One of the biggest issues facing property management departments is rate discounting. There’s always an owner coming to you claiming that so-and-so down the street is only charging 3% and, therefore, you need to match them or else! The question that arises is, “When did this become a question of price instead of value?” The easy answer is when value stopped being part of the property management package.
You see, the poor fool down the road figures that his 3% is the bare minimum he can charge for a bare minimum service. You, on the other hand, are – or should be – offering a quality service that includes value-added components that intelligent owners expect and demand. Working with some of our client agencies, we’ve developed some ideas that might help build value in your agency’s rent roll.
Increase rents fairly, equitably and regularly
The fastest and most-effective way to increase income for your landlords and for your agency is to make sure you regularly review your rents and make sure your increases are fair and equitable. This is a big part of why you make such a difference because setting increases correctly is an art as well as a science. Just remember that a change in tenancy incurs costs for your landlord that need to be recovered by an equivalent, or greater, increase in rent.
Become a full service agency
Offer more! There are a wide range of services your owners would appreciate. You may already know what these are relevant to your socio-economic and geographic peculiarities but feel as though you don’t have the resources to offer them. If you’re to get the best possible rates for your agency, you’re going to have to find a way to provide them. There’s a lot of new technology out there and companies that can support you. Find out what can work for your agency!
Create opportunities for growth
What are your landlords’ property ownership goals? Find out. Do they want to grow their portfolio? How can you help them do that? Do they have other properties that you don’t manage? How can you help them consolidate their portfolio into your agency? One Sydney agency estimated that 40% of their owners had other properties that the agency didn’t manage. How many properties would that add to your portfolio?
Increase your fees
In automotive terms, it’s called “badge engineering”. Look at an Audi A4, a Skoda Octavia and a VW Passat. Same engine, gearbox, size and many of the same appointments but the price range from the cheapest to the dearest is huge. The Audi’s price is 70% higher than the Skoda’s. Why do so many people buy the Audi? They perceive it to be better value. So why do other people buy the Skoda instead? They perceive the Skoda to be better value! Value is purely a matter of perception. If your landlords perceive you to be offering a high value service, then you will be worth the extra fees. If they don’t feel you offer a high value service, you won’t.
Stop pinching pennies
A real gripe for many owners is the many line items that start appearing on their statements – including a fee for sending them the statement itself! With more and more owners happy to accept PDF statements via email, charging a fee for what was once aimed at recovering the cost of paper, envelopes and postage is really redundant. You can understand why they’re not as accepting as they once were to let you charge these fees. Try this exercise: Calculate your management fee on your average rent. Then add the annual income you would receive from all of your additional monthly fees. The total is what you’re currently making. Now try the exercise again but with your new all-inclusive rate of 1% higher than now.
Ultimately, don’t sell yourself short. If you didn’t care about your role in Property Management, you wouldn’t have reached this paragraph. You and your team represent the value that is added to property management for your landlords. Growing your rent roll and increasing your agency’s profits is the reward.
David Taylor is the managing director of National Property Systems. For more information, visit www.nationalpropertysystems.com.au.