Property Managers can play a vital role in establishing the maximum ROI for your property, in a unique and unexpected way.
Your property manager could essentially be doing everything right in marketing vacancies, servicing tenants and working with vendors, while managing staff – but if they act as a mere “agent” and not as a partner, then it’s safe to assume that opportunities are being missed in maximizing your ROI.
Property Managers to Avoid
Property managers serve two important and often competing interests – the owners and tenants of a property. There are many reasons why both can become dissatisfied with their property manager(s), but there are at least two prominent types you should avoid.
1. The Opportunist Property Manager
The Opportunist Property Manager will focus on always providing you with a favorable proforma, even if your property is non-performing. They will make it their mission to impress you, fabricate scenarios at the expense of others and lead you to believe that they are doing a miraculous job when they’re not.
Although it’s essential to have a property manager who can keep an eye on the bottom line, making it their priority can cause an undesirable ripple effect to occur for your property.
Property managers that are purely focused on providing a favorable ROI to you, without making the effort to justify or address the immediate needs of your property, will cost you more in the end. Whether it be due to a sizable deferred or the lack of maintenance. The nature of this type of property manager is entitlement, having the tendency of putting themselves on such a high pedestal that they become unreachable to tenants, vendors and sometimes their own staff.
When this occurs, you risk a decline in service from their vendors, attention from the staff, and the risk of tenants wanting to relocate – all of which will hurt the overall performance of your property. At the forefront it may seem that you have a performing property with a favorable NOI today, but be aware that it may be built on a house of cards that will soon come tumbling down when you least expect it.
It is realized that some deferred maintenance may be necessary due to Capital constraints for non-performing properties, however it’s crucial to have these issues identified and determine if there’s the ability for immediate mitigation, then strategically plan for replacement or repairs at the property owner’s discretion.
2. The Dictator Property Manager
The Dictator Property Manager will manage your property at the best of their ability, based on their own experience, knowledge and expertise, with no interest in collaborating with others to explore viable options. They naturally exhibit a “it’s my way or the highway” attitude and will not hesitate to take full credit for the good work of their team or vendors.
This type of Property Manager is also eager to please and will deflect blame to others when given the opportunity, which promotes a toxic environment, causes skepticism and provides a higher risk for miscommunication with their tenants, vendors and employees. In the end, these problems when combined can become costly and at the expense of the property’s owner.
Finding the Right Property Management
Having a Property Manager that understands the Highest and Best Use of a property and is able to provide recommendations is a huge asset to any property owner.
As we explained in a previous post, Highest and Best Use (HBU) is the applied concept to determine the best use of a property, that results in the highest value by evaluating four key benchmarks:
- Legally permissible
- Physically possible
- Financially feasible
- Maximally Productive
As a real estate investor, if you have to make a decision whether to purchase a property based on its potential to perform or to retain a property that is “non-performing” in an unfavorable market, having a Property Manager on your team who understands the highest and best use of a property and how to get the best ROI on your investment is essential and invaluable.
Benefits of Having a Property Manager That Understands HBU
All property managers should acknowledge and realize that they are part of the service industry, similar to their vendors, regardless if it’s an Owner or Third Party managed property.
Becoming a partner to the property’s ownership, tenants, vendors and even its own staff, provides an opportunity for everyone to participate in ensuring it’s performing at its maximum potential.
There are numerous benefits to having a property manager that understands the details behind the bigger picture:
- Good communication. A property manager that understands the bigger picture is able to effectively address theirtenants needs and establish a working relationship, which will promote tenant retention, even in an unfavorable market.
- Strong relationships with vendors. Service vendors are really the “property physicians,” regardless of their areas of expertise, whether it be mechanical, security, parking, landscaping or maintenance. The Performance in servicing your property and their interest to proactively identify potential issues and make recommendations, is a reflection of the property manager and the ownership. It’s imperative for a property manager to maintain a trusting relationship with their vendors and be transparent on expectations for both sides.
- Effective use of staff. When a property manager is able to highlight the strengths of their own staff, they’re able to delegate and navigate the balance of effectively managing their property. They’re able to establish camaraderie and provide consistency for their team. .
What Services Should a Good Property Manager be Able to Provide Owners?
Good property management, who understands HBU, should be able to provide their Client with the following:
- A comprehensive understanding of a Client’s immediate needs for performance and future intentions of their property.
- Host regular meetings with a Client to further discuss financial performance, as well as provide updates on operations and issues to be resolved at the property.
- Have current knowledge of market trends surrounding their property, which could benefit or become a hindrance to its performance.
- Be able to collaborate and strategize with a Client and then make recommendations for better property performance.
- Have access to reliable resources and provide immediate assistance with further consultation and specialized services for the property.
If your property manager isn’t able to provide these at a minimum, then they’re not presenting you with the accurate potential of your ROI.
Why You Should Have a Full-Service Firm vs a Traditional Property Management Company
The value in selecting a property management company is often determined by the volume of their accounts and the popularity of their name, which could potentially come with a price tag that is often overlooked and accepted.
Many traditional property management companies will have their focus on the quantity vs. the quality of their accounts and how it all affects their bottom line, while trying to justify the performance of their portfolio.
Working with a full service firm such as the Redmont Group, which understands the highest and best use of a property,has access to reliable resources in specialized fields, and enables a property owner to feel confident and secure with their investment.
A prudent investor will find value in a good property management company based on its ability to provide proficient service, one who identifies and caters to the specific needs of a property versus quantifying its own portfolio.
If you think your property could benefit from having that type of property management on Oahu or anywhere in Hawaii, please call the Redmont Group at 808.445.9436 today!
Carlie Woodward-Dela Cruz is responsible for managing the Property Management and Maintenance Departments for Redmont Group.She is a licensed real estate professional offering 10+ years of experience in property management and is currently President for BOMA Hawaii.
Photo credit: Nancy via Flickr