'Exciting news' from my PM. What do you think?

Yep, they could have perhaps done a better job selling the move to you, but if you did a ring around of potential new PMs, this is the sort of thing you would be looking for:

Might be better than what you had.

Rent rolls are where the value is in an agency. I remember in the last Sydney boom there were lots of agents popping up with spivvy suits and nice cars and flash offices who weren't interested in sullying their hands with rentals. I remember so clearly a conversation I had with one of them where I suggested that when that current boom tapered off that it might be useful to have some recurrent income to prop his office up during the lull. He smiled at me in that way that agents do where you know they are thinking, 'This bloke is a complete dill.'

 

Struggling businesses or startups usually cannot purchase rent rolls. You need $$$$$ and systems and experience and all hands on deck.

 

Thanks for all your responses guys!!

So, i ended up ringing the new potential PM. She confirmed that she had bought the rent roll and it will settle by the end of the month. She said she was happy to honour everything that my current PM is providing. When speaking to her, she sounded quite good and professional and is also the director of the company with 30yrs experience. It seems like she is doing a lot though.. being a PM and managing her own business. She said she currently has about 150 properties to manage, but has managed close to 300 previously with a different company. That seemed quite excessive to me.. not sure how good the customer service would be then. I asked her if future PM's would be joining the business (to gauge whether my property might be thrown around between PM's). It seemed like they might be hiring. I'm after a PM that will be sticking around for a long time (i guess its hard these days with it being such a stressful job).

I'll try and call a couple of other potential PM's and i'll decide from there.

 

After years of building up a business some Principals sell their rent rolls to retire to successful agencies or boutique agencies - all that hard work over many years require a light at the end of the tunnel for retirement. Good practice would recommend to not have this come as a surprise to clients. We have one of our IPs managed by a boutique agency in Cairns - this couple worked so hard over the years that it was time to reap rewards of years of work and no paid holidays. They called us, discussed their impending retirement, asked us what we valued about their service to ensure they sell their rent roll to the right agency to meet the needs of their clients at a broad level, we received a letter thereafter, and the couple also informed us that one of them will continue working with the new agency for six months settling things in before fully retiring. We supported our wonderful PMs by moving our business to the agency they sold to.

 

Going against the grain here a little but my suggestion is to call your current agency and ask the following...

Are you selling all of your rent roll or a portion of it- agencies will sell away properties based on a number of factors, location is possibly a valid reason if they have a handful in the area. The other reason common to my location is agencies that do not want to operate in low social economic areas and move to where they can focus taking on high rent houses= more profit. I know there are also agents out there that will get rid of properties in the too hard basket, and I have seen this happen to a bunch of small agencies who are struggling managing their business and want to finish up and cut their loses. This also includes agencies getting rid of properties that are not financially sustainable based on the work, or used as a way to "cleanse the portfolio" so they can make it run smoother as a whole by getting rid of a portion based on a variety of reasons to fit their business model etc. Your not going to be the only owner being sold off but the reasons why they are selling good also tell you a lot about the intentions of who is going to buy the rent role or portion of it- though in most cases it's a case of the purchasing agency is looking to increase the size of their portfolio and this often cheaper than marketing for new landlords. The purchaser is going to look at the whole picture of your property, your tenants, you as a owner and the service delivery and documentation to date before cash exchanges hands, so on a plus side they likely want you as a client.

What is happening with the staff that has been looking after my property(if you are or are not happy this could be important) if the sale is because of retirement etc then often the purchasing new agency is going to want some or all of the staff currently on deck to help the transitional period and have someone in the office who understands the history and has established relationships with the owners and tenants. If they are going to the new agency and your not happy with the service this is a great excuse to say bye. If you are super having with your pm and want to move to their next job offer, maybe do some Nancy Drew work. If they are staying at the same agency and only you are moving I think this prompts questions around how many properties are moving to the new agency and if they are simply getting rid of you for a reason that doesn't really bring out as a winner in the transaction.

Can we renegotiate..... Please no PM's shooting me if you look at the service the new agent is offering and the service is the same or better value for the fees then great. If you not getting the same level of communication guaranteed, access to staff with the same experience and resources or the proposition will now have changed(and not in your favour) then it may be time to have that reflected in your fees.while you need a great property manager if you are currently paying for all the extra value adds and the new property management team does not also provide these options as part of the service then I would be renegotiating - I am a big believer in paying for value.


While I am a property manager, I am also an investor. The reason they move your management on needs to be a win/win outcome that benefits you as much as the old agency. We would all like to find a situation that would work for as long as we need it but some times the other party is done first. Hopefully all works out

 

@Ricky Adelaide - all great points :thumbs up:

@kimba88 - no pm should be required to run 300 properties without assistance. Ie they need to have a 3 person team accounts bod doing the daily trust entries/adjustments, an administrator to handle documentation (rent reviews, letters, lodgements, releases etc) & pm to handle the technical aspects. A BDM would be out there sourcing new business. Anything less imho is unsatisfactory for a portfolio of that size.

I measure the space under management rather than number of properties as it's a different beast. It is nowhere near as impressive for me to say that I've managed 120 properties with only 7-8 tenants or 90 owners/75 agents than to say $1b of assets or 1,500,000 m2 (additional support included team leader and contract manager). So don't go for a 'hero' as you may be disappointed.

 

As a general rule a good PM should be able to manage less than 100 properties easily, 100-120 well, 125-150 would be capacity.

Anything over 150 it is very likely that service will drop.

There are a number of factors that will influence this, such as how demanding the properties are, how much experience the PM has, how good the screening process is.

If you look at 150 properties the PM will likely be doing in one year;

2-4 inspections (lets pick 3 or 450 inspections) - each inspection is 30 minutes (including travel) - 225 hours
450 inspection reports - 10 minutes/75 hours p.a.
150 lease/release agreements + screening & follow ups (2 hour each avg) - 300 hours
10% follow up late payments - 15 calls per week/780 p.a. - I am making up this number but sure a PM can provide greater insight. 5 minutes per call/60 hours a year
Of which 50% will require a follow up call/recall ~ 390 p.a. /30 hours p.a.
Of which lets say 1 requires notice to be served 1p.w/52p.a. - I am guessing this number is low. - 30 minutes each/26 hours p.a.
5% repairs/maintenance - 7.5calls per week/390 p.a. - again making up - 10 mins per call/65 hours.
Showing potential tenants through properties - 8 hours pw/416 hours

So far I have calculated 1,197 hours however a PM only works approx. 44 weeks p.a. (4 weeks annual leave, 2 weeks public holiday, 2 weeks sick). Which is 27.2 hours or about 3.5 working days (8 hour days).

I haven't included building their business, orgnaising private inspections, going to tribunal, advertising properties, future development/training, consulting landlords, doing CMAs, etc.

Using your 300 example the person would be doing nearly 2400 p.a or 54 hours a week or 6.8 working 8 hours a day and this isn't sustainable.

 

I wish it was that easy - we spend triple the time on our routine property inspections as a minimum, we spend at least an hour with the report write up and subsequent follow ups with maintenance matters raised; at least an hour with an Open Home (preparing the home, being onsite, noting matters to highlight to owners etc, watering grass if its a new build); not including meeting clients onsite to discuss small renos and value adds etc. More than 100 IPs per PM is a huge ask with a lot of back end support if the job is undertaken thoroughly from our experience. We can only speak from our own experience.

 

Good points raised - yes selling off part of a portfolio does make sense as one refines your business strategy and identifies what is costing the business too much and if some IPs are too far away to service them sufficiently well. Every business needs to undertake a review of the strategic plan every two years at least.

 

I really was making up a lot of these numbers out of my donkey, however it was really to demonstrate that getting up towards the 150 becomes increasingly more difficult to manage but over 150 it is really unmanageable for one PM.

 

I dont think it is legal to sign a document and not date it.

As already stated it is likely the opposite as a few hundred k have likely changed hands to acquire the rent roll.

 

I was talking to a friend who recently found out thier PM had 'outsourced' the inspections

PM now just goes on the reports and hadn't been to the property themeslves

 

What is better: paying your pm and finding out that they use more efficient ways of doing business or a pm who uses old systems, is inefficient and wants to charge more to introduce efficiencies?

 

From working in the industry I would seriously be concerned with the quality control of an agency doing outsourced inspections. There is a case that this may be acceptable but it is very unlikely that sufficient control measures are in place to insure that accountability stays in place. When you go to tribunal for tenancy issues your work/approach and documentation as a PM is the first thing to be questioned and outsourcing these types of day to day activities not only brings your practices into question and also hinders the lines of communication with all parties in my opinion and make consultation/mediation more unlikely. This is partially important when there is a tenancy issue as we all know how one sided tribunals can be - no need to give your tenants another edge.

By all means, outsource. Just dont outsource a key touch point that is so important!

 

Welcome to the Forum Ricky! How long have you been a member ?