4. Agenda For The Day
• Australia v New Zealand
• WorkSafe in New Zealand
• The Property Management Process
• Lunch
• The Property Management Process
• Dealing with Mediators and Preparing for Tribunal
• Yields, Leverage, ROI, What Does it all Mean?
• Love Your Clients
4
6. Who we interviewed
Michael Furlong Director MAP Real Estate, Melbourne
Tara Bradbury Director of BDM Academy, Queensland
Fiona Blayney Managing Director of Real+, Sydney
Darren Hunter Property Management Consultant, SA
Peter Aquilina Director of RED, Queensland
Andrew Reece Former owner of Pro Rentals, Brisbane
6
7. What is the Difference?
Australia
• Estimated that 78% of properties are professionally managed
• All states have to be qualified except South Australia
• Landlord pays the letting fee
• Trust accounts and audits are compulsory
• Industry is highly regulated
• Different Act’s for different states
• Reluctance to do casuals
• Rent rolls worth more
• The property to staff ratio is 80:100 to 1
7
8. What about New Zealand
• We estimate about 40 to 50% managed
• No qualifications required
• No Background checks required
• NZRPM Level 3 and 4 qualifications available
• REINZ introduced Accreditation for Property
Managers
• No governing body
• No requirement for Trust accounts or to be
audited
8
9. Fees in Australia
Most common fee between 7 & 8%
Queensland is about 8.1%
Victoria is the cheapest on average 6.3%
Western Australia most expensive at 9.3%
9
10. Fees in Western Australia
• Highest earning fees in Australia
• Management fee 9.35% plus GST
• Letting fee 2 weeks rent
• Ingoing inspection $200
• Routine inspection $80 x 4 per year
• Annual marketing fee $200
• Annual YTD summary $200
• Court fees $100
• Insurance claims $150
• Lease renewal fee 1 weeks rent
10
11. Range of Fees in New Zealand
Auckland 6.5 to 7.5%
Christchurch & Wellington 6.75 to 8%
Other regions 7.5-9%
11
13. What this management is worth
• $2,337.50 in management fees
• $1000 in letting fees
• $500 in lease renewal
• $440 in inspection fees
• $400 in marketing and account fees
• TOTAL $4,677.50 per annum
• LTV $27,000 over a 6.5 year period
13
15. What is this one worth?
• Management fee at 6.7%
• $1,675 in management fees
• $500 in letting fees
• $150 in lease renewal fee
• $120 in inspection fees
• $100 in maintenance fees
• TOTAL $2,545 per annum
• LTV $15,500 over a 6.5 year period
15
16. The Difference
PERTH AUCKLAND DIFFERENCE
RENT $500 $500 $0.00
FEE 9.35% 6.70% 2.65%
MANAGEMENT
REV
$2,337.50 $1,675.00 $662.50
TOTAL REV PER
ANNUM
$4,677.50 $2,545.00 $2132.50
LTV REV PER
ANNUM
$27,000 $15,500 $11,500
16
17. Other factors to consider
• All feel that Australia has younger property managers
• Rent rolls are generally much bigger
• Opinions vary but property to staff ratio is between 80-
100 properties per staff member whereas between 70 -
80 properties per staff member in NZ
• More consumer protection
• Estimates 77,400 people work in the industry in 2012 and
is expected to grow to 84,000 by 2017
• Casual letting is done but not to the same extent as NZ
17
19. What needs to happen
1. Industry needs to be regulated and comes
under the REAA
2. Property Managers need to qualified to Level
3 or 4 NZRPM standard
3. A new bridging qualification for people
entering the industry is required
4. Trust accounts with audits become
compulsory
5. Background checks such as Police checks
on people wanting to work in the industry
19
22. Health and Safety Reform Bill
Health and Safety at Work Act
Comes into effect 4 April 2016
Pike River Mining Disaster 19 November 2010
22
23. Facts
• Our new Health and Safety law is based on
Australia
• Australia has seen a 16% drop in workplace
deaths since 2012
• In NZ 75 people die every year through
workplace accidents
• Twice as likely to be killed or seriously injured
compared Australia
• Six times more likely compared to the UK
23
25. What or who is a PCBU
• Person Conducting a Business or Undertaking
• Usually a business entity such as a
company
• A Sole Trader or self employed contractor
might be a PCBU
• Employee’s are not PCBU’s, these are
Workers or Officers
25
26. What does this mean
• Everyone is responsible for Health and Safety
• All PCBU’s have a ‘Primary Duty of Care’ to
workers and other people
• Officers (eg. Directors) of PCBU’s must
exercise due diligence to ensure H&S is being
met
• All PCBU’s , so far as reasonably practicable,
must engage with workers
26
28. Choi Rentals has 400 managements and 6 staff. Kelly is the
owner and director. She regularly engages Dave’s Plumbing to
carry out work on her rent roll. Dave is the sole trader and
owner of his business.
• Is Kelly or Choi Rentals a PCBU?
• Are Choi Rentals employee’s workers or PCBU’s?
• _______ is an officer of Choi Rentals
• Is Dave’s Plumbing a PCBU?
• Does Dave become a worker of Choi Rentals when engaged
to carry out work or does he remain a PCBU?
28
29. Choi Rentals has 400 managements and 6 staff. Kelly is the
owner and director. She regularly engages Dave’s Plumbing to
carry out work on her rent roll. Dave is the sole trader and
owner of his business.
• Choi Rentals is a PCBU.
• Choi Rentals employees are workers of Choi Rentals
• Kelly is an officer of Choi Rentals
• Yes. Dave is a PCBU, conducting his plumbing business
• Dave becomes a worker of Choi Rentals.
29
30. 30
Health and Safety duty to: Workers Other people
at workplace
Take reasonable care for his or her own health and safety Yes Yes
Take reasonable care that his or her acts or omissions do
not adversely affect the health and safety of other persons
Yes Yes
Comply, so far as reasonably able, with any reasonable
instruction that is given to them by the PCBU to allow the
PCBU to comply with the law
Yes Yes
Cooperate with any reasonable policy or procedure of the
PCBU relating to health or safety at the workplace that has
been notified to workers
Yes No
31. 10 Things that should happen
1. Your contractors need to be on agreements
2. Landlords should not do their own maintenance
3. Directors have to engage workers on H&S issues
4. You cannot manage non compliant property
5. H&S must become an agenda on meetings
6. You must identify risks involved in your business
7. You have to have policies around these risks
8. Only bailiff's should do evictions
9. Have a ‘No Cash’ policy
10. Large companies need to consider committees or
H&S representatives.
31
34. • Planning the Perfect Week
• Marketing a Property
• Tenant Selection and Induction
• Entry, Exit and Routine Inspections
• Arrears Management
• Dealing with Contractors
• The Importance of Rent Reviews
• Measurement of Occupancy
• Grade your clients
In This Section
34
36. How Much Time
• Routine Inspections
• Arrears
• Viewings
• Entry/Exit Inspections
• Client communication
• Planning
• Training
• Advertising
36
37. Inspections
• 130 properties
• Maximum 4 inspections each year
• 520 inspections/46 weeks
• 11 inspections per week
• How long to do one inspection?
37
40. Why Properties don’t Rent
1. Poor marketing
2. Overpriced
3. Something wrong
with the property
40
41. What does your company offer?
For Rent
Signage
Website Video
Online
booking
Weekend
viewing
Social
Media
Print
For Rent
List
Your
agency
Yes 3 Yes Yes Yes Yes Yes Yes
ABC
rentals
No 3 No No Yes No Yes Yes
Choi
Rentals
Yes 2 No Yes No Yes Yes Yes
Cheap
Rentals
Yes 3 No No No No Yes Ys
41
47. Educate your Investor
• Show how many properties rent
• Show what is available
• What % of properties rented are 3
bedroom?
• 229/425*100%= 54% of rented properties
in Pukekoe are 3 bedroom houses
47
54. Tips on advertising
• Use professional photography
• If doing video, make sure it’s quality!
• You need tenant online booking system
• Used ‘For Rent’ signs with ‘Rented’ stickers
• When script writing of properties, write a letter
about the property
• Get someone to do an audit
54
56. Moving in Process
Payment of Letting fee, Bond and Rent
The Sign Up and Induction
Offering the Property
The Selection Process
The Tenancy Application
The Viewing
The Tenant Enquiry
56
58. How Much is Too Much?
Rent should be no more than 40% of
net income of all the tenants
58
59. Why is Tenant Induction
so crucial?
It sets the tone and expectations for your
future relationship with your new tenants.
59
60. The Induction Process
• How long should an induction take?
• Do you offer refreshments?
• What do you have to keep kids
entertained?
• Do you have a Tenant Handbook?
• Do you have an induction video?
• How do you receive rent?
• Do you offer Fast Connect?
60
64. Entry Inspection
• Vital it is correct and detailed
• All cleaning and repairs complete
• All keys, remotes, swipe cards
• The property has no owner belongings left
behind
• Record age of carpets
• Make and model of white wear
• Document chattels
64
66. Exit Inspections
• One of the most Hated jobs
• Ever heard ‘It’s cleaner now than when we
moved in’.
• Treat same way as Tenant Induction
• Induct tenant in how to ‘Get Your Bond Back’
• Don’t let tenants go back
• What if there is a dispute?
• Measure % of full bond refunds
66
67. Exit Inspections
Be positive when discussing with tenant
“Our aim is to help you move out with minimum stress
and to make sure that you get your bond back quickly”
v.
“If you don’t do X, Y & Z, you won’t get
your bond back”
67
69. Routine Inspections
How Many Inspections?
• 130 properties x 4 inspections
• 520 inspections a year
• 46 weeks
• Approximately 11 per week
69
70. How Long to Take
• Plan and Notification
• Preparation
• Travel
• Complete inspection
• Report
• Call to owner
• Maintenance
• Approximately 1 ½ hours
70
71. Keep it Streamlined
& Systemised
• Property-based v. Tenancy-based
• Grouping inspections
• Use Tenant Induction
• Think like a property owner
71
72. What do Owners Want
• Transparency
• Punctual
• Photos or Video
• Detail
• Recommendations
• Solutions to issues
72
73. What about Tenants
• Always thank them, regardless of
condition
• Always be respectful
• Leave ‘Thank you cards’ with jelly beans
• Leave a tenant newsletter
• Try not to let them postpone
73
76. Broken Window Policy
• Used by Mayor Guiliani in New York
• Same concept to rent arrears
• ‘Zero Tolerance’ works but most people do
not follow it
76
77. What is Your Process
• Arrears Management starts at Selection
• Clear about process at Induction
• Call tenant one week after moving in.
• SMS Notification day 1
• Phone call is always recommended
• Email breach day 2 with SMS notification
• Application under s56 no later than day 7
• Consider Fast Track
77
78. How Much Rent Do You Collect?
• How many properties do you manage?
• What is your average rent?
• What is your occupancy?
Example:
130 managements at $400 average rent
running at 96% occupancy means you have
collected $2.6 million in rent
78
79. Estimate How Much You Failed to
Collect
• Look at your portfolio over the last 12
months
• How many tenants left owing money?
Example:
Same portfolio. 5 tenants left in arrears and
after tribunal combined amount of $3,500 in
rent arrears outstanding. You failed to
collect on 0.13%
79
80. Points to remember
• The policy and process decides
• ‘Broken Window’ policy to Property
Management
• Arrears starts at tenant selection
• Clear induction
• Contact tenant one week after moving in
• Follow the process
80
82. How Many Contractors
– Plumbers
– Electricians
– Handyman
– Glazer
– Gardens and lawns
– Builder
– Locksmith
– Pest eradication
– Carpet cleaner
– Cleaners
– Arborist
82
83. How Much Do You Pay Them?
• 130 managements
• $1,500 per annum on R&M
• $193,500
• Do you charge maintenance?
• 7% = $13,545 in maintenance fees
• Are you getting your money?
83
84. Do You Allow Owners to Pay
Invoices Direct ?
• Do not allow this
• Do not use landlords contractors
– Are they qualified?
– Remember, PCBU
– Do they have insurance
– More administration work
– You should have good rates
84
87. Why Review Rent?
To ensure that the rent is at a level
where the landlord is receiving rent
in proportion with the market.
87
88. Rent Increase Exercise
Increase rent on your portfolio by 5% per
annum, what will be the increase in
management fee revenue per year?
88
89. Rent Increase
• 130 managements at 96% occupancy
• Rent increase from $400 to $420
• Rent collected increase to $2,730,000 from $2,600,000
• Management fee of 7%
• Increase revenue from $182,000 to $191,100. Increase of
$9,100
• Now increase your fee to 7.5%
• Revenue goes up $204,750
• Increase of $13,650.00
89
90. Accumulative increases
1 property Year 1 Year 2 Year 3 TOTAL Man Fee% Revenue
No Increase til
Y3 at 10% $20,800.00 $20,800.00 $22,880.00 $64,480.00 7% $4,513.60
5% per annum $20,800.00 $21,840.00 $22,932.00 $65,572.00 7% $4,590.04
Difference $- $1,040.00 $52.00 $1,092.00 7% $76.44
10 Properties Year 1 Year 2 Year 3 TOTAL Man Fee% Revenue
No Increase til
Y3 at 10% $208,000.00 $208,000.00 $228,800.00 $644,800.00 7% $45,136.00
5% per annum $208,000.00 $218,400.00 $229,320.00 $655,720.00 7% $45,900.40
Difference $- $10,400.00 $520.00 $10,920.00 7% $764.40
100 properties Year 1 Year 2 Year 3 TOTAL Man Fee% Revenue
No Increase til
Y3 at 10% $2,080,000.00 $2,080,000.00 $2,288,000.00 $6,448,000.00 7% $451,360.00
5% per annum $2,080,000.00 $2,184,000.00 $2,293,200.00 $6,557,200.00 7% $459,004.00
Difference $- $104,000.00 $5,200.00 $109,200.00 7% $7,644.00
91. Rent Increase Exercise
If you were to increase your rent roll by 2.5%
every 6 months, for the next 3 years, what is
the total management fees you could be
collecting?
93. Physical and Economic
Occupancy
• The physical rate is the proportion of
properties that are occupied by tenants
• An economic occupancy rate is the
proportion of the gross potential rent (GPR)
that is collected
93
94. Gross Potential Rent (GPR)
• GPR can be defined as the sum of the
rental amounts stated in the tenancy
agreement
• If you have 130 properties that rent at
$400 per week,
GPR = $2,704,000
95. Physical Occupancy Calculation
A single month’s physical occupancy is
# of occupied properties
# of available properties
Example:
Average number of available properties for 12
months = 122
Average number of occupied properties for 12
months = 115
115/122 x 100% = 94%
96. Economic Occupancy Calculation
• First calculate GPR
• 130 properties at $400 per week
• GPR for November $208,000
• - Rent you have not received through
either vacancy or arrears
• Total rent collected $192,000
$192,000/$208,000 x 100% = 92%
97. Grading Economic Occupancy
100% You should be taking this class.
95-100% Excellent
90-95% Very Good
85-90% OK
80%-85% You probably have fewer than you
think you have
70-80% You are struggling to break even
<70% High vacancy, High arrears, you
need serious help
97
100. • 80 properties per staff member
• Work on average 45 hours per week
• Work 2,340 hours per year
2,340 / 80 properties = 29 ¼ hours per
property per year
100
101. How Profitable?
Revenue per
property per
annum
Average hours
work property
per annum
Revenue per
hour worked on
property
Hourly Wage
cost at 45% of
total revenue
$3,000 29.25 $102.50 $46.13
$2,500 29.25 $85.50 $38.48
$2,000 29.25 $68.38 $30.77
$1,750 29.25 $59.83 $26.92
$1,500 29.25 $51.28 $23.07
$1,250 29.25 $42.74 $19.23
$1,000 29.25 $34.19 $15.39
$800 29.25 $27.35 $12.30
$500 29.25 $17.09 $7.69
101
102. ✓ Is the Property Compliant?
✓ Is the Owner good to deal with?
✓ Is the Tenant good to deal with?
✓ Is it Profitable
102
105. Knowledge is Power
• What is the difference between section 55
and section 56?
• What section refers to Tenant
Responsibility?
• What section refers to Landlord
Responsibilities?
105
106. Answers
• Section 55, termination if arrears more than 21 days or
damage or assault
• Section 56, breach capable of remedy and 14 day notice
has been served. Other party failed to remedy notice
• Section 40 is Tenant Responsibilities
• Section 45 is Landlord Responsibilities
106
107. Serving a 14 day
Service method Notice Starts How long to wait
Personally given to
tenant
The day after it is served 14 days
Post to address Four working days after
service
4 working days then 14
days
Put letter in box or affix to
door
Two working days after
service
2 working days then 14
days
In Addition
Email Immediately 14 days
Fax before 5pm of day Immediately 14 days
107
108. Top Tips
• Give 90 days notice prior to any Tribunal
application (periodic only)
• Do not wait till 14 day breach has expired
before making application
• Try and come to an agreement with
tenant prior to any mediation
• Ask the tenant for a solution
• Always follow company policy
108
110. The Role Mediation
• Object of Mediation is to clarify and sort out a
dispute
• The Mediator does not tell you what to do
• Mediators are there to try a find a resolution
• Any agreements are confirmed in a Mediated
order
• Only enforceable once ‘Sealed’ by Tribunal
110
111. David’s Top 5 Tips for Mediation
1. Be prepared. Know what you want to get
out of it
2. Know your BATNA
• Best Alternative To a Negotiated Agreement.
3. Always maintain control
4. Get the tenant to say ‘Yes’
5. Do not let the mediator make the
decision
111
112. The Role Tribunal
• Adjudicator will make decision based on
the following.
– Evidence provided
– Your credibility
– The tenant’s credibility
• Level of proof is based on a balance of
probabilities
– This means you need to prove your case 51%
112
113. The Tribunal Process
The Tribunal Standard Process
The Applicant Presents The applicant has to prove their case
with documentary evidence and
witnesses if necessary
The Other Party Presents The other party gives their evidence,
including any documents and/or
witnesses
The Applicant Responds This is a second chance to clarify, or
rebut what the other party may have
said
The adjudicator makes a
decision
In most cases the decision is then
delivered by the adjudicator
113
114. The Case of the Broken Window
• Case one: Rule in Tenant's favour
• Case two: Rule in the Landlord's favour
114
115. Who Pays Exemplary Damages?
Cooper and McAllister v Lodge City Rentals
115
118. David’s Top 10 Tips for Tribunal
1. Be prepared, even on straight forward cases.
2. Always take three copies of evidence
3. Take a copy of the RTA with you
4. Never talk to the tenant
5. Speak clearly and to the point
6. If tenant provides evidence ask for a recess
7. Don’t let support people speak
8. Try to address the facts on the application only
9. Don’t be afraid to challenge the adjudicator
10. Charge the landlord for your time at court
118
121. What is a Yield
The income return on an investment.
–Interest or dividends received from a security
–usually expressed annually as a percentage on
the investment cost.
121
122. “The higher the yield the better the return”
“The better the return usually means the
higher the risk”
122
123. Gross and Net Rental Yield
The gross rental yield for a property can be found by
dividing the annual rent collected by the total property
cost, then multiplying that number by 100 to get the
percentage.
Example
$400 per week x 52 weeks = $20,800
Purchase Price of property = $300,000
$20,800 / $300,000 x 100 = 6.93% Gross Yield
123
124. The net rental yield for a property can be found by dividing
the annual rent collected by the total property cost minus.
–Property Management Fee
–Insurance
–Maintenance
–Rates and any other outgoings
Gross and Net Rental Yield
124
125. Net Yield
$400 per week x 52 weeks = $20,800
Purchase Price of property = $300,000
$20,800 / $300,000 x 100 = 6.93% Gross Yield
Other Costs
2 weeks vacant = $800
Property Management @ 7% = $1,600
Rates = $2,000
Insurance = $1,200
R&M = $1,500
TOTAL INCOME - EXPENSES = $13,700
125
126. Net Yield
$13,700 / $300,000 x 100 = 4.57%
$300,000 Term Deposit @ 3.80%
$11,600
Difference of $2,100
126
127. Interest Rates
Paul purchases an investment property for
$300,000. He has a 20% deposit of $60,000.
He borrows $240,000 at 5.1% for a 20 year
term. He rents the property at $450 per week
Rent: $23,400
Mortgage: ($19,164)
Property Management Fee @ 7% ($1,638)
Insurance ($1,200)
Rates ($2,000)
R&M ($2,000)
Profit ($-2,602)
127
129. Other Jargon
Capital Gain: An increase in the value of real estate that gives
it a higher worth than purchase price
Example: Paul purchases his investment property for
$400,000. Two years later he sells the property for $450,000
making a profit of $50,000.
Leverage: Using equity in the property to put down a deposit
to purchase another property
Example: Paul decides not to sell his house. Instead he uses
the equity gained and the principal paid off to put down a
deposit on another investment
129
130. David’s Top Five Tips
1. Have an investor mindset
2. Provide recommendation to increase rent
and increase capital gain
3. Understand how much it costs to own an
investment property
4. Find out what your clients want to achieve
5. Educate yourself and your clients
130
145. Some Simple Rules dealing with
Complaints
• If attacked, don’t react. ‘Go to the Balcony’
• Listen actively and acknowledge how they
feel
• People only care about themselves
• Nobody wins an argument
• Never tell someone they are wrong
• Get them to say ‘Yes’ whenever you can
• Know your ‘BATNA’
• Best Alternative To a Negotiated Agreement
145
146. Top 10 Tips for Landlords
1. Listen to what they want
2. Educate them
3. Call new clients after their first statement
4. Be more personable
5. Be transparent
6. Have client nights
7. Survey your landlords
8. Embrace technology
9. Help them grow
10. People do business with people they like
146
148. 10 Top Tips for Tenants
1. Induction video
2. Thank you cards for inspections
3. Leave Jelly beans after inspections
4. Tidy Bedroom Certificates
5. Have a tenant newsletter
6. Call them one week after they moved in
7. Deal with maintenance quickly
8. Educate them
9. Best Tenant prizes
10. Refund their bond quickly
148
150. Top Ten Tips to Look After You
1. Have goals and review them regularly
2. Plan your week and review at the end
3. Turn your phone off when you're not working
4. It is not your problem
5. Learn to say ‘No’
6. Use Auto replies on email
7. Change your phone message regularly
8. Have your lunch away from your desk
9. Give back
10. Have fun, do something socially
150