Selling a property management business is a challenging experience whether you’re an experienced property manager or not. There are a number of factors to take into account and in the video below Hamish Turner explains them to you in detail.
If you want to speak to Hamish in person you can do so here: https://hamishturner.co.nz/contact-us/
What is a retention and how does it work? Historically, retention was for a 3-month period after the settlement of a rent roll sale.
The split would typically be 90/10 i.e. 10% deposit, 80% at settlement, then 10% held in the lawyer’s trust account until the end of retention. More recently (say the last 24 months) an 80/20 split with a 3-6-month retention period has been quite common in the high majority of cases.
So, what happens post-settlement with any new clients? It is very common for these to be part of the goodwill of a transition and not to be counted as a credit against loses or attrition during retention. Technically, with a restraint of trade in place (typical), the vendor cannot act and therefore cannot actually work towards credit new properties to offset attrition.
Losses or attrition during retention is for the most part properties that have sold or going on the market or management being transferred to another agency or to the owner client to manage. There are a lot of variables, so it can pay to clarify with the vendor and purchaser what constitutes termination or loss.
Historically, attrition was around 5-10% loss rate during retention. Nowadays, purchasers are a lot savvier when it comes to transferring rent rolls and this loss rate has been reduced substantially. Factors that reduce loss rate include but are not limited to:
– Taking on the vendor’s property managers and support staff.
– Not just sending letters, but picking up the phone and speaking to owner clients.
– Using vendors branding, website, IP etc. on transition as an affiliation of sorts.
– Keeping commercial premises rent roll is being run out of.
– Working with vendor to communicate per, during and post-acquisition, ensuring client and staff confidence is held at its maximum.
Hamish has over 17 years of experience within the property management industry and has experience throughout New Zealand and Australia as a manager, principal and consultant. He utilised all of this experience to form a property management business that he expanded between 2009 and 2016 into 7 locations around New Zealand.
– Qualify the owners: do we want them as a landlord? They may manage the properties themselves as no agent wants them.
– Call them and offer to do the casual let – and have the Junior/systems do the legwork.
– Ask for money upfront, so you invoice the client right at the start.
– Only do applications & viewings. Do no paperwork after this point and hand the files to the client.
– Critical – Business Development Manager is the one that then makes the call to them and asks for the business.
– Following up after the “NO”
– Call them after two weeks and give them a gentle reminder regarding the bond. Again, it gives you the chance to offer to do the work for them if you are managing the property for them.
– Service call
– Three to four-month follow-up – as these are the times that a routine inspection should be done, and need to ensure they are happy with the tenant…..then….
– Have your PROMO ready, and offer them an incentive at each call for them to give you the business……Three months of free management? Wine? Whatever the “in” thing to do is at the time, but make it different at each call.
– Repeat every three to four months.
– The monies raised with the casual lets can be used for social funds or Christmas parties at the end of the year. So you can make it fun, with the target being a great social event and some new listings.
– Remember to include them for your newsletters – add all of your casual let clients to your database.
Hamish has over 17 years of experience within the property management industry and has experience throughout New Zealand and Australia as a manager, principal and consultant. He utilised all of this experience to form a property management business that he expanded between 2009 and 2016 into 7 locations around New Zealand.
Throughout the year tenants fall behind in rent – one of the most common times is just after Christmas, and it’s a fantastic time of year too. You can just sense the joy and elation as people hustle and bustle around trying to buy that last-minute surprise and catching the specials. This time of year is about giving and the joy is everywhere. We all spend that little extra and think “she’ll be right” “it doesn’t matter if I break the budget this week, I’ll deal with it next week.”
But guess what? All of the property managers are the ones that get affected by this. When that credit card bill comes in a few days after Christmas and all the laybys have to be paid, and the agency is closed, clients know they won’t get a call from their agent. As a result, the rent becomes the last bill to be paid.
Hamish has over 17 years of experience within the property management industry and has experience throughout New Zealand and Australia as a manager, principal and consultant. He utilised all of this experience to form a property management business that he expanded between 2009 and 2016 into 7 locations around New Zealand.
I have had a lot of questions about this subject and also seen and heard some varied views from industry professionals about this subject recently, so I thought it was opportune to share my personal views.
In the past quarter (90 days), I have been involved with over 11 rent roll sales around New Zealand, with several currently under offer and under contract also. In each instance, the outcome or result has not been lower as a result of industry changes that have or are occurring ie; various legislation changes, of which the most recent being letting fees. Demand is still very strong and both multiple and competitive offers are being received in the high majority of these sales occurring. Demand for rent rolls if anything has actually increased in my view.
I would suggest that with books of scale ($1mil or more) I have received similar/same interest levels that I am used to seeing say 12-18 months ago. With these ones, certainly less formal offers are being received than what was being experienced 18 months ago. In fact, 3 of the 11 rent rolls in the past 90 days have achieved record multiplier levels for their given region or location. This may or may not be different with rent rolls being privately sold.
I suspect in 2019 there will be an increase in smaller independent operators wanting to sell simply due to the impact of resources required to cope with the regular change over a relatively short time period. The industry as a whole has been slow to get ahead of letting fee changes, but now there is a line in the sand, change is occurring. Of the say 10 principals I have talked to in the past 2 weeks, all but 1 are actively making changes and seem pretty comfortable with their direction going forward regarding letting fee changes.
The reality is that in 6 months time, the high majority of agencies will have transitioned tenant clients to owner clients paying letting fees or indeed increased revenue elsewhere be it administration fees or increasing management fees. Rent increases are likely to follow broadly speaking. In 6 months time with changes implemented rent rolls will actually be taking higher revenue as a result of letting fee legislation changes occurring. Ironically the capital value of these rent rolls will be marginally higher also!
– LPMA
– REINZ: Real Estate Institute of NZ
– IPMA: Independent Property Managers Association
– BNI
– Other networking groups
Remember locally too:
Accountants, financial advisers, mortgage brokers, sales agents, potential landlords, solicitors, developers, business owners, electricians, plumbers, handymen, painters, ANYONE who does work for you.
Hamish has over 17 years of experience within the property management industry and has experience throughout New Zealand and Australia as a manager, principal and consultant. He utilised all of this experience to form a property management business that he expanded between 2009 and 2016 into 7 locations around New Zealand.
