This presentation was done for the First National Stakeholders conference in Wellington. The focus in on Rent Roll Brokerage and also covers points about how to set up a successful structure for a Property Management Business

1. Understanding Rent Rolls
David Faulkner
Director
John Crocker and Associates
14th October 2015
Johncrocker.nz Ltd Licensed under the REAA 2008

2. About the presenter
David Faulkner
• 11 years experience
• Been a Property Manager
• Former chair of REINZ Sector
Group
• Now Director of John Crocker
and Associates
• Live in Wellington

4. What this presentation is about
• History and future predictions
• How we appraise a rent roll
• Multipliers
• Due Diligence
• Post Settlement
• Structure of a Property Management
team
• Most common mistakes made

5. 2008

6. GFC sees a slow down in sales
REAA: Property Management left out
National Party comes into power

7. 2010

8. Amendments to the Residential Tenancies Act 2010

11. 2015
&
beyond

12. Today
• An over supply of Property Management
companies
• Lack of professionalism
• Desperate tactics just to survive
• DIY attitude of Baby Boomer Landlords
• Unregulated industry
• Squeeze on Management Fee, especially in
Auckland

13. Tomorrow
• Smaller players will be bought out
• Increase in professionalism
• Industry will become regulated at
some stage
• Younger people coming into the
industry, clients and employee’s
• Increase in technology and
outsourcing

15. How Do We Value a Rent Roll
• Demand for rent rolls
• Comparative sales
• At least six month trading history
• Breakdown of fees
• Number of properties
• Occupancy
• Properties won v properties lost
• Owner to Property ratio
• Arrears
• Geographical spread of properties
• Actual revenue v Potential revenue

16. What is Actual v
Potential

18. Location:
New Zealand
Multiplier Location:
Australia
Multiplier
Auckland 2.2 to 2.7 Sydney 3.2 to 4
Christchurch 2.1 to 2.5 Melbourne 2.8 to 3.5
Wellington 2.0 to 2.4 Brisbane 2 to 3
Larger cities 2.0 to 2.4 South Australia 2.8 to 3.1
Regional town 1.5 to 2.0 Perth 2.35 to 2.95
Rural town 1.3 to 1.6 Central Coast 2.5 to 2.85
Rent Roll Multipliers
NZ Statistics provided by ‘Opinion of Fair Value’ and ‘Rent Roll Sales’ by johncrocker.nz ltd
Australia Statistics provided by Statistics from Macquarie Bank Research 2013

19. Do I Want To Buy?

20. Ten Questions to Ask Yourself
1. Why do I want to buy?
2. Can I afford to buy it?
3. Do I have the capacity?
4. Will I be able to add value?
5. What impact will it have on competition?
6. What if the competition buy it?
7. Do I want the staff?
8. What impact will it have on my time?
9. What software do they use?
10. How long will it take to get a ROI?

22. Due Diligence
• Are all management authorities correct?
• Do they have the assignment clause?
• What is the owner to property ratio like?
• Does the vendor own any units?
• Are any units on the market for sale?
• Are bonds held for each property?

23. Due Diligence
• Has the Trust account been audited?
• Are there any pending tribunal cases?
• What is happening with outstanding debts?
• Are all inspections up to date?
• Are any letting fees being paid off?
• What is the balance of the Suspense Account?

24. Due Diligence
• Are contractors owed money?
• What is spent in maintenance?
• Do they SLA in place?
• Are they insured and qualified?
• Are their outstanding maintenance issues?
• What impact with this have on you?

25. Purchase Process
• Pay Deposit usual 10% of price
• Pay on settlement; E.g. 70% of price
• Retention period; Can be between 1 to 6 months

27. Clauses to use
• Employees
• Apportionment of fees at settlement
• Vendor Assistance
• Restraint of trade
• What is the retention payment and period
• Details of documentation to be handed
over on settlement
• Due Diligence period
• Websites

28. Post Sale
• Communication is the key and is critical
• Have a joint communication plan
• Owners traditionally do not like change
• Find out owner expectations
• Landlord function
• Smooth transistion of rent payments
• Retention should be in excess of 90%

30. Useful Information
• Average Staff to Property Ratio is
approximately 80:1
• Portfolio system most common
• Increase in POD system and Business
Development Manager
• Average fee varies on region
• Property to owner ratio average 1.4: 1

31. Portfolio System
Branch Manager
Property Manager Property Manager Property Manager
• Each Property Manager looks after 130 on average
• Responsible for all aspects of Property Management
and new business
• Separate person doing accounts/month end

32. POD System
Property Management
(Sheppard)
Senior PM (Managing
Landlords)
PM (Managing
Tenans)
Business Development
(Hunter gatherer)
Business Development
Manager (New
landlords)
Letting Agent (new
tenants)
• Each POD looks after 240 on average
• One deals with Landlords/Investors one is
responsible for tenants
• Need to be clear on roles and need numbers to
support it

34. How to Remunerate
Employee’s
Salary plus KPI’s
• Base salary
• Set KPI’s for incentive
performance related
pay
1. Arrears
2. Revenue
3. Won v Lost
4. Occupancy
5. Average Rent
Commission
• Example
• 30% of all revenue
• 120 Properties
• $280 a week rent @ 8%
• Earn approximately
$47,000 per annum
• 140 Units earn approx.
$54,000 per annum

35. Thank you
johncrocker.nz

36. 4th November: Auckland
11th November: Wellington
18th November: Christchurch

37. Is brought to you by

38. Questions?
www.johncrocker.nz