A difficult landlord can be a strain on resources both physically and psychologically, but making a decision to fire them isn’t always easy. Natalie Hastings helps you decide if a client is worth keeping.
IF YOU’RE A property management professional you’ve been there. An insufferable, unreliable, disrespectful or unkind landlord has made your life, or the lives of your tenants or your team, so complex that you want to show them the door.
There’s no doubt that working in property management as a negotiator and go-between can be deeply taxing emotionally, particularly if you’re feeling overworked, unsupported in your role or unappreciated by your tenants and landlords. This emotional pressure-cooker can heighten your response to challenging clients, leading you to think that sacking problematic landlords would solve a whole lot of your troubles. But would it?
There are certainly times that mismatched landlords should be ‘let go’. By acting decisively you will reduce stress on your staff, and you may also reduce the potential legal liabilities of your business. No matter what their monthly fee, there’s no point having a client on board who chews your PM’s time and energy – particularly if they’re also neglecting their investment property and ignoring legislation.
But rather than making a rash decision based solely on a peak of emotion, I encourage you to use systems and processes to help you come to a conclusion about a client’s suitability within your management portfolio. In fact, sometimes clients who are perfectly pleasant may be a poor match for your rent roll; you won’t know until you examine your numbers closely.
Here is a simple series of exercises to undertake if you’re unsure about keeping a ‘risky’ client, or taking on a client who doesn’t seem an ideal fit for your business.
CHECK YOUR FEES, CROSS YOUR TS
Rent rolls are about income and building an asset; they need to add up. Each month, check the management fees collected for each property. Are you only collecting $50 per month in fees for an owner you spend hours servicing? Rationally, you will need to increase that fee or let that owner go. Most property management software will allow you to export your fees into a spreadsheet, filtering them from high to low and making them easy to assess.
THE 80/20 RULE
Whether a client is a good match for your rent roll is a fine balance of time used in management and fees taken. Let’s look at your high-maintenance landlords first: are they taking up 80 per cent of your time and efficiencies? Seek to lift their fees or, if that can’t be achieved, manage their expectations in terms of service.
DISCOUNTS FOR DEALS
Are you or your listing agents discounting your rates in order to win business? Be careful with this approach to building a rent roll. When discounts are used profligately, they ultimately bleed energy from your business and can lead to overworked, under-compensated teams. Too many ‘dirt cheap’ listings actually damage the overall value of your rent roll, too. Additionally, clients who are motivated by ultra-low fees have likely been with every agent and it won’t take them long to tire of you, too. Tread carefully here.
Sometimes a landlord can be brought back from the brink with a little tough love. If a landlord has a bit of a bullying tendency, has been coddled by property managers because they have, say, more than one property listed with your agency, or simply don’t have a clear regard for professional boundaries or their role as a landlord, a sit-down meeting to establish rules may be in order.
Tough conversations and plain speaking about their responsibilities, your responsibilities and the adequacy of their fees and expectations can resolve relationships that are going awry. You may even be rewarded with a higher fee or better behaviour from your client – or the certain knowledge that they don’t belong within your business.
YOU GET WHAT YOU PAY FOR
If you have long-standing clients who have grown comfortable with your business, they may occasionally ask for a loyalty discount. Whilst this is sometimes appropriate, say in the case of a client with multiple properties, a sense of responsibility for their property and a courteous, understanding manner, often familiarity breeds contempt.
You’ll need to kindly remind these clients about the level of service you provide for your fee – and ask them which part of your service they’d like removed in exchange for a cheaper rate. As the saying goes, ‘If you think it’s expensive to hire a professional, wait until you hire an amateur’.
To sack or not to sack? By methodically addressing your desire to ‘fire’ a landlord by using facts, systems and processes rather than emotions, you’ll come to a rational decision your whole business can benefit from and feel good about.