The real estate industry consistently ranks as one of the least trusted professions in Australia. In 2016, a Roy Morgan poll found that people rank real estate agents 28 out of a possible 30 professions for trustworthiness. Trust and openness between client and agent is more important now more than ever but the industry is still rife with deceit and shady business practices. To correct the negative aspects of the industry Authentic Property Management is on a mission to lead by example.

Below we outline some of the aspects of property management that agents and managers keep quiet from landlords, an overview of problems in the industry and how we remedy them. Some of it may seem harsh or negative but it’s a reality that many landlords face without even knowing it.

What is the problem with the property management industry?

The first problem is that a full service real estate agency emphasises their sales department because each transaction produces more income for the office than a rental property.

Over time, as agents sell to property investors, these buyers trust the office from which they purchased the property. Out of necessity these offices have set up property management departments as a secondary thought.

Sales agents gain two sets of commissions; one when a property is sold and another when a property is referred to the property management team. Sales staff will continue to refer properties for management as they receive their fee and never have to worry about what happens next. For the Property Manager the only thing that increases is their workload. The Property Manager keeps up with the pace for a short while, but has a limit. Once this limit is exceeded communication, maintenance and requests get left until the last minute or go unfulfilled for extended periods. This begins a snowball effect where small issues turn into big issues and things change from a proactive approach to a reactive one ( how many times have you been the one to initiate contact with your agent rather than them calling you to advise on updates and make recommendations for your investment? ).

Soon the Property Manager is in a daily routine of putting out flash fires across their portfolio. Under this stress they quickly burn out before they have an opportunity to develop their skills and career. When they eventually quit or get fired their replacement steps into the minefield that was left behind and the cycle repeats itself. There’s little wonder that 80% of real estate professionals don’t last beyond two years and most of the remainder are so dissatisfied with the industry they just stop caring.

What is a business development manager/client relationship manager/new business manager?

An actor that’s slightly better paid than the property manager! A BDM or CRM’s role is to bring new business to the office. They will practice scripts and dialogues in an attempt to close you on every question or objection you throw at them. Their role is to make the property management team sound like they know what they’re doing as you have various (often embellished) company statistics and charts flashed in front of your face. But isn’t it better to deal directly with the person who would be looking after your investment instead of the person who’s hired to talk the talk and never seen again?

How do agencies take care of clients and their property management needs?

Property Managers use one of three management systems: these are known as Portfolio Based, Task Based and Pod (sometimes also called Squad).

A Portfolio Based Property Manager covers all aspects of property management on their own. They will carry out all inspections, lease properties, and take care of maintenance and outgoing tenancies. As a client, you only have one point of contact with this system.

A Task Based system introduces additional staff, usually called “specialists”. One will look after leasing and ingoing tenancy inspections; another arranges maintenance and routine inspections; and the third will cover accounts (sometimes a fourth senior member will also oversee the others work).

The third style, the Pod, is identical to the Task Based system. The difference is the client has a single point of contact.

It’s clear where the last two systems fail – with more hands in the mix, it’s easy to overlook details and maintain clear communication. Boredom levels increase as these “specialists” have no variety or range to their work; it becomes repetitive. As the number of properties increase the senior members of the team end up with too many maintenance tasks to keep track of.

The first system isn’t without flaws either and will often fail from mismanagement of total client numbers.

An average property manager running a Portfolio Based system will have 150 properties to look after, even though industry best practice is 120 (by comparison, a Task Based and Pod system will typically have 200-300 properties under management for each team).

Why do agents charge different amounts?

Greed. When new business is brought on board the listing agent is encouraged to try to obtain the highest fee they can from the client.

Agents try to obtain 7.7% of the gross rental income, hoping that clients will either accept the fee or negotiate down to 6.6%.

Either way the client receives the same level of service whether they pay 7.7% or 6.6%. That’s right: there is no difference to your service even if you pay more for it.

If you saw every single agency agreement an office has with its clients, you would never see the same set of fees twice in a row.

Like every other product or service, if you pay more for something you expect to receive more. This is not the case with property management.

How do some offices afford to reduce their fees so much?

It’s all about numbers and volume. The more properties they can add to a property manager’s portfolio, the more money they will make.

The problem with this approach is that the only winner is the owner of the business; their income goes up while their cost of business remains static.

An agency will never turn down your business but they will often discount their fees heavily to win clients only looking at the short-term.

As described earlier, this piles on more work to an already overloaded Property Manager without regard for the lowered quality of service you receive as a result. A secondary bonus for the agency is if the client decides to sell as the agency expects they will make an additional income from the sale as well.

Does a signboard help my property lease faster?

No! These days prospective tenants only look to one place when trying to find their next property – the internet. Internet advertising has become so effective through convenience it has eradicated newspaper ads, letterbox drops and signboards.

Any advertising serves two purposes; to put the property in front of prospective tenants and to put the agency in front of prospective clients. If tenants are no longer being attracted by signboards you should ask yourself what the agent is really trying to promote with your money.

Will a rental range on my property attract more tenants?

Yes absolutely, but for the wrong reasons.

A relatively recent tactic in the market is to put a range on the rent instead of a fixed figure. The range is $20 above your ideal rent and $30 below. So if the ideal rent is $500 per week the agent will suggests a range $470 – $520 per week.

The office sells this concept to the landlord by suggesting that the range will bring in a larger group of prospective tenants. Once they are all inside for inspection, tenants will realise there is competition and naturally offer a reasonable price – either in the middle of the range or slightly higher.

The reality is that tenants, much like property buyers, work from a budget. If they see a property advertised at $470 – $520 per week, they will think they have a chance to lease the property for $470 and they will put in their offer at that figure.

Once several rental offers come in at $470 the agent presents this to the landlord citing the “market” as setting the price as that’s all that people are willing to pay. The truth is the agent created this false market by setting a lower figure on the property in the first place.

It’s a tactic used to reduce the rent unnecessarily simply to get the property leased and off the market. This boosts office statistics of “fast rental turnovers” in their marketing to prospective clients.

Are blacklist tenancy databases all they’re cracked up to be?

No, but they do have their place in some instances. Agents will often mention they utilise tenancy databases as a point of difference when carrying out their listing presentation but the problem is that it’s extremely difficult to list a tenant on a database.

There are many legislative hoops to jump through and in all but extreme cases a poor quality tenant simply moves to another property without any record on a central database.

Where these come in handy is depending on the specific database used a tenants VEDA history is viewable which shows any company ownerships and whether any large defaults or bankruptcies have been registered against them.

What about prospective tenancy databases that I keep hearing about?

This is another half-truth that agents will tout as a point of difference. The claim is that the office has a large database of prospective tenants looking for properties much like the one the client is looking to rent out.

In reality a database such as the one described is impossible to maintain. Tenants are in the market for a property for a very short amount of time, typically 2-3 weeks. During this entire time they are actively searching for suitable properties that match their criteria online, from the comfort of their own home.

To prove this point, ask anyone you know who is renting if they were contacted by an agency to inform them about the property they are now living in and see what they say…

Agents do have the power to search their email inbox for enquiries and make suggestions to prospective tenants for other properties but even though it’s ineffective, with an already overflowing workload it’s just another thing that is promised but never delivered on.

What is involved in changing managing agents?

Changing managing agents is a simple process for both investor and tenant. All that you’re required to do is provide notice in writing to your current managing agent.

Authentic Property Management can do this on your behalf if you prefer not to speak with your existing managing agent. Usually, a 30-day notice period is required, after which we will collect the tenancy file from the previous agency.

The truth is the real estate industry is a great one when properly managed. A good quality Property Manager will make you more money than a mediocre one. This in turn builds a solid reputation, which spurs more referrals and helps the business thrive.

Some entrepreneurial minds are noticing this and changing the whole formula for property management, opting to specialise exclusively in this field and do it the right way.

This is where Authentic Property Management’s philosophy of fairness and transparency comes in. Click here to read about our key differences.