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How do you validate your property managers appraisals - Believe it or not

Discussion in 'Property Management' started by Ricky Adelaide, 1st Aug, 2016.

  1. Ricky Adelaide

    Ricky Adelaide PM in Adelaide -Elizabeth Salisbury Modbury Business Member

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    There are so many very experienced and hands on investors on this forum. Many of us appear to want to control the ship and use a pm as someone to action series of tasks on our behalf opposed to having a set and forget mentality. From personal experience both talking to other investors and property managers, I have seen and heard of many cases of investors both proving their property managers right and wrong about how much their property should be rented out for.

    I would love to hear about peoples' wins and loses in this area and what the take away was from how you could have validated the higher rent better before the loss( being vacant too long) happened or how you knew their was money on the table your property manager didn't know.

    DISCUSS!!!:D
     
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  2. Marg4000

    Marg4000 Well-Known Member

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    Simply look up similar properties in the area available for rent and check how yours compares price wise.
    Marg
     
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  3. Xenia

    Xenia Adelaide Property Manager Business Member

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    Here's my experience with this Ricky from a PM view point, I hope you don't mind.
    Once you provide a comparative rental analysis to a landlord, 99% of the time they accept the PM's opinion for the suggested rent increase.

    We also consider outstanding maintenance etc to determine whether an increase is warranted. If there are serious maintenance issues and the landlord is refusing action - it does happen, then we do not suggest an increase or suggest a smaller one. The reason is that the chances of a tenant vacating are higher and vacancy rates can cost more than not increasing the rent.

    Therefore Risk is assessed individually for each property before approaching the landlord.

    I personally have not been challenged on rent increases but have been challenged by landlords on not increasing the rent - this is more common as landlords sometimes have a perception that a good tenant and up to date market rent are mutually exclusive.

    Ie -I dont want to put the rent up, they are good tenants and pay rent on time....

    A property managers job is also to educate landlords on the false premise of the above statement.
     
  4. MTR

    MTR Well-Known Member Premium Member

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    excellent and smart landlords have smart PMs that simple cos they know what you know:)
     
  5. Ricky Adelaide

    Ricky Adelaide PM in Adelaide -Elizabeth Salisbury Modbury Business Member

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    Your approach to lease renewals is spot and is pretty much the same general approach i would take with the same situation.

    I may have phased myself a little loosely before but I was more looking at a appraisal of a property that is vacant and lets assume you and I said the numbers suggested (lets say) $350pw rent, the owner says nope... $420 is the go, they get the owners price and the PM is like that makes no sense.

    How did the owner come to that or a similar conclusion despite the immediate numbers saying this makes no sense. I normally see it when the property is very different to what you normally see in an area but there is also so many different opinions on rent returns - simple invite 5 agents to give you an appraisal and you see mountains of difference between the highest and lowest numbers despite all having the same tool one assumes.

    We all know there is a formula that gives us consistent results(Consistency is Key), but it would be great to hear about some of those weird situations where you got a prefect storm for some reason- or possibly thought you did for seemed like good reasons but didn't.

    You know the kinds of stories that give property the investing bug for the first time.
     
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  6. HUGH72

    HUGH72 Well-Known Member

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    I have a place in regional Qld where the rental market is weak currently. The house is shortly becoming vacant. The pm is recommending a $35 per week drop in rent.
    I looked at the rental comparison report but it looks like her figure is based on comparable 3 bedroom houses, ours is 5 bedrooms.
    Frustrating....
     
  7. Ricky Adelaide

    Ricky Adelaide PM in Adelaide -Elizabeth Salisbury Modbury Business Member

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    So are you going to go to market at your current price and see how you go, or are you going to move forward with the PM's recommendation - very frustrating when you are looking down a huge price drop, or long vacancy.

    Personally I am of the thought the person who will pay way over the fair market rate isn't someone you want more often than not, so best not to be unrealistic. But if there isn't a lot of 5 bedroom places and you get that family who "needs" the room they would likely snap it up and rent it if it fits their life style - in that case, the extra $35 could seem a bargain!
     
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  8. HUGH72

    HUGH72 Well-Known Member

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    I am going to ask to drop the advertised rent by $15 per week and will see how it goes for a few weeks, I accept the market has changed but the assessment wasn't based on valid compareable properties IMO. I was happy to be shown otherwise but this wasn't provided.

    The PM works for one of the big agencies and I tend to think that she is overloaded with too many properties under management to be able to do the job well unfortunately.
     
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  9. D.T.

    D.T. Adelaide Property Manager Business Member

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    What town Hugh?
     
  10. Big Will

    Big Will Well-Known Member

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    I look at the PM comparable rentals, then I do my own DD from it and looking myself through the net.

    If I agree with PM (which is likely as it this is their job and why am i paying them) then we advertise otherwise discuss with them before going to market. If i still think my higher price is correct try for a week but if no one comes through or 1 person comes through and no offer then we need to assess the price.

    For me it isn't about getting the most amount of money per week it is about getting the most amount p.a.
     
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  11. HUGH72

    HUGH72 Well-Known Member

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    Rocky.
     
  12. D.T.

    D.T. Adelaide Property Manager Business Member

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    This is a pretty good strategy, try for a week and see how many bites you get. Did this recently and managed to rent a 290pw property at 305pw.

    Yup, highest rent and optimal rent are 2 different things.
     
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  13. Ricky Adelaide

    Ricky Adelaide PM in Adelaide -Elizabeth Salisbury Modbury Business Member

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    Its a big picture game that is for sure.

    If you have a vacant property testing the market is more of a gamble as you don't have rent coming in while you try the higher amount but is a really good way to see if you can a little extra when you have a longer lead in time like if the owners are moving out and are flexible on time frames or if you have a tenant leaving- just have to be careful in this case around possibly being under fire for mitigating loses.
     
  14. Stimpy

    Stimpy Member

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    Being a BDM I come across this alot. An owner always has an opinion on how much their property is worth, how much they need, and what they would like. Most of the time it is way above market value at that time. Some compare to what the property was getting 12 months ago, some listen to what their mothers cousin sisters aunt is getting in a totally different state.

    Personally I use comparable rentals that have leased from the last 3 months ( rarely use what is on realestate websites currently as again, that isnt accurate) and I also conduct some of showings so I can get a real time analysis of what exactly potential tenants are saying and wanting. This information is invaluable for providing accurate market conditions to back up your assessment of what a property is worth and to provide an owner with as much information as needed to make informed decisions.

    But I am also happy to try to achieve what a landlord wants, even if it is unrealistic on the proviso we assess what has happened over the last 3 inspections (which is about 7-10 days) and adjust accordingly if required. You dont actually know until you go to market and get people through the property so you are able to assess feedback... its all best guess until then.

    I am also happy to say I have been proven wrong on occasions. The right tenant that was willing to pay was there at the time and a higher result was achieved.
     
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  15. PorkBellyLover

    PorkBellyLover Active Member

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    Hi Stimpy,

    Which website do you use as your reference? Do you use Domain?
     
  16. Stimpy

    Stimpy Member

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    Domain, realestate.com, the usual suspects. I actually monitor this on a daily basis so I can see what property has leased, what hasnt, what has adjusted etc. My issue is that if a property is going to lease for the advertised price it wouldnt be on there. (chicken and egg anyone?) This is why historical data is more important and accurate when advising owners compared to what is currently available (dont forget we are all chasing the highest price and current adverts can reflect this). Once we are live I do use it to monitor where we sit in the market though, are we over priced/underpriced/just right etc. Its only a small part of a bigger picture but then tenant feedback is the most important once live.

    For historical information I use a combination of RPdata stats and my own experience and data of the area. I have been here for nearly 7 years now so I like to think I know my market area. :D

    ( hint - Potential tenants are over granny flats in back yards! ;) )
     
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  17. Stimpy

    Stimpy Member

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    My most notable was a few years ago when rental increases were really starting to climb. Our sales guys sold a property and we had a nice, realistic purchaser in terms of rental values. As I was aware of what the market was doing at the time in that area I asked permission to try a rental price that just made no sense whilst the property was in cooling off, just to see what happened. The vendor was happy as the purchaser agreed to cover the costs if a tenant was found prior to settlement etc etc.

    It was a well presented home, nothing flash but the market was very competitive and I put it on at $80pw OVER market conditions at that time.... I rented it in 12 days! Those tenants are still in that property today.
     
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  18. D.T.

    D.T. Adelaide Property Manager Business Member

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    Yup some owners expectations are over, but some owners expectations are under as well. As a PM we're their trusted advisor and its up to us to educate them on where the market is at and use evidence to explain this where necessary.

    Evidence can involve recently rented properties (days it took is useful as well), currently on the market properties, but also stats from your system on how many people have attended opens in the area recently.
     
  19. Ricky Adelaide

    Ricky Adelaide PM in Adelaide -Elizabeth Salisbury Modbury Business Member

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    This is exactly the kinds of smart thinking stories I wanted to hear about! has some good merit to trying it and even if it didn't pane out there was a good plan B (get the normal going rent without a downside)
     
  20. Colin Rice

    Colin Rice Mortgage Broker Australia Wide Business Member

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    Mother in law rented an IP 12 months ago in Perth when prices where dropping.

    PM said $420/week and MIL said $450. Got $450 within a week in a depressed rental market and they recently renewed for another 12 months at same price.

    The property is unique as it is elevated, overlooks a nice park and main living area and outdoor area are front facing hence getting premium rent in a depressed market. If you select the right location with a clever and unique design you will do well in any market IMO.

    I take the credit as I did the original development including design selection :D
     
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