Professional rental property managers have been an important part of the property investment landscape for as long as most of us can remember. Landlords have long relied on these experts to shoulder the day-to-day demands and intricacies of keeping tenants in line and rental properties running smoothly.
However, recent years have seen an increasing trend of landlords expecting more from their rental managers than they’re receiving. Changes in the space, and the availability of free online rental tools and services, have created the perception that basic rental management services are ‘easy’ and professional rental managers should be delivering a service far beyond that which can now be DIYed.
So, does this means the golden age of rental management has come to an end? No, it doesn’t.
Evolving consumer demands have been affecting all aspects of the property industry, and it would be naïve to assume rental management could escape unchanged. Now is the time for reinvention and adaption to bring the industry back in line with customer demands and demonstrate the irreplaceable value of a true professional’s expertise.
The challenges facing Rental Managers
With the internet making access to tools and information widely and freely available, and the professional tools available to rental managers remaining largely unchanged, it has become undeniably more difficult for rental agents to convey the true value of what they do – let alone enhance that value to meet growing expectations.
That’s not to say good rental agents aren’t currently earning their fees. Their role is both varied and time consuming and generally amounts to far more than the sum of its parts. A new investor approaching a rental agent for the first time, however, may find it difficult to look past the apparent simplicity technology has brought to the rental management process. That makes it easy for them to underestimate the return on investment that their management fees would be delivering, making the self-service route appear attractive by contrast.
To illustrate that picture, let’s take a look at a traditional rental property manager’s role from a modern landlord’s perspective.
The (seemingly simple) role of rental property managers
In the past, finding tenants could be an arduous task. From publishing adverts in multiple newspapers and magazines to fielding a constant stream of enquiry phone calls, tenant acquisition alone could be enough to convince a landlord that paying a rental agent was worth their while.
These days, a single, well-crafted post on selected online portals can be enough to spark plenty of interest from prospective tenants, and email correspondence makes handling enquiries far less intrusive and time consuming than before. The whole process can appear quite manageable to even the newest of landlords, making them wonder why they need a professional to handle it at all.
Credit checks could also be a headache to run in the past, with red tape making it difficult to access the right information as a private individual. These days, assuming you have the correct permissions, a simple online enquiry is all it takes. No mess, no fuss, and very little effort required – at least from the perspective of potential DIY landlords.
Legal agreements and administration
Even legal agreements like leases can be easily sourced online – often free of charge – and can be customised as necessary to suit a particular rental property. Other important processes like reference checks and FICA may be a chore to perform, but are far from complex and just as accessible to a private individual as they are to a professional rental property manager.
“Why, then,” a landlord may wonder, “should I pay a fee to have a manager handle the details?”
Deposit collection & administration
Online and mobile banking has even lightened the load on the financial aspects of rental management, making it a simple matter to take transfer of a deposit and keep track of it in an appropriate, isolated, interest-bearing account. No need for a professional to handle the money side of things either then, right?
Ingoing and outgoing inspections
Inspections can, admittedly be time-consuming to set up and perform, but a couple of hours every 12 months may not seem like a huge commitment to a new or prospective landlord. Online checklists can also ceate the impression that incoming and outgoing inspections take little to no professional expertise. (A myth many an agent would be happy to refute with horror stories of the dire repercussions of incomplete, inaccurate or non-compliant inspections!) As a result, many thrifty landlords now consider DIY inspections time well spent.
Collecting and managing rental income and third-party payments
Let’s face it: taking transfer of a rent cheque every month is scarcely difficult. Using that income to pay rates and taxes, as well as body corporate levies, may be a little more time consuming and involve some organisation skills, but it doesn’t take a rocket scientist to pull off, either. In fact, internet banking, till point rates payments and other modern conveniences have reduced these administrative chores to a matter of mere minutes, once a month – an easy thing for a landlord to handle on their own.
General maintenance management
An old or poorly maintained rental property may come with a hefty maintenance burden, but most modern investment properties are in reasonably good condition. That means maintenance obligations are typically limited to one or two incidents a year (if that) – not exactly a massive time-sink for a cost-conscious landlord to take on.
Default management (arrears)
Dealing with defaulting tenants is one area in which the services of rental agents still hold an obvious edge. The process of sending arrears letters, letters of demand, and tracking all correspondence in readiness to hand over to lawyers if necessary, is both stressful and potentially damaging if done in a non-compliant manner.
That said, there is nothing about the default/arrears process that precludes a landlord (or other nominated party) from handling this themselves. All the necessary information is available online for those willing to shoulder the responsibility.
Monthly reporting to landlord and tenant
Reporting is an area in which a rental agent can add a huge amount of value, and yet most rental management reports are limited (generally by the tools used to produce them) to the bare basics of distribution statements and/or cashflow. With this information readily available to landlords through digital banking and online payment channels, it can be difficult to see any added value in receiving professional reports.
The rise of DIY
When we ask rental property management agencies who their biggest competitor is, they typically answer one of two things: a particular agency active in their area, or no-one at all – they’re great at what they do.
What very few agencies realise is that there’s a far bigger competitor on the market than the brand just down the road. It’s the invisible one that can’t be seen stealing a client list, because it is the client list: landlords.
Thanks to technology, modern landlords have access to all the tools and information they need to perform the basic role of a rental property manager themselves. In fact, there are even free, complete, rental management solutions available online that are designed to help and encourage them do exactly that.
With these tools at hand, and widely available advice and breakdowns on the legislation and day-to-day responsibilities, the process of managing a rental property really doesn’t seem so intimidating anymore. Add the ability to avoid paying a 10% (or thereabouts) management fee, and a lot of landlords are seeing little reason not to DIY.
How the rental investment experience is falling short of expectations
Easy access to tools and information stimulating a DIY movement is only one of the challenges facing modern rental property managers. Another major factor is that the traditional rental management experience simply doesn’t live up to the asset management experiences of other investment classes.
Let’s do a quick comparison to show you what we mean.
Typical financial asset management experience
Most investors interested in financial assets like stocks, bonds or unit trusts receive tailored guidance from a professional financial advisor before even setting foot on the market. This advisor helps them define their financial goals and translate these into an investment strategy that not only meets their immediate needs, but also supports their projected future.
Once the right investments have been selected and purchased, the personalised service continues. Think detailed quarterly reports reflecting the status of the investment as well as market trends and influences, and annual champagne-and-canape evenings at which investment houses share a synopsis of market performance and their forecasts for the following year. At every point, the investor is kept fully informed of not just the value of and income generated by his/her investment, but also its progress in relation to the market and his/her overarching investment strategy.
This creates a sense of confidence in the asset and those trusted with its growth, as well as a gratifying sense of importance as a part of an “elite” group. And it all comes for a management fee of as little as 1 – 2%.
Typical rental property management experience
By comparison, the rental property management experience leaves a lot to be desired.
Many property investors hit the market with little to no input from a rental agent, and only approach a rental manager after signing on the dotted line. At this point, they’ll probably receive advice on rental potential and the process of securing and keeping a tenant, but that’s often where the advice portion of the service ends. Very few rental managers ever ask how a property fits into an investor’s broader financial plans, let alone formulate a customised strategy for the property to help support those goals.
Things don’t get much better over the course of having a property managed, either. In fact, the most common – and often only – time a landlord hears from their rental agent is when something goes wrong. Otherwise, it’s just a monthly cashflow statement that has zero information on the overall status of the property as an investment or in relation to the market, and seldom includes any kind of market trends or forecasts. This (seemingly) minimal level of customer service also comes at a rate of around 10% – a seriously hefty sum compared to the management fees of other asset classes.
The danger of the disconnect
Ironically, 99% of the time, property investments are by far the highest value single assets any investor will own. Far more valuable than any stock, bond or unit trust. That means property investments generally have higher exposure and greater risk than smaller investments where bets are more widely distributed.
While the returns are almost invariably worth the additional risk, the lack of strategy-focussed investment advice and updates – particularly in comparison to other asset management experiences – is a real deterrent for a lot of less-experienced property investors.
How to reposition rental management as a rental asset management
Clearly, the rental property management industry needs to evolve to suit the needs of modern landlords if its going to survive the increase in DIYers and competition from other agencies and other asset classes. Thankfully, the changes needed are far less drastic than they may seem. In fact, most of it boils down to successfully communicating knowledge most rental managers already have.
Make your role obvious in your title
The first step to being seen as more than just a rental manager is to get that message out as far and wide as possible. By simply rebranding your agency or agents as rental asset managers rather than rental managers, you can make it clear to investors that you understand the importance of your role in their financial wellbeing. You’re not just keeping a property tenanted, you’re overseeing the health and growth of a very valuable and important asset.
Help your clients plan and implement a property investment strategy
Before signing up a new landlord, it’s incredibly important to talk to them about how a property fits into their financial plan and formulate the right investment strategy for their specific needs.
Are they buying for the capital growth, and letting in the short-term until their property appreciates beyond a certain level? Or is their investment a long-term one, designed to yield ongoing income and be recapitalised as it appreciates in order to fund future property investments?
Many investors are unaware of the variety of options and opportunities available to them. Sharing this information is a vital step towards conveying your professional value and ability to help an investor attain their financial goals and maximise their ROI.
Provide professional, comprehensive investment reporting
A monthly cashflow report is not enough for modern property investors. Landlords need to be kept aware of the growth and changes affecting their asset, not just it’s current value and expenses. That means taking the time (or putting the right systems in place) to provide regular and comprehensive reporting on a property’s yield, capital growth and ROI, as well as analyses of market trends, future forecasts and information on potential opportunities.
This kind of reporting not only makes investors aware of the level of thought that goes into your management choices, it also demonstrates your effective delivery of a service that outperforms any and all competitors.
Get the tools you need to succeed
WeconnectU has an exciting new Rental Asset Management tool designed to help rental agents deliver a faster, more efficient and more competitive asset management service than ever before. For the latest information on release dates, email