Defining the Quality of New Business

@adamhooley 's recent blog about taking on new business makes interesting reading. https://lpma.com/blog/defining-the-quality-of-new-business . That old saying “not all business is good business” comes to mind.

Just this week we were approached by an owner who first up only wanted to speak to a man - alarm bell number one.
Second he told us the tenant is his son who doesn’t pay his rent on time so he wants someone to crack the whip and get it paid. Alarm bell number 2.
And to round it off the rent is $300 per week. Thank you but no thank you!

Do other businesses have minimum criteria that a property must reach in order to take it on?

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Great discussion point.

Yes, we have a criteria and that person you speak about doesn’t fit any professional’s office.

The other one is when an owner first up wants to know about fees and nothing else. I can’t seem to get past the fee question and at times I think, there’s a reason because no all business is good business

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It is a definite alarm bell when all the points mentioned scream trouble but there are still those agents out there that do take on this business which brings down the industry as a whole. Majority of agents strive for professionalism but others … thus the prospective client does not see the value (in general) of property managers. Of course, this type of client also tends not to want to spend money on maintenance either. We try to avoid these type of clients as they end up by costing the business in wasted time spent.

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Agreed on all counts - we inherited a tenant once who turned out to be the owner’s grandson and was also pretty relaxed about paying rent…
Our policies around new business include: always visit the property in person before signing; fee must be above water level, and life’s too short to work with unpleasant people (or hand them over to our team)!

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Great Topic Colleen ( @rent ) - one of the points I try and encourage teams to focus on, especially for new business and when they are analysing their RR is a process I call “above the line / below the line”.

Firstly - the Agency needs to identify what the “cost of managing a property is” and this is a dollar figure, not percentage (this is usually first face palm)

Then once you have identified the cost to manage a property - then you would need to add your expected profit - 20-30% at least

So if the cost to manage 1 property comes out at $1,000 per year - then you add your profit, you end up at around the $1,200 - $1,300 range (net of GST)

Or approximately $100 pcm net

I think Ben White has regularly spoken, and I am sure that @adamhooley can clarify, that the industry average across Australia is about $120 pcm net ($1,440.00 AAMI)

So when you strip out your rent roll into an excel spreadsheet - then you can add your AAMI ($1,200 or $1,300 or $1,440) and the sort for your properties - above the line, or below the line

If there are Red Flags in the initial discussion - doesn’t matter how much you charge - it may not be worth the headache

In am office I am working in at the moment, we have a $150 (inc GST) pcm as the minimum monthly amount - so if there is a low rent - (like $300 p/w) our team know to revert to a fixed monthly management fee (not percentage) and it is so much easier to sell this to a LL when the rent is low - the cost to manage a property properly, and the amount needed to charge has no bearing on what the rent is - the cost & expected profit are the same

By focussing on the AAMI (and if your ancillary fees are another 25- 40% above the AMMI each year) then you are a long way to only bringing on profitable properties

Hope some of the points I have raised - help. If you are reading this post, and never conducted an above the line below the line exercise - you might be surprised (typically disappointed) at what percentage of your portfolio is below the line…these are great properties to identify and hopefully list for sale through your Agency - convert a non profitable property into a $10,000 - $15,000 sales commission -

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