While the entry barrier for property management companies is low, it is hard to find success in the industry. Companies that have folded in barely a few years have typically made the following mistakes, that you must avoid:
- Failure to maintain books
It is an imperative and fundamental rule that any company needs to keep their books properly to stay in business. An accountant should maintain books. Property managers aren’t accountants. They aren’t trained to do their own or their clients’ accounting. So when they do, the result is missing income, inaccurate expenses, overdue payments, inaccurate rent rolls and so on. The solution is to either get the proper accounting software and infrastructure and to then hire an in-house accounting team, or, better still, to outsource it to an accounting company for lower overall costs and all the benefits of gaining from skill, infrastructure and scalability.
- A tendency to overpay contractors
A property manager wants to be seen as a value-addition when being appraised by real estate investors. But they must also do this without hurting their own business. They can do this by staying up-to-date with the going rates for maintenance and repair, and the prices being offered by different contractors. Sometimes a rate may seem like a bargain till one finds out about another contractor offering the same quality for a substantially lower price. Or worse, paying less and compromising on quality only to have to repeat the job and pay more overall. Another strategy some property managers adopt is to vet contractors and then enter into exclusive agreements with them to secure lower prices.
- Avoiding technology instead of adapting
Many people are afraid of technology and integrating it with their businesses. Some don’t want to make the time for this fearing they will probably be wasting precious time getting acquainted with the new technology and familiar with the new processes. But for those who refuse to keep up with the changing world, they end up facing more headaches, wasting more time, and getting left behind in the industry race. Technology helps people communicate faster with you, makes some of the tasks of the job easier, and lets you carry on with things that really need your presence. For instance, having a 3D video viewing of a vacant property will save you and potential renters the hassle of fixing or re-scheduling property viewings. Using real estate accounting and property management software can help automate a lot of your routine tasks, keep you organised, allow you to share files electronically, and provide easy access and security of data.
- Being disorganised, lagging behind, and being impractical
You can’t be getting ready to renew leases in April because they expire only in May. You need to be planning much ahead. Referencing point 3, you need to have strict systems in place for all your processes – rent collection, tracking of ongoing, completed and due repairs/maintenance, or even just responding to service requests. It also makes sense to benefit from proximity of rental units. A complex or rental units located in one area or close to each other save you the obvious trouble of travelling up and down and across the city. This also means that you don’t need to find vendors in different locales for all the spread out units, and you don’t have to break your head on understanding the different marketing nuances of all the different areas.
- Not knowing the market when it changes and expanding when they aren’t ready
If a property manager is so busy weeding through quotidian tasks of the business they lose the pulse on the ever changing market and potentially lose on revenue, while also hurting the business. While this job involves a lot of ground work, in order to keep abreast of change and opportunities, it is imperative to have one’s ear the ground. This way one also knows when to expand. Many expand when they aren’t ready. Either the business climate is frigid, or they haven’t prepared themselves for an expansion – i.e. planning to manage the sudden influx of units, reviewing the staff’s capability, training the team and hiring new members, putting new systems into place, and again, using technology to aid in the expansion while taking off some of the load.
If you look at these points, you will notice how a combination of these patterns can knock your business at the knees. But as we have pointed out, a little shaking-up can take care of the problem.