Property management rates are under increasing pressure across Australia, with agent profits suffering as a result. In fact, the average profit margins have dropped from 16.8% to 15.4% in just 2 years (2014-2016).
And as more fixed-fee and low-cost competitors enter the market, it’s getting harder and harder for real estate agents to command the same rates as they had before. So, increasing rent roll profitability is essential to the long-term success of your business.
Fortunately, there are a number of ways you can help this to happen. Read on to find out more:
1) Look at Quality, not Quantity
It’s easy to get caught up in growing your rent roll as fast as possible, however this isn’t always the best way to go.
You need to focus on quality over quantity. For example, 200 properties at $300/week is better than 300 properties at $200/week. Whilst both make the same money, the larger one requires more time, money and staff, as well as resources, to manage. This increases costs and has a heavy impact on profitability.
2) Understand the Market
Your clients don’t just engage you for your property management know-how – they also do so to tap into your industry expertise and knowledge. This is exactly why it’s crucial that you keep your finger on the pulse of new industry developments and market trends, as it allows you to add more value to your clients.
This doesn’t have to be a complicated process – it can be as simple as knowing what the average rental value of similar neighbourhood properties is so you can help clients to reduce vacancy rates and boost their returns. As a result, you’ll promote yourself as an experienced property manager, which will help you to grow your rental roll down the line.
3) Offer Premium Customer Service
It’s common for agents to drop their fees or offer heavy long-term discounts to win new clients. Although this may work for clients who are watching their budgets, it’s not a sustainable long-term plan.
Instead of lowering your charges, instead focus on providing your clients with premium customer support. This can be as simple as making sure you get back to them the same day, they contact you, or by making your process transparent by giving them access to a client portal where they can track progress. Research shows that clients are willing to pay up to 16% more for high-level customer service, so this poses a great opportunity for you to increase your fees.
4) Display Your Value
Don’t wait for clients to find out – let them know about the value you offer by broadcasting it across your marketing channels. This could include anything from encouraging clients to leave reviews on Google or by sharing testimonials on your social accounts. They’ll all help to win you new business at a lower cost.
85% of consumers trust online reviews as much as personal recommendations, so a strong digital presence can have a large impact on your end profitability.
5) Raise Your Fees
For many clients, your fees will be indicative of the level of service they should expect to receive. Additionally, it’s also the simplest way to boost your bottom line.
However, the issue you’ll likely face will be when to increase your fees and how to communicate this to existing clients, without losing them.
Maybe you’re increasing your fees to match a rise in legislative compliance costs. Maybe you’re simply doing it because it’s been ages since you did. Whatever the reason, you need to be able to demonstrate why it’s happening and provide adequate notice to your clients.
You also need to have a contingency plan for those clients who’ll be reluctant to hand over more money for fees. Whether you offer them a longer contract term or limited services, make sure you’ve got it covered.