Property Managers have never really been taught how to deal with bad business as too many business owners believe that all business is good business. This is very far from the truth as 20% of your properties burn 80% of your time.
With that in mind, the next seven tips will help you to sort the good from the bad.
#1 – Identify c-class owners.
Bad owners often have bad properties that usually attract bad tenants. Bad all around! This will burn your time. So, identify owners on your rent roll who are; over-demanding and unreasonable, take up too much of your time, have low fees and want unreasonable rents and who won’t put any money into the property for repairs or upkeep. If they also have a low rent property (lower than your average) you need to flag them as ‘bad business’.
#2 – Do a time analysis on the property.
The average rental property with a tenant moving in and out in a 12 month period, with all tenant, property activity and drive time is around 20 hours a year. A property owned by a c-class owner could easily use up another 10 or more hours in the same period. How much time are you spending on each property and why?
#3 – Work out income per property.
You may have worked out that your average income per property is $2000 per year but what is the average income just for those properties owned by a difficult landlord? With all the factors outlined in the first tip in this category, you might find that a c-class owner, with all the extra time and issues that you have to face, is actually causing you to earn much less. So you might be earning 25-33% less than average property. It might be $1500 per year and this is bringing your average income overall down too.
#4 – Work out how much your company is earning per hour.
So an average property as outlined above might be earning $100 per hour. With a c-class owner, this could be $60 or less per hour! You’re working at a rate a bit better than the cleaner or lawnmower man! Do your stats and work it out! With all the stress and grief and amount of time wasted with this type of owner and property – this exercise will give you a new perspective on the value of these clients to the business.
#5 – Get permission to review/remove the business.
Why do you need to keep them? It’s possible that your reasons are just NOT good enough. The boss might say ‘they might want to sell one day’. My response to that is; if they are a bad owner now, they’ll be a bad seller too – wanting to haggle commissions and ask an unreasonable sale price. Get the boss’s agreement on the owners that should be reviewed and removed.
#6 – Create a ‘Worst First’ List of your Ten Worst Properties.
So who are your ten worst offending owners and properties? Create a list, get your bosses approval and stick the list up somewhere (not in public view). Now for every two or three quality new properties, remove one offending property – ‘worst first’ and work through the list. A very motivating exercise indeed!
#7 – Grade your tenants
Grade your tenants who: A. Pay rent on time – inspections great – no issues, B. Are a bit tardy with rent from time to time – inspections OK – odd issue, C. General rent arrears issues but can keep on top of – inspections are OK – some issues, D. All bad. You don’t want Ds – they need to go or be improved to Cs. Work on getting a C tenant to a B. If a C won’t change, then remove them at lease end. You ideally want only As and Bs.