Continuing on from Part One, we reveal the next five common mistakes we see principals making across the country. Be sure you have read Part One in our last issue, before reading this article.
6. Not learning property management – as most principals have a sales background and they have never really applied themselves to understand their property managers. Many of the issues they face are simply foreign to them! However successful principals (though only initially learning sales) applied themselves to learning and understanding property management either first hand (they did the position for a while themselves to’ learn the ropes’) or second hand by spending a lot of time with their people working on the front line.
I know of several principals who left the comfort of their ‘selling principal’ roles for a time and became a property manager (mostly for just weeks or a few months), and came out at the end much richer for their experience and able to drive their departments so much more effectively now that they understand better the dynamics of property management.
7. No accountability – I have been in departments where the property manager ‘rules supreme’ without any accountability to the principal. I know of many principals that have a simple strategy of ‘set and forget’ and ‘out of mind out of sight’. I know of principals that paid their property manager a lot of money so that they don’t have to know about any problems whatsoever. If the property manager did come to them the response was ‘I don’t want to know about it!’
The results are quite scary where accountability is lacking and untold negligence occurs in day to day practices leaving a trail of destruction for others to clean up, usually after the property manager resigns! However we have also seen some property managers commit fraud with trust account monies and the pattern was the same in just about all cases, is a lack of accountability!
8. No systems – property management is generally an intense role with lots happening in any given minute. With so much happening it is easy to miss one or two steps in a process that needs to be completed thoroughly. The result is a problem or issue ‘blowing up’ later, causing 2-3 times more effort and time to fix it, as well as emotional stress and possible company finances to rectify.
However when a person follows a checklist, this, in fact, guarantees the process will be done right the first time! Further, it takes only days to train a new person to a written step by step process but it takes weeks and months to train a new person without such a process- if they survive!
Though it takes an investment of time and dollars to invest in procedures and policies, it is very worthwhile when this foundation is laid!
9. Get Business at all cost! – Many principals seem just to focus on getting as many properties on board as they can without taking into consideration the factors that drive profitability. Factors like what the yearly minimum total fee income and minimum management fee, the distance to drive from the office and what the minimum rent is before you say ‘no’!
The result is a rental department that becomes generally unprofitable and problematic because 10-20% of properties are of poorer quality, in bad areas attracting more difficult tenants and creating an ‘erosion factor’ that works against your people and can burn them out! The Pareto Principle that 20% of your properties accounts for 80% of the work is true in this case.
10. Discounting – lastly, discounting seems to be a very prevalent mistake we see happening in property management. Yes, many principals we see with a ‘property numbers only’ mindset are directly encouraging crazy levels of discounting resulting in properties either being managed at just above cost, at cost or even below the cost to manage. In a lot of cases dropping your management fee by 1- 2% can completely eliminate the profit margin for that management, however, celebration still occurring for bringing in ‘another management!’ by the property manager concerned.
However, we see also because principals do not generally provide any training on how to overcome common fee objections and in fact, provide no listing presentation training (like sales people get all the time!) then the property manager knows nothing else except to discount! The focus must be on not just getting business, but also winning profitable business!
What focus will do for you
In closing, there is a simplified remedy for all of these issues, and that is whatever you oversee, it needs focus, nourishment and energy to drive it! I promise you will be well rewarded when you drive your property management business forward and you will realise how profitable and rewarding property management can be.
I remember a principal telling me once that the day she started focussing so much more on her property management department is the day the growth rapidly increased to become the dominant force in her marketplace.
All the best!