When Owners Are Selling, What Should a Property Manager Do?
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The Covid-19 pandemic greatly influenced the global and U.S. real estate markets. In the U.S., property prices saw a 17.5 % year-on-year growth in March 2022. This is three times higher than the average growth rate over the last thirty years.
The competition for rental properties is fierce and rental prices are soaring. However, despite this, property managers are watching their portfolios dwindling. What is causing landlords to sell, and what can you do to retain clients? If it feels like all of your owners are selling, these property management tips from expert consultants can help.
Why Are Property Owners Selling?
As you (and your property owners) know, there are several pros and cons to owning a rental property. Ideally, a rental property can garner a fairly 'passive' income while also growing in value so that owners eventually have an asset worth considerably more than its initial purchase price.
However, the markets fluctuate. Sometimes the return on investment (ROI) is not favorable for property owners depending on their goals. Let's consider why property managers see many small-scale landlords selling their rental properties.
1. It's a Seller's Market
The property market is at an all-time high. As a result, rental property owners might consider selling now to get the highest return on their real estate investment. This is especially true of accidental landlords ready to be rid of the hassles of tenants and legal red tape.
2. Legislation Favoring Tenants Can Make Rent Collection Challenging
Due to the global pandemic, many landlords did not receive rent payments for many months. In addition, the federal eviction moratorium made it impossible for landlords to remove non-paying tenants while they still had to pay maintenance costs, taxes, and mortgages. Recovery has been difficult for property owners, and many small-scale landlords are compelled to sell to avoid financial trouble.
3. The Rate of Return Is Lower
The cost of repairs and maintenance has spiked, and taxes have increased. Therefore, if the rent a property owner can charge doesn't increase proportionally, then the return on investment is insufficient to maintain the property.
4. Rental Real Estate Has Become Less Attractive to Small-Scale Investors
The post-pandemic demand for rentals is high. However, with property prices being so competitive, there are very few good deals available. Real estate investors are holding back from big purchases.
What Can You Do?
In the face of losing some of your property owner clients because they are selling some or all of their properties, follow these property management tips to help you make the most of a challenging situation.
1. Don't Fight It
It's impossible to fight the market when conditions are ideal for real estate investors to sell properties. As a property management consultant, we don't advise trying to dissuade your owner clients from selling. The market is what it is, and they must make the right decision for their financial best interests.
2. Recommend In-House Resources to Help Investors Sell
So if investors are going to sell, use that as an opportunity to apply other aspects of your 'full-service' rental management business. Before your owners can send the business of the sale to an outside real estate agent, chat to your client about making the sale in-house.
As a successful property manager, you are connected to other investors and can help facilitate a sale for owners. Look to other investors in your portfolio to purchase the property. You, the property owners, and your tenants benefit because:
- The current tenants do not have to move out.
- The seller benefits from a sale that is likely to proceed more quickly.
- The new property owners don't need to find a new tenant.
- The property remains in your portfolio.
Exercise your skills as a real estate agent and leverage relationships to help clients through this situation (without losing properties from your management portfolio).
3. Don't Let Your Client Waste Your Time
However, if a property owner decides to take the sale of the property to another agent, cut your losses. Make a clean break and move along swiftly.
- Don't help the other agents find a buyer for the property.
- Unless you are contractually bound, don't do the security deposit paperwork for a property you'll no longer manage.
- Don't facilitate the make-ready for a new tenant.
While it's important to keep the relationships professional, you don't need to do any work for property owners who will not be paying you for the work.
4. End on a Good Note
While you might feel bitter about losing the work, end your relationship with the property owner on a good note. They might not be doing business with you anymore; however, you certainly want them to have good things to say to other people looking for the services of a property manager to oversee their rental properties.
5. Get New Doors
As with every business, what you do in times of stress can determine your property management success. For every door that you lose, you need to find a replacement. Now is the time to up the ante on your marketing campaign and client generation processes.
6. Silver Linings
Losing a client can deal a big blow to your morale. Don't let the loss of business damage the confidence and enthusiasm of your employees. Take a step back and evaluate why you might be losing clients. While you can't control the market, use the information to improve your services and keep all the worthwhile clients that you still have.
If you find time available due to a decreased workload, make the most of this by scheduling training and upskilling sessions for you and your personnel.
7. Work With a Real Estate Management Consultant
A few years ago, property managers could find new clients with less difficulty. However, with the pandemic-imposed changes to the real estate industry, many property managers are finding it increasingly challenging to find new clients.
Real estate management consulting can help you pinpoint the areas in your business where you can make improvements to keep current clients or grow your business!
Get More Business Growth and Property Management Tips from an Expert
If clients are selling properties, don't panic. It's part of the real estate market and the nature of investment properties. In a seller's market, even with your best team, processes, and technology in place, owners are going to sell.
However, losing doors (no matter the reason) can create the perfect opportunity to perform a health check on your property management business. Set time aside to review your operations and chat with your team. In addition, an outside expert's view and guidance can be a tremendous help to get you back on the path to success. Real-Time Consulting Services is here to help! Reach out to learn more.
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