Too many property managers, it would seem, will sign up any new property as long as it has a ‘roof and a front door’. Sure, they might also say it needs to be in reasonable condition, but that’s about it!

Guest post – Inspired Growth Training

When 20% of rental properties cause 80% of the stress and grief, we need to adopt criteria to be used when signing up new business.
The facts are staggering and cannot be ignored: Property managers are not lasting more than 1-2 years (on average) on the job, and most cite stress and burnout as the reason when they resign.
With this knowledge, surely having criteria of what you will NOT manage makes good sense.

Here are 11 property types that should be avoided:

  1. The low-rent property

    How low do rental values go in your marketplace before you start getting into that ‘low-end’ type property that attracts a low-grade tenant and is likely to give you grief and headaches?
    When rent is a third less than a better type of property, your total fee income for that property will be likely to be a third less too and often represents more work than a quality property.
    More work and less income! It doesn’t make good business sense!
  2. The low-fee property

    When you’ve discounted your management fee by 1-2% and/or the leasing fee, you may have actually thrown away your profit margin for that property too.
    If the average profit margin is around 20% it doesn’t take too much discounting to eliminate the main incentive for managing it in the first place!
  3. The low-grade property

    Taking on property that is not in a reasonable or better condition simply shouldn’t be an option in modern property management. Tenants are far more aware of their rights than ever before and they know if they pay 100% rent they expect a property to comply 100% and be in a good state or repair – not to mention the risk and liability issues that poor quality housing represents!
    Low-grade properties also say something about the type of owner/investor. If they won’t renovate or repair it. Avoid it!
  4. The low-socio property

    When teaching in the USA I leave this one out due to discrimination laws and concerns, but here in Australia, it’s an issue we can legally discuss. Low-socio areas give us low rents and low-grade tenants who in turn are less likely to want to pay the low rent!
    What results is less income, more work and more stress per property on average. This is a big factor that can burn staff out and make the job quite unpleasant. Properties in these areas should just be avoided. If you have a property and the only tenants who would want to reside there are ‘the best of a bad bunch’ then you shouldn’t manage it!
  5. The long-distance property

    When a property is too far from the office and you manage too many of them, you start to feel pressure as office tasks fall behind and pile up due to your time on the road – mostly sitting in your car.
    I remember being involved in an office where properties were spread over the Adelaide metro area. They should have been able to manage those property numbers with no problems but the property manager was burnt out and always short of time even with a full-time assistant.
    When a time and motion study was done (with their full cooperation) we found that 26% of their time in a typical week was spent sitting in a car. It was clearly dead time, restricting them from being able to manage a full portfolio properly!
    No more than a 30-minute drive from the office is what I recommend – maximum! Yes, you do sometimes need to take on a property with a multi-property owner that might be long distance but keep this type of property to an absolute minimum for good, profitable business reasons.
  6. The C-class property

    This type of property is typically owned by a ‘c-class’ landlord who is difficult and demanding. As a direct result, the property is in a less than desirable state of repair and usually attracts low rent.
    On top of that, the owner client insists on paying lower fees. Low quality and high stress all around. It should be avoided! The property reflects the mindset of the owner. Not too hard to guess when you look at the factors.
  7. The default landlord property

    The owner of a property has just been told by his boss that he’s being transferred away from the area and now he needs to rent out his family home, and he’s stressed out about it!
    Naturally, not all owners who fall into this category are an issue, but when you meet the owner at the listing presentation and they seem unreasonable regarding the definition of ‘fair, wear and tear’, and have a long list of unusual requests for the tenant to abide by, pay attention!
    The issue isn’t so much what happens during the tenancy but more what happens when a highly strung owner moves back into the property later on. With their emotional attachment and photographic memory, they can cause a lot of trouble and stress for everyone concerned after the final inspection with the outgoing tenant.
    If they should not be the owner of a rental property as they don’t have the right expectations then you should not be assisting them!
  8. The wrong type of property

    There are certain types of property that simply have a high chance of attracting the wrong type of tenant. It can be a multi-storey block of flats or former government housing that can only typically attract a low-grade tenant. These typically also fit into the low rent property category anyway and are therefore low income generating.
    If the property type is likely to get you the wrong type of tenant, it should be avoided.
  9. The furnished property

    I call this one the ‘F-word!’ When we’re dealing with typical suburban residential property, the type of tenants that we want will have their own furniture so we are limiting our tenant reach by having furniture in the property.
    Aside from the issues that come with lost, soiled and damaged furniture, the human nature rule is that people are not as likely to look after someone else’s stuff as if it was their own.
    Just avoid managing furnished properties! (unless that’s the niche type property you deal with like executive short-term, holiday letting or student housing etc).
  10. The eviction property

    I’ve learned this one from too many years on the job. When a self-managing owner has got themselves into trouble with a tenant that needs evicting, taking on the management to do the dirty work of the eviction process for them just to obtain the new management isn’t such a good idea!
    Stress and problems can be the result and when the tenant doesn’t pay up and ‘shoot through’ it can be financially a bad business decision. Sometimes they work out, more often than not they don’t!
  11. The leasing-only property

    Not everyone will like my opinion on this one! When a self-managing owner only hires you to find a tenant for them, it isn’t so much of an issue – until things go bad!
    For example, if a tenant is a few days behind in rent as an agent you’ll take action. The self-managing owner may not act for weeks and therefore has a higher eviction chance with that tenant.
    When the tenant gets evicted the owner thinks that not only has he got a bad tenant but also a bad agent that gave him that tenant. Therefore your reputation can take a hit due to bad word of mouth. We cannot afford to be creating business that causes burnout and undue stress for property managers.
    If PM turnover and disillusionment is to stop, we must address the issues that are causing it. Having a property listing criteria minimum standard goes a long way towards that. Your people and rent roll are worth it!

1 COMMENT

  1. One Principal I had in a previous life time as a Snr PM also forced me to sign up something that had no front door…entry was only possible through a shared, delipidated single garage roller door that would only be operational if you were 7 feet tall … he could see no tenancy issues with that! argh Those were the old days, thank goodness.

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