“So, have you got a spare $5,000 set aside for unanticipated expenses or urgent repairs?” This question makes its way into every listing presentation I roll out for a potential client.
Pretty confronting stuff when you haven’t even gotten their signature on the Managing Agency Agreement yet, right? Most are caught off guard. But here’s why you owe it to your client, your property managers (if you’re a BDM) and yourself (if you’re a PM) to ask this question.
Setting realistic expectations: There comes a point in your listing presentation when you need to address the nuts-and-bolts reality of residential tenancy – that it’s not all about getting a rental return. Sometimes landlords will need to spend money – whether they want to or not. A burst hot water system, a serious electrical fault, blocked drains, the list goes on. And they all fall under the legislative designation of ‘urgent repair’. These aren’t the minor maintenance issues where you can find your landlord arguing with you for 45 minutes over a $25 tap handle replacement. These are the non-negotiable must-do’s – the “I’m calling to let you know that the tenant has reported that the hot water system blew out overnight and our plumber has advised that it’s non-repairable, we’re going to have to replace it today” call.
And that’s why “So, have you got a spare $5,000 set aside for unanticipated expenses or urgent repairs?” always finds its way into my listing presentation. Most clients don’t. But when I outline the reasons why having a cash reserve set aside in the event of such incidents is so vital, almost all clients start re-organising their finances. It leaves a sour taste in your client’s mouth when the first they know of the $1,800 they have to pluck out of the air is the phone call to inform them that the hot water system has blown. In some unfortunate cases, this happens in the same weekend the drains get backed up, or the oven dies. You’re demonstrating a duty of care right from the first meeting by setting realistic expectations about the expenses involved in residential tenancy.
Addressing the “but I don’t have that kind of cash” response: Nothing jeopardises potential new business like that look of panic in your client’s eyes when they realise that you’re talking serious money about things that haven’t even happened yet...but could. You can allay their fears immediately. It’s not a case of having a lump sum cash deposit set aside. You can work with them to reserve a certain portion or percentage from each rental payment to build up a reserve that can be held over in your trust account. If they are relying on the entire rental return to pay the mortgage and this is not an option, you can point them in the direction of reliable mortgage brokers who can assist them in refinancing or adjusting their existing mortgage arrangements. There are about a trillion instant loan outfits (GE Money, Credit24, Rapid Loans, etc) that can help out with cash payouts of up to $5,000 in just minutes over the phone.
My ethos: Never present a problem in one breath without offering a solution in the next.
Your prospective client will be left with a lasting impression that you have their best interests at heart and you’re arming them with information to protect them against being caught out by unexpected expenses. When your competitors present their proposal to your prospective clients and don’t bring up any of the realities of residential tenancy that make them shift uncomfortably in their chairs, they’ll leave them wondering what else they haven’t told them, or worse, kept from them.
The “but my landlord insurance should cover me” myth: Landlord insurance covers the following general items: damage to your property, damage by natural disaster, damage caused by theft or fire, and flood cover (which is different to ‘rising water’ damage – but that’s another article altogether!) and tenant protection. What your insurance doesn’t cover are the expenses you will incur for urgent repairs.
The foundation of trust: The listing presentation isn’t merely a platform to compete for new business with your competitors – it is the first brick in the foundation of trust that can lead to a lifelong client relationship. Each respective state and territory’s Agents Act and standard Residential Tenancies Act will refer frequently to a duty termed ‘fiduciary obligation’ which, in a nutshell, is the legal duty to act solely in another party’s interest.
Impart the good with the bad when discussing why yours is the only agency your prospective client can and should trust. No-one likes bad news – they like it even less when it comes unexpectedly. Do yourself or your PMs a favour by having this conversation at the outset of the relationship so that if the unexpected happens, you’re working with your client on a resolution based on pre-arranged and agreed measures and solutions.