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You've finally decided to give yourself a break and let an expert take over and manage your property. Now you have more time on your hands and less to worry about. But what exactly should you expect from your property manager (PM) and how can you tell if you're getting the best deal?
First, let's define the term. In its broadest meaning, property management is the operation, control and oversight of residential, commercial and industrial real estate, in which a PM acts on behalf of an owner to enhance the value and yield of the property. In an ideal scenario, your PM should be able to maximise the financial potential of your property assets by providing regular maintenance at the lowest costs, securing the best possible rental or sale price, and taking care of all administrative tasks. For rental property, a competent PM will ensure shorter vacancy cycles and better tenant retention.
How well a PM performs is what makes the difference to the end of result, which we can measure by indicators such as the net yield, internal rate of return and cash-on-cash return.
Generally, a PM manages all aspects of income and expense for the investor, be it a residential unit, holiday home, retail space or warehouse. On the income side, a PM works closely with real estate agents and brokers to guarantee maximum occupancy rate of the leasable area at market levels, and then collect rents and other charges as per the leasing contract.
If your property is on sale, then your PM will conduct wide-ranging research to determine the best possible sales price and buyer. The value of this comprehensive service lies in your PM's knowledge of the market as well as access to data on recently sold or leased property and valuation tools. After all, if the price you're asking for is too high, you will be stuck waiting, and if it's too low, you're losing money.
Similarly, an experienced PM has written hundreds of adverts and understands what to say and where to advertise to attract a larger pool of candidates in a shorter period of time.
Tenant retention is crucial because high turnover more expenses on intensive cleaning, changing locks, repainting walls and, sometimes, new carpets or small repairs, besides additional effort on marketing and settling in a new tenant. This can be avoided by making sure the tenant is well taken care of and content.
Managing the tenant mix is equally important. A wrong tenant mix can destroy your property, whereas careful selection can keep it in top condition and save you the unwanted hassle. This is imperative if you are planning to sell your property in the near future.
Good maintenance keeps tenants happy and helps you secure a better sales price, but it also preserves the value of your investment in the long run.
A reputed PM can give you access to a network of licensed and trusted contractors, vendors and suppliers, who have been appraised for quality and pricing. This can translate into considerable savings compared with going through directories and hiring a handyman yourself.
Preventative maintenance, including routine cleaning and pest control, is one of the key responsibilities of a PM. This typically involves putting a system in place to deal with repair issues before they grow into bigger problems.
It also involves snagging and inspecting the property, whether it is for handover or moving out. Such an exercise protects the interests of the owner and ensures the property is safe, particularly when it concerns waterproofing, electrical and fire systems. A PM will thus arrange for a snagging company to visit your property once a year and provide an annual condition report.
Things don't always go as planned, of course, and sometimes problems go out of hand. When that happens, your PM should step in and deal with emergencies.
In the oversight of expenditures, the value of reliability, transparency and responsiveness come to light. For instance, you should never get a maintenance bill that exceeds the agreed budget, or for repairs without your prior approval. Like any rerelationship, trust is essential. Without it, many things could go wrong.
Moreover, a professional PM will provide you with feedback on upgrades and modifications, while explaining how such changes will affect the rent you can charge. A PM can also advise you on design improvements, recommend furnishing or make suggestions to increase the value of your property.
Finally, you can save time on administrative duties — from Ejari registration, tenancy agreements and sales contracts, to making multiple trips to the bank and the Real Estate Regulatory Authority.
There are clearly many compelling advantages to hiring a professional PM, but most importantly, it takes away the burden of managing day-to-day issues. The result: less stress and more freedom to do other things. Indeed, peace of mind is the ultimate asset when you have a property manager.
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Source: Niraj Masand, Special to Property Weekly
The author is Director of Banke International Properties