It is a recurring theme: Losing property management clients to “cut price” operators. They offer fee structures so low it simply cannot be sustainable, and how do you compete with that?
Competing on price is a race to the bottom. You might win the sprint but then you’ll need to retire as you run out of resources that will help you run the next race.
The possibilities are endless, from a 2% introductory rate for 12 months, to 3 months free management, or $0 letting fee, the list goes on. But be cautious, offering constant discounts or dropping your prices too easily could condition your landlords to think of you as a cheap service – and no one wants that!
Conditioning your landlord to think this way is certainly not the only potential problem arising from price wars;
- How do you pay, train and retain a quality PM team on such tight margins?
- How do you offer a quality service to your clients on such tight margins? Do you skip a few inspections? It’s a slippery slope!
- What about when the agency 2 streets away offers the same deal, but your introductory rate has expired? Your landlords will be compelled to chase the next cheap deal if you haven’t won them over with outstanding service.
So, ask yourself this: were those tactics only good to get you through the qualifying rounds, and will they stand you in good stead to run the marathon? Probably not.
How to run the marathon, and compete in management wars
If your clients understand the value you provide to them, they will be happy to pay a fair price. There is a perception that landlords are overly sensitive to pricing, but this isn’t always the case. Show them that when the tax deductible cost of your services is compared to the other costs of owning their investment property (for example, insurance), you are the one providing extremely good value.
Make their problems your problems. Do your landlords complain if the money is not in their account in time for their mortgage payment? If the tenant is a little late with the rent do your landlords now have to wait for the next disbursement before they see their money? What if their mortgage payment is due before then? If you don’t know, ask your landlord when their mortgage payment is due… just asking that question shows that you care about their financial wellbeing too. Our research with landlords across Australia shows that 30% of landlords have experienced rent arrears (sometimes, frequently or always) – that’s huge! And with many landlords using negative gearing, that can be a cash flow nightmare! Letting them know that you understand the pressure a late rent payment causes demonstrates the value of your professional skills.
Go one step further and offer additional capabilities that set you apart from your competition. We surveyed over 300 landlords nationally in mid-2017 and discovered that over 70% of them are interested in receiving their rent via direct debit. In addition, landlords are much more likely to think that they get the most benefit out of direct debit (72% said landlords), as compared to property managers (43%) or tenants (33%). We recently partnered with Ezidebit to enable our clients the integrated capability to direct debit tenant’s rent. You can now offer this service to your landlords and give them confidence that you are in control of their tenant’s rent payments. Demonstrate that you are taking steps to ensure they receive their rent in time to pay their mortgage.
If you really want to blow their socks off, consider this – Console Pay provides cleared funds into your trust account within 2 days. If you have landlords who are really price-sensitive why not offer to give them their money sooner? Do they currently wait for a disbursement once per month or fortnightly if they’re lucky? Would they rather have their rent money offsetting their mortgage instead of sitting stagnant in your trust account? If you’re not spending time reversing receipts for dishonoured payments or chasing tenants for arrears, this gives you time back in your day to provide even better service to your landlords.
What about the tenants?
We also surveyed over 300 tenants across Australia in mid-2017 and found that the majority (69%) will pay by direct debit if they don’t have to pay for it. By passing this cost on to your landlords, you are ensuring that you get greater numbers of tenants signing up to the service. The more tenants who sign up, the more efficient your office processes become. How? Gateway automatically creates your receipts for you, giving you additional time to service your landlords in more value-adding ways.
The old adage “you get what you pay for” has never been truer than in our industry right now, so show your clients that they get their money’s worth by partnering with you to manage what is often their biggest asset. Console Pay is now available in Gateway for Property Managers wanting to streamline their processes and automate rent collection.