Do property management agencies have the right business model in a post-COVID world?

The COVID-19 crisis has brought challenges in the property management industry and has since changed the way we do business. In the recently concluded MRI Ascend APAC 2020, Industry Principal Josh Symons was joined by esteemed property management leaders in a residential panel to discuss the impact the pandemic has had on property management businesses – particularly if they have the right business model as we move towards the new normal. Here are some key highlights from the session.

The property management business model is evolving not just to survive but also thrive in the future

In a property management business, the main revenue stream has always been a percentage of the rent collected. But the pandemic has highlighted that this model will not be sustainable for much longer, especially when looking at rent reductions and how leases are valued in a volatile climate. “For a long while we have all operated on the reliability of property management fees, but what we’re seeing now is it’s evident that there’s some bigger, macro-economic issues at play that will likely continue on for a couple of years,” said Cathie Crampton, Director of Property Management at Place Estate Agents. “As a result, relying solely on management fee revenue is quite dangerous.”

Cathie sees this as an opportunity to explore additional revenue streams in line with the important role property management plays in the real estate rental space. “We support our clients in multiple facets, which we don’t really effectively derive revenue for. And in addition to that there are other ways that we can support a client before they even become a rental client,” says Cathie. “We need to get a lot smarter about the scope and the landscape that we position ourselves in than what we currently are.”

The property management role is evolving as well

As the pandemic presented new and unique challenges for owners and tenants, the need for a reliable and accessible advisor became apparent and the property manager fits the role perfectly. The panelists agreed that what we will see from here on out is the rise of property managers as trusted advisors. Tamsin Wilson, Head of Property Management at Belle Property Paramatta noted, “We actually truly became advisors and we had this really unique opportunity to actually help people, not just with their property, but with their livelihoods over the last couple of months.”

Josh agreed, “There were significant lease negotiations and having to really be that middleman that can get the best for the landlord, but also not forgetting that the tenant is a client as well. We’ve seen how property managers fulfilled that duty of striking the right balance – helping landlords make informed decisions while keeping in mind the wellbeing of the tenant.”

Income diversification should be supported by technology

The panelists agreed that multiple revenue streams and a shift in a property manager’s role are the future for the property management businesses. But without the right technology to support additional services, agencies will find it hard to efficiently serve their client’s needs.

“As technology moves on, we have to move on. We need to have platforms that support this because that’s what we get rated on by our clients,” said Maria Carlino, National Head of Property Management at The Agency. “What stands us apart from everyone else is our service and the platforms that we use to be able to execute that service as best as we can.”

The growing popularity of mobile apps and client portals for instance, makes service transactions faster and more convenient for clients. In property management, these interfaces provide clients access to their rental property information and a direct communication channel to their property managers. Tamsin shared how they are utilizing this technology now, “We’re using MRI Property Connect tenant app and about 25% of our tenants are already using it to get information and to communicate with us. It’s quick and easy for them and it saves us time as well.”

These solutions aid the changing business model of property management and help deliver services as the client expects them. “These apps are designed to give that real-time information and operational efficiency, but also landlords and tenants can self-serve at a time that suits them in a way that suits them,” said Josh.

Adapting the right mindset, along with proper training, will help property management teams adapt to new responsibilities

Implementing a more comprehensive business model would need a highly-skilled workforce. For the panellists, team members should not only have the technical knowledge but also the mental capacity and attitude to adapt to changes. “One of the big challenges through the pandemic has been the capacity of team members to be openminded to what the client is and what their role is to the client,” said Cathie adding that not all property managers would initially have the relationship manager style that is needed moving forward. “We can conceive these multiple revenue streams but the reality is we still need to coach train, mentor, and help shift the mindset of some of our team members.”

Now it has become even more important for property managers to take the initiative in educating themselves. “Commit to educating yourself about what is happening in the market, about what you can do. With the information you have, you’ll be able to make informed recommendations that can best serve your clients’ interests. That’s where they see the value.”

A fundamental change in the property management business model is not a new topic for those in the industry. But as this crisis has highlighted, the time has come for agencies to actively participate in the discussion if they are to meet the demands of the changing times.

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