Are you paying for Property Management or Rental Management?

Traditionally, the role of Real Estate agents stems from medieval English land agents, who managed vast rural estates for absentee nobility or the wealthy elite.  The everyday tasks of maximising the use of agricultural land, managing labourers and supervising tenants all fell to these "stewards".

Move forward a few hundred years and in early Australia, land agents either managed private estates for wealth pastoralists (often squatters that did not own the land), or were government officials responsible for managing, surveying, selling, or leasing Crown land.  Land agents would often purchase small plots of private land from settlers to resell or to combine into large privately held pastoral companies.  While much of the work of government land agents was aimed at transferring illegal squatter grazing tracts into legitimate long-term leases.

The first “modern form” of the Real Estate agency provided services that included property management, sales, leasing, and, crucially, valuation and consulting.  Valuations were important because of the then asymmetric market, where consulting services advised clients on the best use of land.

Today, Real Estate agencies tend to provide appraisals (though this tends to be driven by the market and recent sales), manage marketing campaigns, conduct open inspections, negotiate with potential buyers and manage sale processes through to settlement.

Oh, and by the way, they also lease residential and commercial properties.

Many Real Estate agencies have moved toward the specialised segregation of roles, creating a divide between sales and rental teams.  The management of rentals, however, has emerged as a cornerstone of agency revenue stability.  It is often described as the “bread and butter” of agencies.  To provide revenue stability, however, agencies need to manage large rental portfolios.  The larger the agency, the larger the rental portfolio needs to be to “support” overheads and other distinct areas of the agency.

Property Manager or Portfolio Manager?

The term “property manager” started to gain popular use when modern "management rights" agreements originated on the Gold Coast during the 1970s.  Driven by the increase of strata-titled resort style developments, a need existed for an on-site caretaker for shared facilities.  Combined with the caretaker agreement, letting agreements were often included in the management rights package, so that on-site managers (the property manager) could also oversee the letting of properties for investor owners.

Originally, property manager roles were focused on operational tasks, handling the day-to-day processes of rent collection, upkeep, and tenant issues. Owner committees (bodies corporate) retained the obligation of long-term structural integrity for the facilities and the safety of residents.

With the popularity of the Gold Coast as a holiday destination, many property manager roles transformed into pseudo hoteliers, managing short-term holiday rentals.  Over time, clear distinctions started to emerge between those property managers undertaking permanent letting and those managing short-term or holiday letting.

Property Management was focused on the entire experience for residents of strata-titled complexes.  Property managers built long-term relationships with residents (often neighbours) and reciprocal relationships with investor owners.

Real Estate agencies also started to take on more of a coordinated focus for managing their rental portfolios, especially following the introduction of Queensland’s Residential Tenancies Act in 1975.

Property Management became a structured profession, focusing on compliance, consistent processes and standards by which to educate those working in the industry.  The focus of residential legislation tended to be tenant’s rights and regulation, but many Real Estate agency’s focus remained on landlord relations (after all it’s the landlord that pays the commission).

Today, Property Management is highly regulated, with Real Estate agents* acting as a landlord’s legal proxy in day-to-day operations, maintenance, and tenant relations.  They are expected to know and follow relevant tenancy laws and manage all legal paperwork, lease agreements, tenant notices, compliance requirements, etc. They must act in the landlord’s best interest but are also required to ensure that all rental arrangements comply with tenancy laws.

Most Real Estate agencies employ a structure where the licensed agent (agency Principal) does not generally become involved with the day-to-day operation of the rental portfolio.  There is usually a dedicated team leader that oversees, typically junior, staff who manage the routine day-to-day work.

Based on the skill level and expertise of rental team employees, tenants and landlords experience wildly different circumstances.  The high level of “churn” (change over of staff) of rental employees and the fact that the role is typically seen as an entry level job, means that many of the people acting as your property manager are learning as they go.

Ultimately, however, while junior staff act on the landlord’s behalf to manage the property and communicate with tenants; landlords themselves retain ultimate legal liability for adherence to property laws and property standards.

Property managers have been a part of the Australian Real Estate landscape for over 50 years. Understanding the difference between a Real Estate (physical land and structures) focus and the Real Property (land plus the legal rights attached to it) focus is key to understanding whether you’re paying for Rental Management or Property Management.

Redefining Property Management

Property owners who do not share common areas or structures with neighbours (anyone with a detached house), generally do not have the “benefit” of a proactive body corporate that plans for the systematic upkeep of their structure.  Proactive asset management strategies shift from just fixing things as they break to preventing them from breaking in the first place.  Structures that are kept in better condition will rent for longer and further increase their market value.

Moving beyond a traditional caretaker role to focus on the strategic use and protection of your investment is the key to Real Property Management.  Shifting from a reactive rent-collecting focus to a proactive partnership allows landlords to confidently maximise their investment returns, while fostering better long-term relationships with tenants.

Planned preventative maintenance is significantly less expensive than emergency repairs and, overall, more responsive investment strategies are proven to increase rental returns and lower longer-term costs.  Treating rental properties as strategic assets helps to maximise their benefit to you.

Much like the intention of medieval land agents, a proficient Property Management arrangement should ensure that everyday tasks are competently administered, but should primarily assist in managing your business affairs to ensure maximum revenue and efficient operation of your asset to achieve your investment goals.

*  I have used the term ‘Real Estate agents’ because to be a Property Manager, as opposed to a caretaker, people must hold a valid Queensland Real Estate Licence.