Putting Value into Property Management

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What is property management? And should you self-manage or engage a Property Manager?

1st February 2015
What is property management? And should you self-manage or engage a Property Manager? Here are 7 questions to ask yourself.

What is property management? And should you self-manage or engage a Property Manager? Here are 7 questions to ask yourself.

As a property investor, effective property management can make or break your property investment’s profitability.

The cost of engaging a professional Property Manager is just the beginning: what’s far more important in the long-term are things like choosing the right tenants; keeping the property well maintained; keeping the vacant period to a minimum; and ensuring there are no rent defaults. These are the nuts and bolts of managing a property, and by understanding exactly ‘what is property management’, you’ll be able to get a feel as to whether it’s for you or not.

Hands-on property management takes a range of skills for a positive outcome. And it’s far better to recognise early on if property management is something you can successfully do yourself, or if you’d be better off (financially and emotionally) by engaging a professional.

To answer the question of ‘what is property management’, and to see if hands-on property management is for you or not, ask yourself these 7 questions:

1. Can you wear all 7 hats of property management?

A Property Manager’s job is varied, and there are 7 hats you need to wear and juggle:

  1. Accountant
  2. Lawyer
  3. Tenant manager
  4. Maintenance manager
  5. Project manager
  6. Debt collector
  7. Property investor

This overview gives you a good idea of what property management involves.

Can you comfortably wear all of these of hats of property management?

And remember, if you’re managing a portfolio of properties, you’ll be wearing numerous hats at once. You may be calling on your tenant management skills for one property, whilst you’re in debt collection mode for another. And that’s while you’re organising an emergency plumber for another property, and advertising for new tenants for another.

It is not as simple as wearing just one hat at a time: you need to be prepared to be flexible, adaptable and make good on the promises you make to your tenants.

2. Do you have a good team around you?

Although you need to wear the 7 hats of property management, you don’t need to be an expert in every area. However, as an investor you also need a good team of people around you to support you. This includes:

  • Accountant
  • Lawyer
  • Valuer
  • Real estate agent
  • Mortgage broker
  • Good contractors: lawn and garden care, cleaning services, plumber, electrician, painter, builder, etc.

You need access to a good team of advisors around you so that you get the correct advice at any time.

In effect, you are the general manager or CEO of your own property investment business. As CEO, you have no excuse for getting run down by operational issues when you have a team of advisors you can delegate problems to!

The most powerful resource for problem solving is going to be via your fellow members at your local property investors’ association. You will meet very experienced investors who will be happy to give you advice to improve your investing. There is a high degree of leverage here because you are tapping into someone else’s experience that may have been gained from hard experience (i.e. mistakes).

By learning from experienced investors you don’t need to make those same mistakes. Rather, you’ll be on the fast track to success.

You will find you become very experienced just by attending property investor association meetings. All you have to do is turn up and listen! Over the years I have seen many people get help by being directed to an experienced member. The advice sought may have been about a subdivision problem, tenant management or an accounting issue.

So, in essence your property investment journey can be very easy if you surround yourself with experienced people. The process is quite enjoyable when you can solve problems quickly rather than having problems and mistakes surround you for many months or years at a time.

Don’t become one of the many people who leave property investment and sell up a portfolio because they became over burdened with tenant problems.

3. Are you willing to treat your property investment as a serious business?

The question is: are you willing to treat your property investing as a business? Are you willing to be the leader, and to be proactive in all aspects of managing your property?

There is no point in a landlord or Property Manager believing that problems will go away by themselves, if given enough time.

Yes, some problems may resolve themselves without any intervention, but this is purely luck that has gone in your favour.

Management is not about waiting for luck to blow over you.

Yet many landlords are more comfortable with having their head in the sand, rather than being in a position of control where they can observe their surroundings and take action.

We have seen situations where landlords actually avoid going to the property because they may have to speak to the tenant. If you’re self-managing your property, you can’t afford to have tenant-phobia.

4. Are you confident and in control when negotiating with tenants?

You need to portray that you’re confident and in control at all times, especially when dealing with tenant problems.

If you’re calm and confident, the tenant is more likely to work with you to resolve the problem. You cannot afford to appear nervous or lacking in confidence when dealing with tenant problems.

Communication also needs to be supportive and specific. For example:

“That’s an excellent solution, Bob. I do need you to be back on track with rent payments by this Friday. As discussed, I’ll meet you tomorrow at your office at 12 noon so I can collect your outstanding rent.”

Can you stay calm and in control in all situations involving tenants? Are you willing to work on this skill?

5. Are you always focused on protecting the asset?

It’s all too easy for tenant dramas to obscure the long-term goal of protecting (and optimising) the asset – i.e. the property.

You may intend to hold that asset long-term; therefore you will always want to locate long-term tenants. However, that won’t always work out, so if one tenant does not meet your requirements, then move them on.

Your goal should be for the property investor to hold the asset long term, and the tenant profile needs to fit in with this investment plan – not work against it. There is no point in having a long-term investment plan combined with short-term tenants. You need to protect the asset at all costs.

Are you willing to deal with tenants who don’t fit with your long-term goal? Are you willing to charge a fair market rent? Are you willing to increase the rent, as allowed for by law? Will you deal promptly and fairly with issues relating to damage? Are you willing to confront the tenants face-to-face if you see any signs of them contravening their tenancy agreement?

If you are self-managing your property, you need to be willing to do the hard tasks, so that you protect your asset.

6. Do you live geographically close to the property?

It is really important that you (or your Property Manager) have easy access to your property. That is, the travelling time should not be too onerous. A 1 to 1.5 hour return trip in the car is a reasonable barrier to many property investors from taking a 5-minute walk around the grounds each month to check that everything looks in order.

And when there’s a problem to tend to on site, the landlord shouldn’t be deterred by the driving time required.

I wonder how many required site visits get put off to the next property inspection in 3 months’ time?

7. Do you actually enjoy property management and tenant management?

Last but by no means least: do you actually enjoy property investment? After all, property investment is a long-term plan, so it’s important that you enjoy the journey.

Well – are you enjoying your journey? Or has it become a highway to hell? Or maybe it’s making you a bit anxious and stressed out?

Residential property investment is a long-term strategy that works exceedingly well for creating wealth. If you stick to the knitting and stay on track you will do very well.

Because it is a long-term plan it is very important you enjoy the journey along the way. There is no point in putting up with tasks or problems that are going to get you down.

Every human being has strengths and weaknesses, and not every problem is going to be solved as easily as slicing butter.

With experience, you will become an expert at dealing with tenants and contractors – as they say it takes time. You can speed up that learning process in property investment and management by immersing yourself with groups of experts and purchasing some of the excellent reading material available. There are some excellent property investors’ associations in New Zealand. These fall under the umbrella of the NZ Property Investors Federation, they are independent and provide an excellent networking and educational forum.

I have been a member of the Auckland Property Investors Association since 1998 and a board member for the 2007/2008 period. Over the years I have worked with and met many people who have left property investment because they got sick of it. Generally, the core reasons for not continuing relate to tenant problems.

This is a shame as it is an opportunity missed in their lives and all those problems could have been resolved relatively easily by getting help.

If property management is a journey, joining a property investors’ association is a bit like stopping to ask for directions when you’re lost. Are you willing to ask for help – and then follow the advice you’re given?

Summary

  • What is property management? There are many facets to property investment and property management. Many investors start off self-managing, and realise it’s harder than they thought. Can you answer ‘yes’ (honestly) to the questions below?
    1. Can you wear all 7 hats of property management?
    2. Do you have a good team around you?
    3. Are you willing to treat your property investment as a serious business?
    4. Are you confident and in control when negotiating with tenants?
    5. Are you always focused on protecting the asset?
    6. Do you live geographically close to the property?
    7. Do you actually enjoy property management and tenant management?
  • If you didn’t answer ‘yes’ to all the questions, that doesn’t necessarily mean that property investment isn’t right for you… it just means you need some help. Specifically, you need to engage a Property Manager whose strengths cover for your weaknesses. With this knowledge, you know what sort of traits to look for when you’re choosing a Property Manager.

 


 

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