Chapter News

The debate: Is property management the saviour of agencies?

We ask REINSW members which side of the debate they fall on.
 

YES

 
Allison Mifsud
Principal at First National Epping Real Estate

Property management has proven to be the saviour of real estate agencies all over the country, every day of the week.

 
Every Principal in this profession quickly becomes acutely aware of the impacts on cash flow of property cycles, the economy, consumer confidence, government initiatives and the variability of sales team performances. The latter you can influence with professional development and coaching, but the rest of the factors are completely beyond your control.

The chief advantage of a property management department is consistency of cash flow. This you can rely on, no matter what is happening in the sales side of the business. If your sales department has had a slow month, the market is tight, or your team consists of only one or two sales agents, you are almost totally reliant on their consistent performance to support the office’s overheads.

The reality is, of course, that none of us are 100 per cent consistent in our performance. The very best of us face our challenges from time to time and if you have no rent roll, you have no plan B.

Of course, your property management department can also feed listings to the sales side of the business. This creates the opportunity to earn a selling fee, retain the investor as a new customer, and return the property to your management – keeping its full value within your business.

The other advantage of a rent roll is its capital worth. Apart from your customer database, it’s the only other true measure of your business’ value. Typically, your rent roll will be considered to represent 80 to 90 per cent of the value of your business. It’s also an asset that you can borrow against to pursue other interests.

Try borrowing against goodwill and you’ll soon find your bank has no time for you.

Some businesses work their way through cycles of building up their rent roll and then selling sections of it off. This has the advantage of periodically providing capital for investment in other areas of the business, but also helps keep your rent roll at a saleable size. After all, there’s no point building a rent roll that is so enormous and so valuable, that hardly anybody can afford to buy it when you decide to sell.
 


    

NO

 
Susannah Anderson
Managing Director at Di Jones Real Estate

There is no denying that property management is a fundamental part of running a successful real estate agency.

 

 But if we were to agree that property management was the ‘saviour of agencies’, we would be diminishing the important roles that our sales, marketing and administration teams play in ensuring the continued success of any real estate agency. Property management is part of an important mix of elements that go hand in hand with one another – none of which we could survive without.

While each department plays a different role in the day-to-day operations of a real estate agency, they rely on one another to keep each of the wheels of the business turning. When considering the balance between property management and sales, we find that both departments complement one another, exchanging business leads on a day-to-day basis. Our landlords will often become vendors, our tenants buyers, and our buyers landlords.

Essentially the relationship between property management and sales is equally beneficial to both as a business generation tool.

Perhaps the ‘saviour’ of agencies actually lies within the administration and marketing teams, without whom business dealings within property management and sales departments wouldn’t be possible.

We believe the ‘YES’ response to the question posed is likely to credit property management with providing a consistent income and cash flow for the business in comparison to sales, which can at times be far more cyclical. We agree that this is true and we certainly consider our property management department an indispensable constant in our business.

However, given that the word saviour implies protection from danger or difficulty, we cannot agree with the opposing argument. If we were to take this view it would mean placing accountability on one department to maintain business performance, which is dangerous in itself.

The success of an agency must be a shared responsibility and in our experience, it’s teamwork and a mix of elements all equally as important as one another, which provides the most desirable business outcomes.


This article was first published in the December 2013 edition of the Real Estate Journal.