Whether it’s gin distilleries making hand sanitiser or hatted restaurants turning to take-out meals, many businesses and brands have been pivoting to the demands of the COVID-19 pandemic. But does this idea of retooling for a post-COVID world hold for property management? Is a total rethink of your operating model worth it for what could be a temporary state of affairs for your business? Or is this just what we need to bring our industry into the 21st century?
Scott and Brock from the Kolmeo team share their thoughts on the pros and cons of gearing up to pivot your whole property management outfit.
What’s been going on?
For property management, and most other industries, COVID-19 is a challenge that just keeps on giving. Problems to solve, legislation to stay across, technology to get on board with and just so many wonderful opportunities to do more with less!
It’s been a big reminder that property management is a game of slender margins. And that’s the case for every single player – agent, property owner and tenant, with everyone suffering from a major shortage of cash to play with. Tenants haven’t got savings to tide them over when they’re out of work or on reduced income so they’re finding it hard to make the rent. But in a lot of cases, property owners are Mum and Dad investors trying to get ahead. They often have a single investment property and don’t have the cash reserves to get by on low or no income from that property. This all adds up to less commission and most real estate business models will struggle to absorb that shortfall.
So it’s no wonder real estate agents are switching to survival mode just to stay in the game. Here’s just some of what we’re seeing agents doing to get by:
Staying on top of communication
It’s been incredibly important to communicate accurately and quickly with owners and tenants. But that’s been a hard task thanks to the pace of change and all the chatter and confusion about what’s actually happening.
Legislative change has really shaken things up for real estate agents. We’re used to policies on housing evolving at a snail’s pace and what we’ve seen during the pandemic has been lightning fast. Having said this, announcements on changes to rental agreements have often been at the end of the list, coming after the details about restrictions on social gatherings and even whether fishing counts as exercise.
This is not surprising because this stuff is really complex. Pollies would have a justified fear of getting it wrong so they wait until the eleventh hour to make a call on where to draw the line on tenants’ and owners’ legal rights. Along with all the hearsay and confusion on social media, this adds up to a very tough communication challenge for real estate agents.
All hands on deck
The workload is colossal right now. We’ve gone from showing rental properties to 30 people at a time, to having individual viewings or virtual inspections. There are stressed out tenants on the phone asking about reduced payments. And we have property owners panicking about mortgage payments because rent has dried up, not to mention what all this means for commission revenue.
It’s been a time of peak output for team members. Pretty much everyone has stepped up and put in the hours and it’s tempting to expect them to just keep going full throttle indefinitely. Expecting staff to maintain this pace indefinitely puts you at risk of shedding team members at a time when you really need them.
Going too far
A few real estate agents have really gone above and beyond to secure rent for owners and their commissions. But when we see ASIC stepping in to upbraid agents advising tenants to dip into their super, that’s a big wake-up call. Of course the whole industry copped a hiding in the media as a result. And that’s a real injustice for all the real estate agents and property managers who handled thousands of interactions with patience and professionalism, care and compassion, no matter how stressed and overworked they were.
Video apps have certainly been a life-saver for overworked property managers. We shudder to think how vacancy rates would have skyrocketed if it weren’t for virtual walk-throughs. Sticking to rental inspection schedules would have been pretty much impossible without these options. But on the other hand, if your team can’t set foot in properties you manage, your owners may be more inclined to question the value you’re delivering – and your fees.
Cloud ready at last
Any business owner in the world who was yet to be convinced by cloud technology is now over the line thanks to COVID-19. And the real estate industry is no exception. We’ve seen huge growth in across the sector which has led to a few stumbles at the first hurdle. You couldn’t choose a more challenging time to migrate all your data than in the middle of a global pandemic.
But for those who’ve already made the move, they’ve definitely seen the benefits. When efficiency adds up to more time and revenue for real estate businesses, we really get to see the strength of technology as a lever for profitability.
Where agents are winning
Whether to boost customer engagement or support a shift to virtual operations, tech adoption has been a clear winner for any type of business during COVID-19. For many real estate agents, the whole situation has been the push they needed to make the move. But for cash-strapped companies who haven’t been staying on top of balance sheets and capital management, this has been a big ask for their budget.
It’s also the astute financial operators of the sector who have been poised to expand through acquisition. Companies sitting on cash or with access to capital have realised exceptional value in the businesses they’ve snapped up, often bringing expansion plans forward by a year or two to take advantage of bargains on offer.
Another ingredient in the winning formula for real estate has been a respect for property management as a valued source of revenue. For the businesses who’ve focussed their value prop and business operations almost exclusively on sales, a market slump hurts more. Having a robust, high-value property management function can keep cash running through their business when sales volumes sink.
This sense of respect for what property management can be for a real estate business can also shape a winning workplace culture. There’s a lot of upside to the flexibility COVID-19 has brought to all our working lives. It opens the door to better work/life balance, but only when leaders support teams to maintain that balance. A crisis creates the sort of urgency that will see people rally around and do more work to rise to the occasion. But beware of expecting that level of efficiency to continue because it’s not sustainable.
Ours is an industry that’s come to expect a high rate of churn in headcount. As innovation and agility become even more important talents to foster in our teams, there’s even greater value in looking after them. Making sure they take leave and reset on a daily basis can give them the headspace to thrive and bring their best ideas to work.
Lessons for the long term
A business culture that cares is important for all your stakeholders. A lot of people are scared and uncertain right now. Agencies who ignore this in their pursuit of profit will risk huge reputational damage as the super/ASIC snafu made clear.
However, it’s also important to hold the line when it comes to fee arrangements. Negotiate in good faith, but if you reduce your commission for a time, be clear that it’s temporary and a major concession. After all, your business is still working flat out, doing all you can to keep the rent rolling in.
Also be careful not to make the shift to virtual inspections a permanent one. There’s no doubt that it’s your best opportunity to get though this crisis. But to keep proving your value to property owners and tenants, you need to be in front of people, building authentic relationships. And in the wake of COVID-19, human connection is going to be all the more sought after so don’t drop it from your value prop.
Like all crises, COVID-19 brings challenges and opportunities for businesses. It’s definitely a chance to evolve to be more efficient, and more customer-focussed to drive loyalty and growth. At Kolmeo we think the smart approach is to only move forward with wholesale changes to your business model that are going to meet the market where it is when society returns to something resembling normal.