Are property prices affecting your letting pool?

25 March 2022

A booming property market has seen Queensland property prices reach record highs. That is great news for sellers but perhaps not such great news for managers who are losing lots to owner occupiers. It seems that increasing prices is also driving demand for lots in community titles schemes as buyers look to purchase units and townhouses because they can no longer afford a standalone house.

Managers losing lots from their letting pool is not a new problem and one that will continue beyond this current property boom. Unfortunately housing prices are not the only cause of managers loss of lots from the letting pool. There are many factors that contribute to this problem.

The unfortunate impact is not only the loss of income from these letting appointments but also the loss in value of a business. It is not unusual for a letting appointment to be worth many thousands of dollars, or even tens of thousands of dollars depending on the type of business (short/ long term) and the multiplier that applies to that business.

Managers need to understand that this is a risk of owning a management rights business. Income is unlikely to be stable over time. Income goes up as lots are gained in the letting pool or as rents increase. Income goes down when lots are lost from the pool and rates go down. The income for the business will swing as various factors (covid-19, natural disasters, the economy and world politics just to name a few) impact the tourism industry.  The value of the business will change accordingly.

Despite these factors, managers can reduce these risks by doing a good job and having a good relationship with owners. Managers should:

  • Remind owners about the excellent returns on their investment and encourage owners to maintain that investment rather than sell and invest elsewhere.
  • Make owning an investment property as easy as possible for owners through good management and making sure owners know about the excellent service being provided.
  • If owners wish to sell, encourage owners to sell the property as an investment relying upon the excellent returns. Managers should assist owners collate/ provide information for the sales agent regarding the investment returns so that the property can easily and succinctly be marketed on that basis. Managers should work with rather than against the sales agents for the best chance of being engaged as letting agent by any future investor.
  • Remind owners about the excellent condition of the complex and common property and how this positively impacts rental and property values. Owners are more likely to reward managers with their support if they believe that they have contributed to their success.
  • Take active steps to return any lots that are let by outside letting agents back into the letting pool. Good managers are in the best position to provide the best service to owners. Managers need to market this and develop relationship with all owners not just those in the letting pool.
  • Consider obtaining a full real estate licence and offering additional services to owners. Sales agents have an obligation to the owners to achieve the best price so a manager will not be able to ignore owner occupier buyers however a manager will be able to control the marketing of the property to encourage investors rather than owner occupiers. If selling to an owner occupier, managers should develop a good relationship with the buyer at this stage. Circumstances change and owner occupiers may become future investors. People provide referrals for those who provide good service which may lead to other opportunities. You might ask that owner to vote in favour for your next general meeting motion or they might become the next chairperson.