With many business transactions, one of the most common mistakes consumers make is to take the easy option when it comes to referrals. We make the mistake of thinking everyone is going to give us good advice. The sad truth is, many people provide recommendations because there is something in it for them, knowing it is not the best available option for you.
Consumers simply want someone to solve their problems and they are usually time poor, therefore when they are required to make choices, they look for shortcuts and often run with the first recommendation.
For example, when we purchase property, we get advice on who we should engage for the building inspection, conveyancing, property management, finance, insurance, gardeners, cleaning and maintenance contractors. This is the reason many businesses try and roll in as many of these services as they can and call themselves a “one stop shop”. The trouble is, the more services you have under the one roof, the less focus there will be on doing one thing well. There is also conflict of interest in many situations.
Let’s say for example, you purchase a property as an investment from a selling agent who also provided the rent appraisal from their property management department. You talk to their finance department and they approve your finance based on the rental appraisal (return on investment), they then arrange the building inspection and tick it of as structurally sound. Finally they offer to manage the investment for you at a discounted rate because you are a “current client”. Out of convenience, you have just entrusted this one company with every part of the investment process. Every step of the way there has been something in it for the agent. Starting to see the problem? These businesses are generally looking to take full advantage of every possible source of income rather than protecting you as the consumer and this is fraught with danger.
This then leads us to the reason why you should engage an independent property management company. When we give you our opinion on a potential purchase for instance, our aim is to help you have the best possible investing experience and to attract the best possible return. We are focused on managing the risks to ensure this from the very beginning until the very end. We understand that if you have a negative experience, it’s likely you will sell the investment and never invest in property again! Some traditional style Real Estate Agents with a combination rental management and sales have been known to encourage investors to sell when it might not be the right time and rub their hands together when they bank that hefty sales commission.
A common scenario is where a selling agent realises how much cash flow they are missing out on when an investor comes along. Eventually greed gets the better of them and they launch into property management. The typical cycle begins from here, these agents are generally sales people who have never worked a day in property management (and never had any desire to). They will be the operators who poach the most experienced property managers from their competitors because they essentially need that property manager to run the business for them. These agents often provide very little to no training and support to the property managers and generally have no concept of the systems and resources required to effectively manage property investments. They jump in with the perception that it will be as easy as collecting rent and doing the odd inspection.
After almost 25 years in the property management industry, I see this occur regularly and I also deal with the consequences to the investor. So, next time you are tempted to take the easy option with a “one stop shop” solution, or you are offered a referral, do your research before you make the decision to entrust a Property Manager with your financial future.