General

What Must I Know About The Property Management?

To be able to choose effectively and supervise the right property manager, you must almost become a ‘manager of property managers’. This does not mean that you don’t hand over the management task to the manager you are paying –rather it means that you must have a clear understanding of the job you intend for him or her to do. If the property you are considering is standard residential, be very sure that you know everything, there is to know about the costs of property management in the state in which you are looking. Property management costs can vary greatly from state to state, and even from manager .If the positive cash flow is small to begin with, sometimes the added costs of inspections, letting fees, advertising costs and sundries can push this positive cash flow into a negative, especially when you add periods of vacancy to the equation of the housing.

If you are looking at property with some kind of on-site manager, your task becomes far more complex and there are many more things you must know. I am alarmed at how little research people undertake into the entity which is ultimately going to be responsible for the success (or failure) of their investment!

Before you proceed with any investment requiring external management for your house or houses for rent in Bangalore, Mumbai or any other city, the following questions will give you the absolute minimum information you will need.

What Must I Know About The Property Management

What is the Nature of Management?

Is the management a ‘management rights’ arrangement , where an entity has purchased the rights of management (making it far harder to terminate them in the event that mismanagement occurs ) or is it a ‘management agreement ,’where on-site management is provided by way of a contract between the owners (as a body corporate ) and the manager. This type of agreement may be easier to terminate should the need arise.

What is the True Cost of Management?

You need to work out the true cost of management as a percentage of return, as all too often this is not fully disclosed before you sign on the dotted line. While the management see itself may be seven or eight per cent of return (as an example only), often the associated costs of management –such as pool chemicals,cleaning, linen and laundry, telephone charges and other sundries –can severely blow out the final cost to the owner .I have seen managed complexes where the final figure of the management charges was an astounding 50 percent of the gross return. Again, this may be acceptable if the return is very high but you must know about these things beforehand.

What is the Experience of the Manager?

Management rights are commonly purchased by couples who are seeking a lifestyle change. Many times the manager has no past experience whatsoever and so must rely on either the processes of the previous (possibly unsuccessful) manager or on new processes with which he or she is not familiar. Where the manager is a large organization, find out about its other projects by asking to see annual reports and other documentation relating to the outcomes it has previously been able to achieve. Don’t fall into the trap of relying on the experience of the manager just because it has a name you know well – many big name hotels operators have experienced financial difficulty relating to mismanagement and there are also cases where the large name operator subleases the management rights to a smaller, less experienced one.

What is the Commercial Background of the Operator?

To see if the operators have experienced any prior financial difficulties such as receivership or bankruptcy, you should do a background check on them. Much of this information is a part of public record. Be sure to find out what other past or current companies the operators have been involved in so that you can also check out those companies.

Does the Operator have a Business Plan?

The failure of many businesses can largely be attributed to their lack of planning. The entity responsible for earning an income for you must have a clearly laid out business plan and you should have access to this. Where the property you are looking at is new or is being purchased of the plan, try to find out as much as you can about the developers prior to proceedings.