Thank you to our final episode sponsor:
PropertySafe, provider of inspection and reporting systems that will address the current risks and issues associated with personal injury at and around homes. For more info, visit propertysafe.com.au
Coach:
Phil Oakes
Coaching Transcript:
I’ve said this so many times and it’s so true. Of all the industries I’ve worked in, the property management industry has got to be one of the toughest. It’s really for the property managers, it’s such a tough job, because there’s so much going on. There’s so many to answer to.
When you look at this simple example here, you’re a salesperson, you’re an educator, and inspector, a debt collector, a counsellor. You really are. Financial planner, dispute manager, building expert, legal advisor, idea expert, time-management genius, and confidant. That’s just some, you probably can think of another ten on top of that.
That’s really what it is. There’s so many hats, when you look at it, you’ve got all these hats to wear, there’s so many stakeholders to deal with and appease. My goodness, I’ve watched in our system some of the responses back from landlords to PM’s and tenants back to PM’s. Talk about a thankless job. If you were doing all those things perfectly, you’re just doing your job. Every day, it’s a really tough thing.
Innovation in what you’re doing is so crucial to make that easier and actually reap better results. What we’re going to get to in a sec, is we’re gonna show how that translates into massive personal benefits, but fantastic financial benefits for the agency as well. There’s so much competition.
Compliance is the next one that you’ve got. In addition to all those things you did previously, now there are new compliance rules. Now then, as we’re gonna touch on here, there’s the issue that we’ve got the claims in this industry, legal claims are going through the roof.
1 in 2,000, a decade ago, 1 in 9 agencies getting claims now. Really interesting stuff. I was in the States for four weeks. Two weeks ago, I would swear that at least 50% of the ads on TV are about personal injury claims, no win, no fee lawyers. They’re now starting to mention rental properties. Have you been hurt in a rental property? That’s the start of the matter that was in Florida, it was starting to come through. That’s just a really challenging thing from that.
These additional things coming on you, you’re not a builder, you can’t really look after those things, so how do you get around some of those journeys?
Challenge the status quo, we’re going to get to that one in a sec, because that’s a massive one we’re going through. Look for not only the ‘Big Bang’ opportunities, but the 1%ers. John Knight was talking about this, the 1%ers can make a big difference as well. Find these little things and you’re gonna see, when we talk about it in a sec, maintenance is your biggest cost point in a property management agency.
Any efficiency gains you get there reaps you gold. You can do these things very quickly. Any change is in the right direction, don’t put your toe in the water, and just test it. Commit to the process, commit to what you’re going through.
Service providers. Let me just touch on that very quickly, because I’d like to get down to these financials in a sec. Service providers, they’ve got a duty to provide time-saving flexible products. They’ve got to be able to suit your business, you should have to modify your business to suit them, so that’s very important as service providers we do that.
Let’s talk maintenance. This is the big impact. As we’ve said before, area of massive potential gains and losses in an agency. A normal property manager will say that maintenance will take up somewhere between 35-45% and 50% of their time. In general, it’s the least enjoyable, least rewarding portion of their job, the general consensus that I come across. On the risk side, that’s the realities of the job. Wages, again, are the biggest portion of this. You look at those numbers going in there and they’re taking up nearly half your time of your wages expense is being spent on maintenance. So what can we do about that?
Risk. 65% of all claims that are coming, these fast-growing claims, are coming from items already known about in the agency. It’s not brand new things being brought up, they’re already items that you’re aware of and haven’t addressed particularly well.
In addition, the courts have established that agents are also responsible for issues that they should’ve known about – Wu vs. Carter. Even if you don’t know about it, the courts will deem that you should’ve known about it. So you need to be aware of it, so look at the facts, you can’t sort of head in the sand thing, you cannot ignore it, but let’s try to deal with that.
It’s really the only area in the PM business that touches all stakeholders. It’s the only one that touches the landlord, the tenant, the trades, the PM, and even strata is involved. It’s the area that cross-spans all your business. That’s why it’s so important. We’ve got a professional level to go through as well. So you need to make sure, are we sending out the same message, are we dealing with the same way, are we doing those things? Also, we know that compliance is growing dramatically in this area, so we need to address those things.
Generally, our experience will be that maintenance is probably the least efficient and most risky area in an agency, and that’s the area that you can make the biggest gains from, from what we can look at. Our findings, massive efficiency opportunities exist, wage is the biggest cost so efficiencies can be your biggest lever. Risk can be reduced and personal satisfaction.
Let’s go to the numbers. I’m gonna follow-up what John Knight did here, to give some idea of some figures looking through. If we use some of the figures that he gave, we assume, say five property managers, we assume average weekly rent of $485, which is the average provided by CoreLogic over the major cities as of February this year. We took a gross comms of 7.5%, and we assume that the average PM has about 2,000 hours a week, so that’s about 40 hours times 50, assuming 2,000.
If an agency said they spent 40% of their time on maintenance, that breaks down to about 20 hours totally spent on each property per year, and 12 of those hours are spent doing general maintenance. Being, maybe the inspection, trying to find new tenants, lease changes over, those various other things, answering their questions, trying to get rental increases. But paid hours is spent doing maintenance.
We’re assuming there’s 100 properties, and we’re saying the income potential for that agency’s about $945,000 of income. If we go through, and if we can get the time on maintenance down to 20%, and we’ve worked with a lot offices where we’ve got that down to well under 20%, so just use 20% as a benchmark.
We can show that the hours spent on maintenance will drop down to 4 hours per property and in the final show, that for the agency, just by dealing with that, we’re not getting rid of any staff, we’re not changing anything, the income difference is by getting on new properties, because we’re using the same analogy that John used, where you’ve got the tap, you can adjust it between whether you want to do savings or whether you want to put it into growth – 236,000 of gross revenue increase per year is feasible from that. Just by that change.
If you want to look at it on a broader perspective and you start from 45%, and go the way down to 25%, you can see, and then you the potential value on top of that, you’re an agency that’s running there at 45%, which is what I’ll be reading an example about in a sec, 45% of the time spent on maintenance, and that ought would allow to increase the value of that rental up by upwards of over $866,000. Massive differences in what we’re doing then.
There’s other benefits that flow through. Just talking to that for a second. We’ve got an agency that we work very closely with in Melbourne, they’re nearly 4,000 properties. They have 26 property managers, and they said estimated themselves are running about 45% of the time doing maintenance. We went down there, we’ve worked with them, we’ve changed things around.
They have now one person doing the maintenance for that whole office. They have one assistant that helps him part-time, but one person doing it, and all the property managers are loving it because they’re now spending time out doing the things they enjoy. Their own personal motivation level has now gone up. They’ve not shed staff, but they’re trying to grow and using this, so instead of having virtually 12 people full-time doing maintenance, they’ve got that down to 1, by just using really good systems, and doing tricks I’ll show you about in a sec.
One of the key areas I want to talk about is trades. One of the thing that we’ve seen is that when we brought offices across, they might have had for, say, a 300 property office, they might have brought across hundreds of trades. For an office that size, they really only need 50 trades at best, but I’ve seen offices where they’ve got 5 property managers, and every one of those property managers have their own trades. They don’t consolidate those trades, so they’re not talking, they’re not using any efficiencies through that. The argument is, “Well, I like John, and Sally likes Pete, and so I’ll just let them do their own stuff.”
Imagine if a landlord came to you and said, “I’ve got four properties I’m gonna give you, but when you got those four properties, you’ll deal with me on the first one, my wife on the second one, my son on the third one, and my daughter on the fourth one.” It’s a nightmare, because you’re now dealing with all these other people. If I just spoke to one person you could make this consolidated. Same with trades.
Consolidate your trades, deal with that person, your importance to that trade goes dramatically up, so your service levels should go dramatically up. You’ve got more buying power now.
Dashboards, dashboards are crucial these days to make sure you increase your transparency. Dashboards in any good system should be able to show you all your trades, show you how quickly they respond, how much you spend with them.
KPIs, as should be understood that they’re for benchmarking, but also there to help you grow, there to help you identify with your staff where they need additional training, where they need the support. It’s not to try to make them look bad or anything like that. It’s just trying to say, hey, let’s identify where they can up skill, and our types of KPIs, we try to build them in so they’re self-leading, so you can see where you are, and then it tells you want you need to do to make it better.
For example, very quickly there we’ve got a dashboard of ourselves up there, and it’s just showing the key elements, what we believe the key points in the business to look at, so you can see it in a glance, you know where your dangers are, you know where your risk levels are, you know what you got to do, and then it’s got metrics at the top. You got a green smiley face, you’re doing great, and if you don’t you click on some metrics on the right, and it will tell you address these ones quickly. You can address your key ones to get yourself back into a positive situation.
Very simply done, and once you’ve gone through that learning period, people just love this stuff, and it’s the way the are driving, they’re driving by exception, they’re driving by control, and knowing what they’re doing. The same thing with you bringing management reports back to the management team, so they can see it, so they can understand what’s going on in the business, how that goes on compared to other businesses, and what they need to again, help their staff improve, and help their bottom line.
Last little things here is efficiencies. Any system should give you an automated trial to protect you and the agency to show you exactly what’s going on. Everything from the first bit of communication through to the final job going through, and this gives you the opportunity again to tailor your workload to the personalities of the team. You can really go through that.
The other area we get to, obviously, is the risk. As what we’re talking about before. The claims that come through and the risk, and how we address that. It’s a massive growing area, and you can’t hide from it. You’ve got to accept that you can’t control everything right now, but control what you can, and what we recommend and what most of the large training groups recommend is just outsource your hazard identification. Don’t try to do it. You can do this now in a way that, things have changed over the time frame when we’ve started, to what we’re doing now, for example.
You can actually go there and say, “if you do this, you should be able to get a higher rent level,” and it goes back again to what John Knight was showing. Rent levels is one area to increase, it’s like the 1%ers. If you’re increasing someone’s rent by saying, “spend $200 getting this inspection here, we might be able to get you another $5 for your future rent,” or “we’ll have to drop your rent by this much, but $5 of that we’ll save because you’ve been doing this,” could actually be a good news message to the landlords going through.
It also helps you with one of the other areas they talked about, which is cleansing your rent roll. It’s a good time to think about that at the same time, because, again, is there any value in trying to work with rent rolls whereby you’ve got people that will take up all of your time, and you know they’re a nightmare, and that sort of thing.
The bottom line with all this is that a risk-mitigated rent roll, without any doubt, increases the value of that rent roll.
Anyone that’s buying something is looking for something that’s risk mitigated, and how to achieve that. If I’m looking for something else, I’ll look for whatever the investment is, it to be risk mitigated, and that’s the goal for them.
