3 Truths and a Lie Every Property Management Principal Should Know

Every industry has its myths.

Property management is no exception.

So here's a challenge...

Below are 3 truths and a lie about property management businesses.

Think you know which one's the lie?

Have a guess before you read to the end.

"A rent roll is the best recurring income business you'll ever own."

Truth... but only if you're collecting every dollar you're entitled to.

Property management is a wonderful business model. Unlike sales, you're not waking up every month wondering where your next commission cheque is coming from. You have recurring income, predictable cash flow and an asset that can grow in value over time.

But recurring income doesn't automatically mean you're maximising your income.

• When was the last time you reviewed your Management Appointments?
• Are you charging every fee you're entitled to?
• Did your EOFY Statement Fee actually get charged this year?
• Have annual rent reviews quietly fallen behind?
• Have management fee discounts crept in over time?

Now let's put some numbers around it.

Imagine a 500-property rent roll with an average weekly rent of $750 and an average management fee of 6.5%.

That's around $1.27 million in annual management fee income, or approximately $105,600 per month.

Now consider just two operational metrics.

If your rent arrears average 5% instead of 3%, that's approximately $2,100 in management fee income disappearing every month.

If your vacancy rate sits at 4% instead of 3%, that's another $1,050 per month.

Together, those two seemingly small percentages represent more than $3,100 every month, or almost $38,000 every year.

That's before you've even looked at missed fees, uncompleted rent reviews or undercharging.

Small percentages.

Big dollars.

"My rent roll is my retirement fund."

Truth... but only if you're protecting its value today.

Many Principals view their rent roll as the asset they'll eventually sell to fund retirement.

And they're right.

But here's the catch.

You only get one opportunity to sell it.

The difference between a well-managed rent roll and an average one isn't just operational.

It's financial.

Using the same example above, if that rent roll achieved a multiplier of 3.2x instead of 2.8x, the difference in sale price would be over $500,000.

That's not created in the month you decide to sell.

It's created over years through good documentation, consistent fee management, strong landlord retention, healthy arrears, low vacancies, efficient systems and a business that a purchaser has confidence in.

Enterprise value is built long before the business goes to market.

“Your biggest opportunities are usually hiding in the business you already own.”

Truth.

Everyone loves talking about growth.

• Another acquisition
• Another 100 managements
• Another BDM

But before you spend thousands acquiring new landlords, have you maximised the income from the landlords you've already earned?

• Are all of your fees current?
• Are your rent reviews up to date?
• Are you charging what's documented in your Management Appointments?

Are your Property Managers spending time on relationships, or drowning in administration?

Sometimes the fastest way to grow isn't adding more properties.

It's improving the performance of the ones you already manage.

"Every Property Manager reaches their limit at around 120 properties."

Lie!

The idea that a Property Manager can't manage more than 120 properties has become one of the industry's most repeated myths.

Can every Property Manager manage 180 properties?

Of course not.

Can some successfully manage 150, 170 or even more?

Absolutely.

But not because they're superheroes.

Because they're supported by better systems, better technology, better processes, appropriate administration, clear role design and ongoing training.

The goal shouldn't be to squeeze more properties onto someone's desk.

The goal should be to remove everything that stops your Property Managers spending their time where they create the most value... building relationships with landlords and protecting your most valuable business asset.

Perhaps the bigger question isn't how many properties a Property Manager can manage.

It's whether your business is structured to let them perform at their best.

Where does your rent roll sit on this? Rent Roll Pulse benchmarks the 15 health metrics that drive valuation against Australian peers and shows you which ones to move first. Start your 14-day trial or join the Rent Roll Pulse community to talk it through with other principals.