The federal government’s beefed up First Home Owner Grant helped to drive much of the market activity during 2009, especially at the lower end of the market, below $500,000. With the sun setting on the boosted element of the grant, investors are filling part of the gap left by first timers.
Activity, however, has fluctuated from place to place while different price points have seen different responses from the market.
Agents have used this period of increased investor activity to boost their rental rolls and understandably, some have been more successful than others.
Rental managements are ‘bread and butter’ income for most real estate agents. The annuity stream they generate provides a basis for setting budgets, forecasting growth and planning for business development.
Agents should therefore continually be seeking ways to increase their listings.
Bob Walters, managing director of property management training and consulting business BWT, says most estate agencies tend to focus on their sales business. Much to their detriment, however, they do not have in place a focused business development strategy for their rental rolls.
“That’s the main reason why rent rolls in most real estate offices do not grow rapidly,” says Mr Walters.
Driving rental roll growth
Rental market activity fluctuates, and is subject to economic cycles, Reserve Bank interest rate decisions, consumer confidence and the time of year.
Agents who are genuinely focused on business growth, however, should position prospecting for property management front and centre of their business.
New managements are there for the taking, all year round, says Mr Walters. However, there are usually more opportunities to gain new managements when real estate sales activity is stronger – usually during the warmer months of the year.
Most importantly, the time to win new managements is when investor activity is strong, as it has been in the wake of the end of the increased First Home Owner Grant.
“There will be more opportunities for agents to grow their rent rolls when the real estate sales market is attractive to investors,” says Mr Walters. “That part of the sales cycle is when interest rates are generally low and stable, rental demand is strong and residential tenancy laws are not biased against landlords.”
The old adage of ‘strike while the iron is hot’ rings true for estate agents, who should aim to capitalise on the sale of a property to an investor and translate that into a management at the time the contract is signed.
For the ‘average’ real estate agency, most new managements are won at the time of sale. Nevertheless, more aggressive and proactive agencies with a business development strategy will actively prospect among existing investors.
The pitch to an investor, whether they are to be signed up at the time of sale or the management is to be generated through focused prospecting, is basically identical, according to Mr Walters.
“You need to be able to persuasively demonstrate that your agency has a focus on property management and can manage properties more expertly than your competitors,” he says.
Kirsty Dunphey, director of estate agency Elephant Property, says client servicing capabilities and track record can give a lot of weight to signing up any potential new managements.
“Our aim is to sufficiently ‘wow’ each of our owners so that we have a glowing testimonial within three months and at least one client referral within 12 months,” she says.
“I feel personally that the strongest way a client comes to you is from a personal referral. We’ve also had good success with various group interactions such as with Rotary and Accelerate Women (a group that supports Australian business women),” says Ms Dunphey.
Putting across the point
Pitching your property management services needs to be backed up with substance.
Australian investors are split between those who use a real estate agency to manage their investment and those who are quite happy to take care of the job themselves.
According to Mr Walters, those who use agents are in a majority. So, convincing an investor to use your services should not necessarily be a daunting task.
“The question is: ‘Which real estate agency should I choose’?” he says. “If [an investor] buys the property from an agency then that agency is in the box seat to gain the management of the property, provided the investor is reasonably satisfied the agency has the resources and expertise to do so competently.”
An investor may well be sitting on the fence and agents should aim to communicate the following points as a basis for getting the management over the line:
• Tenants do not like dealing with landlords directly – they prefer to go through an agent
• Agents generally have expert knowledge of the rental market and the legislation relevant to property investment. They not only can get the best market rent for the property but also ensure the landlord’s legal rights are protected
• Agents are usually more skilled and have more experience selecting tenants
• Agents have access to a larger number of prospective tenants than a private landlord generally would have, meaning the property can be leased more quickly
• An agent’s fees are fully tax deductible
• Agents have ready access to a large pool of tradespeople who are often cheaper and more reliable than those whom a landlord might engage.
“It really comes down to the agent's ability to persuasively communicate the benefits to a landlord,” Mr Walters says. “These benefits should also be included in the agent’s marketing materials.”
This can pose several challenges for agents, but it can also be an opportunity to take on the role of educator and solutions provider.
Finally, while strong market pedigree can support an agent’s positioning, business can also be found literally a lot closer to home, says Ms Dunphey.
The best place to secure contacts – and potentially new managements – is over the dinner table, she says. “It seems a strange place, but most people complain or query about real estate across the dinner table.
“If they’re having a bad experience with a property manager, they’ll ask their friends who they use. If they’re about to buy their first investment property and want advice, they’ll ask a family member for a reliable contact,” she says.
“If you’ve reliably serviced enough of your own owners and tenants, they’ll do your talking for you.”