Property management skills are complex undertakings involving many disciplines; financial, cashflow and time management. Creating and capitalising on opportunities, and organising people.
We like to think of Landlords, Letting Agents and Managers as Professional Housing Providers (PHPs). They play a very important role in keeping their tenants and residents happy in their homes.
Policies and Procedures.
Property management is running a business. Even if there is only one Tenant, it is still a business. The PHP must approach it in a business like manner. Ensuring that there are policies and procedures in place. These deal with any eventuality. These help to smoothly and effectively deal with problems as they occur without undue stress and delay.
Systematise your business. When letting property ensure that relevant records are kept so that they can be used to easily deal with queries and complaints. Consider using forms that conveniently record such information and a system that can retrieve the information.
Get complaints and requests from tenants in writing. Theses should be dated. Record the actions taken to deal with them, the date or time they were completed. These records would demonstrate how well you have dealt with complaints from tenants at arbitration and conciliation.
Co-ordinate information so that communication is consistent and reliable between the people running the business. Have a master list of properties available for rent, property details, rents, running costs and features of the properties. A list of prospective tenants and their requirements, contact details and progress of enquiry.
PHPs must not forget that in Property Management, they are dealing with people. The interaction and management of the different types of people the PHP will deal with requires different skills.
The successful PHP when dealing with Tenants must foremost portray the correct image. They must be seen to be good business persons who are fair and trustworthy. Policies and procedures help to treat Tenants fairly and consistently. This goes towards building a good reputation which is crucial to developing and maintaining a good business.
Tenant screening is essential to minimise bad debts, damage to property and occurrences of anti-social behaviour that take up valuable time dealing with such matters. Credit checks, employers’ and previous landlord references are particularly useful for such purposes. Be careful to observe the requirements of the Data Protection Act when requesting or providing such information on individuals. Once an unsuitable tenant is in residence, it can be a long and costly legal process to regain possession of the property.
The successful PHP also needs to have good marketing and sales skills. They have to identify the niches in the market. The next step is to weigh up the pros and cons in each niche. To calculate the risks and rewards attached to each venture. Just as importantly the PHP must know how to attract potential Tenants. They must be able to identify what clients require and the best way to package the room/flat/house. The PHP is required to be a good negotiator to obtain satisfactory agreements between Tenant, Landlord and property manager. This would require the PHP to take into account: the location; accommodation; the level of furnishings provided; terms and length of tenancy; types of advertising, frequency and cost; and prevailing market conditions.
Successful property management requires that the business complies with the applicable legal regulations. Appropriate Legal advice should always be sought. The following list (for England & Wales) is not necessarily a complete list:
Obtain detailed written quotations from reputable professionals or tradesmen (from recommendations or from recognised trade bodies). Ensure that they are suitably qualified to undertake the tasks required. It is the PHP’s responsibility to ensure that they are qualified, can undertake the work safely and have suitable insurances. Obtain references and see examples of their work.
Get at least three written quotes for comparison. Ensure the quotes meet the written requirements the PHP provided. Federation of Master Builders' Do's and Dont's of Working with Builders
Inspect the work done and ensure that the PHP is fully satisfied before making staged and full payments. Pay promptly, once the PHP is satisfied. Never pay for work up front and ensure receipts are received for all payments made. These receipts can be used as deductions for tax purposes.
Make estimates of expenses for an initial budget for cashflow management. The budgets should be adjusted regularly to be useful. Begin with the following list of estimates. It is not complete and could be used as an initial guide:
Percentage of rental income
5% for void period or when the property is not let
10% for managing agent’s fees
10% for repairs and maintenance
Mortgage Interest and repayment
Buildings and Content Insurances
Council Taxes and Water Rates in Void periods
Set aside a monthly amount to meet your estimate for the income tax payable on the investment income.
Investment is also about balancing the risks and rewards. PHPs need to reduce the likelihood of accidents. This can only be done by risk assessments and action taken to eliminate or minimise the risks. Insurance policies can be used to protect against the financial losses in accidents.
The PHP should consider the use of Employer’s Liability Insurance, Public Liability Insurance, Rent Guarantees, Buildings and Contents Insurances.
Ensure tenants are aware that their possessions are not covered by Landlords Insurances. They should take out their own policies to cover loss/damage to their property and landlords property.
As a real estate investor, the PHP should ensure the best use of their time. Is the time best spent on acquiring further investment properties or in micro-managing the properties they own? If the best use of their time is in acquiring further properties, they need to appoint someperson or organisation to undertake the management function, and the PHP supervise the managers.