Renting out property
January 28, 2020

Finding Good Tenants - What You Should Expect from Your Agent

The Direct Impacts of Payment Management

There are many aspects to how successful investment properties are run, and it can seem daunting to get into it when it all seem so complex. We think this is something that is inherent to the property industry, and that's because it's a service industry that fights to maintain relevance by complicating it for the consumer, something we would like to simplify.
In these series, we will take you through fundamental aspects and tools on how to make you a better rental Owner, first out in the series is the importance of rental payments and how to best manage it.

Four Distinct Issues

Let's start with the impacts and problems that are directly related to your rental income throughout the rental lifecycle. After spending all this time on comparing agents, you have finally made your decision, it all feels great and you are excited to get your tenants in so that your investment can start working. A couple months down the line, you come across a rental fee evaluation tool, and realise that your agents evaluation is $20 below the weekly rent suggested by the tool - Your agent is simply too busy with the 150 other properties he's managing and subsequently lowers the rent to make sure he can get them up and running as quickly as possible while minimising his workload.
Another issue is late rental payments: you check your bank account, your tenants are now 5 days behind with their rent and you have not heard from your agent. You call, leave a message and feel as though you have to manage your manager to deal with late payments. Not only does it cause stress but it also means that your tenants can potentially be on a downwards spiral and can risk future payments.  
The tenant on the other side, realises they are late, for whatever reason, the embarrassment is already a fact and they are unlikely to engage with your agent, this is where they either pay the rent in their realisation or in rare cases, ignore it. 
After you finally get your rental payment, you ask your agent if they have any preventative measures they could put in place for the next time, and the answer is a slithery no. Truth is that agents don't usually practice proactively, simply because they don't have the capacity. It would be an easy email reminder to the tenant to let them know that the due date is around the corner. 

The Root of the Problem

Partial Agents

This is one of the industry's biggest challenges, it's very labour intense and process driven. With the development and salary increases and licensing the country has experiences the past 20 years, has meant that agents are forced to take on more property to stay profitable while rental owners have seen a decrease in value and offering. That means that your investment gets less attention and ultimately time, time that's so important to ensure you get the right tenants and for the right rent for your investment to yield.

Unsupportive Payment Methods

The reason why issues arise within rent and payments, outside of finding good tenants, which is it's own topic. The first one is the fact that tenants rely on slow methods of clearing the payment, that means that the money can sometimes take days before it reaches the real estate agents books, and once the agent sends it across to you, can add a few days on top.

Transparency

It's a relationship that requires nurturing - Let's flip the coin for a moment, late rental payments are often not deliberate acts of negligence but rather life coming in the way. Most rental owners will at some stage experience late payments, but it doesn't mean that it's because of a bad tenant. It can be simple reasons like the fact that they simply forgot or that something unexpected has happened in their lives. These are factors that can happen to everyone, but the one thing that makes it worse is the lack of communication and transparency to the situation.
A tenant will rarely want to deal with the agent once they have realised they are late with their rent, often they pay when they realise this but are in the process of having the money cleared, which adds to the delay. The key is to make sure that the tenant has a clear communication channel and ability to build a relationship with the other party, where they can freely update on any shortcomings. Imagine if, instead of worrying whether you will get your money, your tenant would keep you updated on how they are tackling the problem.

Reactive Property Management

The other reason is that your agent is most likely never proactive in preventing late payments, they are also unable to enforce counter measures when the it's already late, most state law heavily regulates what the owner can and cannot do and this applies to the agent as well, meaning the agent often becomes equally powerless. 
Insurances can sell the peace of mind but worth noting is that you can usually only claim the money by the end of the tenancy, leaving you with unpaid rent when you might really expect and need it. 

How to Reduce the Risks

If we conclude, there are three key criteria that greatly decreases the negative impacts on your rental income/yield and wellbeing, these fall under;
  1. Objective property management
  2. Up to date technology
  3. Proactive management
  4. Transparency & Communication

1. Objective Property Management

Selection of a rental management solution that puts your interests in front of their own (this one is the hardest) - You need to always see your investment property exactly for what it is, an investment, it's there to create a passive income. It is therefore in your best interest to ensure that your property manager supports that. If your property manager only focuses on getting your property onto the market to 'reduce idleness' through a lower rent, then you need to question it, if you end up having to extend your listing time by a week with a higher rent your rental yield will by far be better than saving it from being on the market for 1 or 2 weeks extra, not to mention that you will probably also get better tenants. To see the impact of increased rent vs listing length follow this link.

2. Up to date technology

Frictionless payment methods aren't a big ask, it should be simple, but they are however a rarity still. Our recommendation is to make sure you go with a service that enables instant payments, 24/7, 365, to ensure both the tenant and you are able to rely on the instantaneousness of technology. 

3. Proactive Management

What's the point of having a property agent if they aren't thinking for you? They should be at the frontline to ensure they do everything to mitigate any kind of issues that are normality in any tenancy. You are paying a premium after all should and you should expect them to make sure that you have minimal impacts from what happens in and around your investment.

4. Transparency & Communication

This one is one is of great importance, your tenant is your biggest investment inside your investment, and as much as it comes from selecting good tenants it all funnels down to relationships, people do what they want and they listen to what they respect and trust, but respect only comes through relationships. That means that you should expect your rental manager to at least keep in touch with the tenants and that that relationship incentivises them to take good care of your investment as well as ensuring you are paid when you should be. 
There are many ways Cubbi works on addressing and responding to the issues the current industry creates between the owner and the tenant and if you are interested in how Cubbi could make managing rentals simpler, feel free to sign up or test the platform here.