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Why you must pay property managers based on performance

13 January 2014 Jarrad Mahon

printjarrad2-med 7060Jarrad Mahon explains how agencies can benefit from paying staff based on their performance.

Blogger: Jarrad Mahon, Director, Investors Edge Real Estate

The problem

Paying property managers fairly can become problematic. When they receive a set wage, they have no motivation to do more than what is minimally necessary to save their jobs. It becomes easy for the “employee mentality” to sink in: go to work, punch in, punch out at five and go home. I don’t mean this in a critical way, either. We can’t expect someone to work hard when they have no reason to do so.

On the other hand, paying a property manager strictly on commission can create a sense that many tasks a property manager would routinely perform for the company are outside of their job description. This can cause resentment on both sides and it can also cause a lot of inter-office wrangling over accounts and commissions.

The solution

In our Perth location, we have found that the best way to pay property managers is to give them a set wage that will pay them fairly for minimal effort. Then, we give them a percentage share from every property they manage. This immediately turns their mentality from that of an employee to that of an owner/investor.

Anyone who has ever had their own business knows how much more important even the smallest expenses become when they are coming out of your own pocket. Paying based on performance immediately turns the mentality of any property manager from employee to owner, because they are subject to the same risks and rewards as an owner, though on a smaller scale.

When rents are below market, the property manager doesn’t make as much money. When rents are in arrears, the property manager makes no money from that property and is motivated to do their best to chase them up. However, when the property manager raises the rents and finds a suitable tenant and chases down arrears he or she makes more money, just like the investor does.

But what about customer satisfaction?

We have built some great checks and balances into our system to ensure customer satisfaction. We must first measure customer satisfaction regularly with a survey every 6 months and when their property has been leased then we also ask for feedback over the phone every now and then. Then most importantly, we make use of all this feedback when carrying out performance reviews with a bonus being given for above average satisfaction ratings. This not only ensures that our property managers go out of their way to satisfy our clients, it also ensures proactive communication on a consistent basis.

The end result: satisfied customers and more referrals each month.

We also allow our property managers to choose how many properties they wish to manage. We know that everyone’s idea of work-life balance is different and we go out of our way to accommodate our property managers in living theirs.

Some people would rather manage less properties and settle for less money, while others want to manage more and make more money, leaving leisure time for later in life.

Everybody wins

Really, everybody involved wins from this system. As a Principal, I benefit because I spend a lot less time managing property managers—they practically manage themselves. The work environment is a lot better because both property managers and clients are happy. Property managers benefit because they feel that they are fairly compensated for their performance.

Clients benefit because their investment properties are being managed by someone who is treating them like their own.

Ultimately, this is what matters the most—satisfied clients make for a successful business.

Why you must pay property managers based on performance
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Jarrad Mahon is an experienced and passionate property investor, real estate agency owner and the "go to" for Perth property investment insights and practical strategies wealth growth in today’s market.

Over the last seven years he has used his engineering background to build and refine WA’s most award-winning property management business with a unique investor mindset.

Jarrad thrives on helping hundreds of clients every year to get the best property returns while avoiding costly mistakes. He has learned by investing all around Australia and using a variety of value-adding strategies.

Jarrad has recently been named in the 'top 40 business owners and entrepreneurs in WA under the age of 40' and he is a regular contributor to a variety of property investment and industry magazines.

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