Cut-Price Property Management: Dirty Deeds, Done Dirt Cheap

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Urban high streets across Melbourne are populated by what now appear to be our most essential businesses: nail salons, coffee shops, property development display suites and supermarkets.

Between the gel pedicures and the Aesop-filled real estate display suites, there’s another trend that’s emerging more brazenly than ever before: dirt cheap property management. Whether pasted on empty apartment windows, dropped into our letterboxes, bombarding us from billboards or as part of our Facebook feed, it’s not unusual to see property management fees advertised for as little as 3.3%.

If you work in the real estate industry, you’ll probably be disgusted by such a low fee. But if you’re not (and let’s face it, most of the community are not), you won’t intuit much from the advertised fee – you won’t know if it’s high or low, and what value you get for your hard-earned. This deficit in communicating value is a failing of the real estate industry in Australia: they’ve not convincingly told the story of property management, and how it is an expert profession.

As a country, we’ve become intensely price-driven across many industries. Having been drip-fed an insulin-sweet feed of cheap clothes and cheap supermarket shopping, our national lizard consciousness now equates cheapness with value. At the same time, most of us inherently seem to understand that we pay a cost for our cheapness: it’s the obsolescence built into our technology, the fashion tops that look rubbish after three washes, the throw-away culture we’ve engendered. As wages stagnate, the cost of essential services like gas and electricity rise and the median price of housing soars, we look for ways to cut costs in other parts of our lives. It’s an uncomfortable tightwalk we balance upon as our economy shifts.

There are, however, some categories of expertise you don’t want to go cheap on. It’s pretty clear that a bargain basement overseas medical procedure is unlikely to be equal to its more expensive local delivery. Cheapness in professional services is something most of us are wary of, too: we want to know our lawyer, accountant and conveyancer are expert in their field. It’s only the few who are entirely price-driven that pretend all doctors are the same, all lawyers are the same and all accountants are the same – regardless of their level of expertise and accountability.

So why do we not feel similarly about our real estate professionals? Being responsible for the care of our real estate assets is clearly an important role – so why do we think that a cheap property manager will be a good property manager? Aren’t we worried that a business who wins custom courtesy of their cheapness might not be the most legitimate and experienced business? It’s disappointing that the race to the bottom when it comes to real estate fees is often fuelled by real estate businesses themselves.

If you’re an investor attracted by ultra-cheap property management fees, here’s a few reasons to think twice before handing over your precious real estate.

  • If you’re not paying much money, YOU ARE THE MONEY.

A real estate agency’s value is based on the only true asset that business has: this is their rent roll. Whilst the public often think sales is where the money is made, property management is where an agency builds its saleable value. There’s no consistency in sales – having six months of outstanding results is no predictor of the next year being a corker. Sales are just the cream on top of property management earnings.

Cheap property management fees are a sure sign of a Principal wanting to build their asset before selling it on. In short: they’re cutting fees to bulk out their property management asset in an effort to raise its value before flipping it. Their focus isn’t about quality service, supporting their property managers to do a great job for landlords or only managing properties in a geographic area that makes sense: it’s just about numbers.

The result for you as a landlord? Prepare to be sold on to another real estate agency, and soon! You’re a number, not a member.

  • Which way do you want your property management service?

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You can only ever pick two. (I take every opportunity I can to wheel out this clever venn diagram.) Cheapness and speed don’t equal excellence – and when you’re gambling with literally hundreds of thousands of dollars of real estate, do you really want your property managed by an agency who put such little value in their services that they slash their own wages? Probs not.

  • The Golden Ratio

There’s a maximum amount of properties that any single manager should be responsible for. It’s approximately 150. In real terms, that’s a minimum of 300 relationships for a competent single individual to manage between landlords and tenants. Do you know how many properties the cut-rate, beleaguered property manager might be handling? Anywhere from 200 to 300 properties. We’re talking about 600 relationships. You don’t have to be a property expert to know that these figures don’t spell quality management. Far better to trust your asset to an experienced property manager handling an appropriate amount of properties. You want them to know you, remember you, call you and know about your weird air conditioner.

There are a bevvy of reasons not to go cheap on yourself when it comes to important services like property management – but these three spine-chillers should do for now. 3.3% management fees? No thanks!

Iolanthe Gabrie is Director of social media agency Ruby Slipper

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Gratitude and the Estate Agent

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I love coffee cards. I only drink decaf, but that doesn’t stop me from punching my way through a coffee card in the space of a fortnight, before being rewarded for my good custom by my local provedore of (de)caffeinated beverages with a freebie.

I feel treatedacknowledged and delighted by this gesture. In all, I’ve probably spent about $35.00 with a coffee shop over the space of a couple of weeks, who then reward me with a coffee worth 10% of the value of my investment in their business. That’s just good business – and increasingly, we expect our loyalty to be rewarded – even with the most basic of purchases.

Can you imagine if an estate agency spent 10% of the value of a vendor’s investment on treating their vendor and buyer? It’s likely you can’t.

And that’s because the real estate industry has a problem with saying thankyou.

The bad old days of cleanskin wines and Donna Hay cookbooks are gone. The real estate industry is being forced to give more than ever before, whilst ostensibly working for the same (or a reduced) commission. Frankly, I don’t know how they’ve gotten away with displaying insubstantial gratitude to the people who pay their bills for so long. Are you a real estate stalwart grumbling with disagreement? You’re likely part of the problem.

Free-market economics are improving standards across the real estate community, with savvy agents looking to innovate across the entirety of their businesses. Creating an edge is where it’s at, and that point of difference simply can’t be achieved with the lacklustre delivery of shiny, branded Christmas cards with a printed ‘signature’, templated dross-filled newsletters focused on your business rather than your community, or a cheese knife and woodblock set handed across the front desk by a harried Sales Secretary at settlement time.

So what’s the edge? And how can you get it?

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The edge is called delight. Delight is the emotional state that creates goodwill between parties. Goodwill brings with it referrals, repeat business and cold business – all drawn magnetically to you as a sales agent or a company because of your reputation. Delight costs, of course. It costs in personalised, thoughtful gifting. In genuinely giving back to your community in terms of quality messaging on bespoke social media. It costs in time, as well – in lounge-room sitting or calling that landlord client to check-in on how his experience with your property manager is faring. Delight is the only currency that matters in an age when fewer agents are doing more business thanks to ‘marketing units’, more powerful databases and the collapse of smaller agencies into monied mega-brands.

So let’s get grateful. To both our vendors and our buyers – who have both paid a healthy portion of your monthly bill courtesy of their invoice. It’s easy to become numb to 5-figure commission checks when you’re within industry, splitting them up into their 40 – 60% splits before they’ve even hit the trust account. But each commission is big bucks to your vendor, and it needs to be appropriately acknowledged.

Word to the wise (and not the wise-assed): this isn’t an opportunity for Principals to pass the buck on gifting. This gesture of gratitude must be a percentage that comes off the whole fee. Not just the amount of commission apportioned to the sales agent – that’s lazy, and greedy. Imagine the sense of delight you could offer your vendors and buyers by setting aside just $3000 of a $30,000 fee and investing in gratitude. BBQs and dinner-tables around your community will soon be buzzing with talk of your decidedly un-realestate-y generosity. This delight could be a big spend all at once, a fair splitting of the resources between the vendor and the buyer. It could be a portioned upfront spend on the two parties, with an additional amount put into a collective ‘delight’ kitty, used for the benevolent scattering of goodwill to deserving clients in the form of coffee cards for newbies to the neighbourhood, magazine subscriptions, tickets to the theatre or weekends away.

The edge is delight, surprise and gratitude. It’s time to give back and to say thankyou. And it feels good.

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Photography: Breeana Dunbar

Location: Aquabelle Apartments, Mornington Peninsula

Iolanthe Gabrie is the Director of Ruby Slipper, Melbourne’s best social media agency. Learn more here.