by Jacob Aldridge, real estate industry business coach
In between the tug-o-war between Owners and Tenants, it’s easy for a Principal to overlook that the biggest drain on your PM Team’s time (and therefore your profit) is the suppliers you engage.
Your property managers have a lot of power recommending tradespeople. No doubt, quality workmanship is a key criteria when making those suggestions – but how aware are you, and your team, of the profit impact of those choices?
Maybe you want your tradespeople to do a good job just because; but have you ever calculated the consequences of poor trade work? Work that needs to be re-done – not only for the tradie, but for your team having to reschedule entries and re-distribute funds.
The long-term effects are even worse. Properties that aren’t maintained will have higher tenant turnover, and demand lower rents. Frustration from owners increases the likelihood they will change agencies.
Good tradies don’t just stop your managements from burning down or falling over; they protect you as the managing agent.
How often do your team inspect each property? Three, maybe four times a year? Not often enough to discover a maintenance issue the tenants have ignored … or perhaps tenant issues that you can’t ignore!
I once had tenants who had a habit of taking the batteries out of smoke alarms. On a routine inspection, that was easily explained away as coincidental timing – it was only repeated feedback from tradies, who saw that as a risk to their safety on site, that let the property manager know something was going wrong.
The tenants would have been responsible had the house burned down with them inside; but that wouldn’t have made the PM or the Owner feel any better. And it would have cost both a lot of money.
Great real estate agencies are at the heart of their communities, and it’s that bigger picture that keeps your business growing and profitable. Your trades team are a key part of that.
First and foremost, they are doing a great job, at a great price, to keep your current clients happy. As long as the rent is paid – and disbursed – on time, owners will only look to leave your agency because of problems with maintenance and repairs. Give good recommendations that make the landlord’s life easier, and they will stay loyal.
It also pays to build a reputation for being able to make tradesperson referrals. Why trust Google, when I can ask my property manager about the best electrician for my own home? And when that sparkie does great work, I remember where the introduction came from.
Amazingly, most BDMs still don’t talk to their tradespeople about referrals. What a missed opportunity! Whether those tradies work exclusively in managed properties, or are going into owner-occupier homes, they are having a huge number of conversations with property owners every week.
What’s the most common reason for some minor renovations? Preparing a house to let or sell! So your tradies are probably learning well in advance about properties that are about to come onto the market or change agencies.
Who are they sharing that information with? If not you, why not you?
Indirectly, mediocre tradies are draining your bottom line because of the impact they have on the time of your team. Busy Property Managers are always looking for ways to save time, and choosing the cheapest tradie achieves that in the short term. It’s usually much faster to get an Owner’s approval when you give them the lowest price.
But you will lose that time, and therefore profit, many times over when work needs to be re-done. I am always fearful of ticketed tradespeople who only have a mobile phone number – because I know when something goes wrong on their job, they’ll be impossible to reach for rectification.
That’s the hidden revenue impact of your tradies, but increasingly your tradespeople are willing to provide a direct profit benefit to your through loyalty programs and referral commissions. On a medium-sized rent roll, these can add up to almost a full-time salary that you don’t have to pay each year!
When you discuss these options with your team however, keep the other 4 profit impacts in mind. It’s fantastic one of your tradies will pay you $10-$50 per property per year – as long as they provide the reliable service you require and don’t drain your team’s time elsewhere through inefficiency or unavailability.
When was the last time you talked with your team and tradies about impacting your bottom line?
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