving correspondence (causing delays to jobs)
When you own an investment property, all property related expenses are tax deductible, meaning:
- The more you pay to the agency, the less you pay to the government!
There are bound to be other factors that support the differences in fee structures between property management firms, but as a former industry professional, those listed above are the most significant.
In real estate, agencies who charge too little are usually offering a low quality service, or they will have too many properties on their rent roll for the property managers to be able to keep up with their work loads. If a service is too cheap to believe, it’s probably too cheap to be effective.
While the message in this is to not be cheap when it comes to business activity, that does not mean that you can’t find a quality service at a good price. Using a referred agent ensures that you are employing the services of someone who has proven results, so just be sure to do some research into prospective property managers before signing a management agreement.
For recommendations or advice on the Sales and Leasing of Australian property assets, feel free to get in touch.