Mike Mortlock: Welcome to Geared for Growth. This week we're chatting with Darren Hunter of darrenhunter.com. Darren's a property management trainer, speaker and consultant both in Australia and internationally. He basically teaches property managers how to go out there and excel and kick bottom. So we delve into the property management industry, get a bit of an inside into how he got to where he is, and we have some really good gems on how to work with property managers, and how to find a good agency that's going to provide a premium service. If you can bear with couple of audio issues that we have with Darren, I think you'll find it's a great interview.
Mike Mortlock: Alright, Darren Hunter thanks for joining us on Geared for Growth.
Darren Hunter: Thank you!
Mike Mortlock: So just to kick things off Darren, can you tell us who you are and what you specialize in?
Darren Hunter: Sure, so I'm a national and international property management trainer, so for the investors that are listening today, when you buy a rental property and you hand it over to a real estate agent, who is going to manage that property, my job is to train those people. And I do a number of different areas, really in an area of growth, in an area of nuts and bolts, and nuts and bolts I teach them complect management communications skills. Time management's a big one for me, you know doing repair, dealing with trades people, all those sort of things. And in the growth area I'm very much an income maximizer, helping them to make more profit with what they do. And also helping them to grow.
Mike Mortlock: Awesome, and I'm looking forward to digging into that a lot deeper during the course of the interview. What posters were on the bedroom walls of youngster Darren, if we can get some cheeky insights into you?
Darren Hunter: Goodness me! Posters on the wall, I don't think there was too many posters on my wall, but there was certainly music in my stereo.
Mike Mortlock: Okay.
Darren Hunter: Called a stereo player. And oh goodness me, I suppose music growing up, which other people it's posters on the wall, you know for me it was clean. And things like that. 80s, I'm very much an 80s child, so 80s music was really, really big for me. I've grew up in Whyalla of South Australia, which is steel mining a working class community. And I came to Adelaide when I was 17 years of age.
Mike Mortlock: Awesome. Good taste there. Can we kick off with how you got started in real estate, and property in general?
Darren Hunter: Basically I'm a university drop out. When I did year 12, I got into my third preference, then my first preference was town planning, I didn't get into that. It didn't have enough points. My second preference was English teacher, I didn't get - sorry it was an Art teacher, I apologize, I didn't get into that 'cause I loved Art. My third preference I fell into as an English teacher, with some also studying skills of Art. And I ended up at the University of South Australia, which was at the Salisbury campus now that has been converted into the Tyndale Christian School. And I was there for nine months. After nine months I've decided I did not want to rely on my parents any longer for financial support.
I wanted my independence, I wanted my own job, my own money. And I wanted to completely disconnect from my parents in that regard, and so I pulled out of university, much to their horror. And started then working jobs. I remember working for the Royal Guide Dog's Association selling tea towels and trinkets over the phone. I worked for a company that sells fertilizers, door to door as in over the phone selling those. I also remember working at a petrol station, you know pumping petrol, changing tires, fixing tires all those sorts of things. And then I happened to come across a man that owns several real estate offices. He saw potential in me, and then he decided to employ me and drop me into the amazing, but very scary world of property management.
Mike Mortlock: Wow, now you've certainly zig-zaged along the way to getting there. It seems funny to think even sort of who you are, and the sort of clientele that you have at the moment. But what can you tell us about the industry, back then, compared to today?
Darren Hunter: The industry back then, obviously we've evolved with technology. So technology is a big one, you know back then it was you hand write a letter, you give it to the secretary. She types up a letter, you then sign it, it gets posted and you get phone calls of people calling in, and someone's there to answer your calls for you. So that was that, but the thing is, with property management, I'd say that awareness of tenants to their rights was a lot less back then. With media, with the internet, people are a lot more savvy on their rights, but also like anywhere, higher expectations. Particularly, they've accelerated during the GFC. People's expectations, tenants' and owners' are a lot higher than what they were. And a lot more demanding as well. So they're probably the three key areas, aside from legislation that's evolved as well. And got tighter of stronger consumer protection as well, towards tenants. All those sort of things had evolved over, you know, since 1989 when I first started.
Mike Mortlock: So property management, obviously lured you in and you stuck with her. What was it that sort of stood out to you, what did you enjoy about it, when you kicked off your career?
Darren Hunter: Well, I'm gonna make it clear from the start, I hated property management.
Mike Mortlock: Okay.
Darren Hunter: I couldn't stand it, I found it really difficult, and because I had a low self-esteem and low confidence.
Mike Mortlock: Right.
Darren Hunter: And I'm not gonna go into the issues of why there, in a lot of ways it was stemming from my childhood, but I found property management a nightmare. It's full of conflict. And then it was really my first two year, I found it really, really difficult. And I'm gonna be honest with you, I was retrenched in through, from the recession, that Paul Keating said that we had to have. I was actually retrenched, and I had a sense of relief. And I knew that I'm not a quitter. And so no matter what difficulty and blockage came up against me that really scared me, I pushed through and I wasn't going to quit. But when I've got retrenched, it gave me a sense of relief 'cause I didn't quit.
But really, I then got back into property management, a short time later as a property inspector. Doing all your entry reports, or your routine inspections, or your final exist, bond inspection, plus all tribunal hearings, for 500 properties. And I thought that I was taking a step back off the front line, I've got thrown further into the front line, with a lot more conflict. But through that time, they say that if you face your fear enough, the death of fear is certain, that's true for me.
And I ended up breaking through the issues that I struggled with, to embrace property management, to go “yes, this is an amazingly difficult job, and I'm going to master it”. So really, my career took off from about '93, '94 when I was able to deal with my confidence issues.
Mike Mortlock: That's a pretty amazing and inspiring story there, Darren. It sounds like you had a real baptism of fire there, and I guess it's not an uncommon thing. People that sort of rise to the top of their fields, do sometimes share stories of hardship and tragedy in commence. So that's a pretty amazing background.
Darren Hunter: Yeah, absolutely. And you know, my story is very inspirational. There is another angle, and another dimension to my story that you know, I tend not to share too much. But it does goes to a completely different level with where I'm - you know really lead to where I am today.
Mike Mortlock: Yeah wow, awesome. Well that might be the topic of a Richard Fidler interview, it's a bit more qualified for the human story than myself. Getting back to sort of property management, and property management offices. There seems to be I guess a bit of a disparity between the sales and the property management department. You know, you hear the press one for sale and press two for property management. I don't think it's an accident that number two is property management. Is there a bit of a sort of an air of superiority that the sales agents sort of seems to sort of lord over the property management side of things? Is that a real thing?
Darren Hunter: Absolutely Mike! Totally 100% you're right. And there are some very key reasons for that. I like your analogy, I've never actually thought press one for sales, two for property management, but you're 100% correct. So right at the top is the boss, he sets the culture. His values set the stage on how the play will go. And his values are: he comes from a sales background. You see, basically this is what happens. The sales person starts, let's say they start as a 19-20-21 year old. And they fall into real estate sales, they got talked into it by another real estate boss, he saw potential in this person. And said “Hey, look I reckon you'll do really, really good in sales. You've got a good background. You're good with people. I can see potential in you. Come and join us in real estate sales”, so he goes “Yeah, why not?”. He joins, he enjoys it but in the first one or two weeks of starting as a real estate sales person, he gets tapped on the shoulder and says “Hey, you see those ladies there in the corner. They do property management. They just bring referals into the office."
Mike Mortlock: Right.
Darren Hunter: And it automatically, right at the start gets this negative view of property management. And it's just problematic, and it's stressful and we don't want to deal with that. And so they get brainwashed really, really early. And so growing over the years, they get really good at sales, they throw some leads at the property managers. They see them struggle, they see them turn over, they see the stress, full confirmation that that person, that first spoke to them in their first two weeks is right. And then one day, they decide to become a real estate boss themselves. And they do, and they're really enjoying sales but they're selling properties to investors who want their properties managed. Well, there's the birth of the property management department. And yet his values don't change.
Mike Mortlock: Yup.
Darren Hunter: And property management becomes second best, because it does have stress. If it's not managed correctly, it can get very problematic. But he's focused on sales. And he loves sales. That's his cash cow, though property management looked after is gotta have a far different function, but also look after him as well as what sales do. But it doesn't happen that way, property management just stays second best, and it's just struggles along. And that is the typical culture of what happens in more than 50% of real estate agencies here in Australia.
Mike Mortlock: Right. Now from my perspective, as a business owner I would love the idea of having a rent-roll as a feely guaranteed income, month on month, whereas sales is a bit up and down in terms of saleability of the business, rent-roll is a bit more bankable than the sales team. Is this changing? Are principals starting to get the power of the property management department over and above just something that we're, to do with chip away maybe pick up a few sales along the way?
Darren Hunter: Slowly, slowly it's changing and generally they need to have crisis, they need to have a really flat sales market, lot of financial pain to realize that they should have been, or can be building their property management department. But the thing is also is that they have this view that you gotta get as many rooms in the front door as you can. Let's bring on as many properties as we can, and do it at any price and they end up building this very busy and problematic property management department, where they're not earning enough income to give the incentive to say “I want to do this well, because we are getting well rewarded from it”. They end up getting very busy, they get very problematic with it, and they're not earning much money, because they've discounted it too much. And therefore, their value and focus doesn't go on the business.
Darren Hunter: Let me tell you, there was survey done by a gentleman by the name of Robert Bevan, some years ago. He runs a what's called bestpractice.com.au, which is all about teaching real estate agents best practice. And he did a survey, and he found that the average real estate principle, the average real estate boss, the amount of time that he spends focusing on property management compared to focusing on his sales department, in a month, the average real estate boss spends one minute per month focusing on property management.
Mike Mortlock: Wow, that's pretty revealing.
Darren Hunter: That's shocking.
Mike Mortlock: Yeah, I mean in some ways, it's not a surprise, but I mean that's a ridiculously low number.
Darren Hunter: Correct.
Mike Mortlock: It's oblivious going very low priority within the office.
Darren Hunter: Correct. So that gives you some insight why a lot of businesses rent-rolls out there, or rental apartments struggle along and contributes to the turnover, which we'll talk some more on.
Mike Mortlock: Yeah, for sure and I definitely wanna talk about price as well. But getting to the other side of the fence, again just talking about tenants, we sort of observe in some of our inspections that tenants will say you know "I'm renting here 'cause I own an investment property elsewhere" or “I'm only renting while I build.” It seems like they want to offer up a justification for why they're renting. And there's maybe a sense that they're feeling like second class citizens. Do you think there is still a negative perception on renters?
Darren Hunter: Absolutely. Totally and you know, I actually think the government contributes to that as well. So for example, in America, the agencies there charge tenant fees. If a tenant gets late in the rent, they get penalized. You know, all sort of different fees, but in Australia the government protects the tenant. There's like it's a very strong consumer protection, and it's like they're saying “Well the tenant cannot afford to buy. They're poor, therefore you can't charge them fees.” That's my viewpoint on that. But certainly property managers in general, still treat the tenant as second best because it can be very, very conflicting in property management.
And at the end of the day, the property manager works for the property investor. The property manager has to work in their best interest, but unfortunately that automatically then translates to treating the tenant as second best. And I had the privilege, in 2003 of going back into the rental market myself, as a tenant, I had to for a couple of years because of my life-style changes. I went into business as a trainer and consultant. And I wasn't in a position to buy because I had to prove all my figures to the bank first of running my business for two years before I could do that.
Mike Mortlock: Yeah, I know that gap.
Darren Hunter: And even the company I was actually training the company, as part of a large real estate network, so the people that were managing my property were attending, well supposedly attending my training, which they weren't. And they still treat me as second best, even though that they knew who I was. But because it was simply part of their culture. And that though the owner may get served as well, the tenant doesn't. The tenant doesn't get feedback after a routine inspection. They don't get a pat on the back. They don't get “Hey look, you paid rent really, really well on the last six months. Thank you very much!”. The good tenants are taken as granted. And so unfortunately that culture is very, very strong. And certainly part of my message is we just can't treat tenants that way.
Mike Mortlock: It's funny, you've only got a sort of inquire on a property for sale, and see the red carpet rolled out. And an inquire on a rental, and have them sort of say “There's an opening at four o'clock on Saturday, if you can't make it, get knicked sort of thing. That's an interesting sort of difference in the service.
Darren Hunter: Yep. Having said that, agents just don't have the resources to go out there, and just say “Look when do you wanna an open inspection”. Basically when in general, there's more demand from tenants, on properties available in general, the agents are not gonna jump for the tenants.
Mike Mortlock: Yeah.
Darren Hunter: When they're able to rent them really, really quickly. Places like Perth, that at the moment that are really struggling, and agencies are more quicker to jump on tenants that wanna have a look at property and service them a lot better when the vacancy rates are really, really high.
Mike Mortlock: It's funny how that works. Now getting back to yourself as a property management trainer. What made you sort of transition from working in property management to becoming a trainer? What made you make the jump?
Darren Hunter: Well it's funny you say that. In 2003, I transitioned from being a senior property manager, managing a rent-roll of 400 with two other staff members, in the Riverland of South Australia. I ended up getting an amazing roll with the company I was working for at the time, to manage 18 branch offices over South Australia Northern Territory and [inaudible 00:17:48]. And with 28 property managers. And so now I'm managing a piece of land with offices the third of the size of Australia.
Mike Mortlock: Wow.
Darren Hunter: And you know, it was really a year into that. I was putting myself through a lot self-development. Really loving my role, but I remember driving. It was 2004, I was driving to the Iron Triangle, in the South Australia, I was about an hour North of Port Wakefield and I just had this epiphany. I was driving on the high, I remember the day, I remember the time and I just realized that I can be a trainer and consultant to the industry. I believed and I knew I could do it. And from that point, I was gone. I was then - took the year to make transition of bringing that dream into reality. Having said that, when I ended up resigning from my job. I took about 6 weeks notice, to then transition to be a full-time trainer. I went from a secure safe salary of a state manager's position, to now nothing.
And I had key people in my life say "Darren, it's not gonna work. You can't do that. Real estate bosses don't care enough about property management. To want to afford someone like you." And so I went and did something that no one has ever done before in South Australia, Northern Territory. And went as a full time property management trainer and consultant. And I just wanna encourage everyone out there, just because no one has ever done it before, it doesn't mean you can't do it. If you really believe you can do it, you can do it. If you know that you can do it, go and make it happen.
Mike Mortlock: I think that's awesome. I mean, one of my favorite sayings is "If you think you can't do it, you're right. If you think you can do it, you're right." I guess once you've got that belief in yourself, then there's not a lot stopping you. And even commentary from friends and family saying "Darren, there's no bloody market for it".
Darren Hunter: Yes, well the thing is that you know, they were right 90% of the time. But we're talking there are 10,000 agencies, over Australasia.
Mike Mortlock: Yep.
Darren Hunter: I found 10% of agents that did care about property management.
Mike Mortlock: Awesome.
Darren Hunter: That did want to invest in someone like me. So I found plenty of work.
Mike Mortlock: And how are you keeping up the energy and passion, obviously you've been doing it for a long time. And it's leaping through the headset at me at the moment. How are you keeping that enthusiasm?
Darren Hunter: Well, you really got to be passionate and love what you do. And the day that that finishes, that is the day you've gotta get out. But I really love what I do. I wake up in the morning and think there is nothing else that I'd rather be doing, that I had been doing for the last 12 years. And I want to be doing for the next 12 years. I love the life-style that it brings, the travel that it brings. The fact that I can just get up, and take my work down to the local café, I don't have to answer to anybody. I don't have to work under the light of a, you know a fluorescent culture, in an office. I can do my work anywhere in the world. I manage my team from anywhere I'm in the world. They can be based anywhere in the world. I just love what I do. I just love the fact that I can get good at what I do, became an expert and earn well from it. Yeah, I'm just in my dream job.
Mike Mortlock: That's awesome. And I guess that's part of the reason why we love property investing so much, is that it enables people to perhaps get that financial security so they can actually discover what their passions are, and move in that direction. To get back to property management, our listeners are generally sort of active, or aspiring property investors. And we're sort of, I guess on the other side of the equation to what happens behind the scenes in a property management practice. What are property managers sort of seeking when they attend conference like yours and the like?
Darren Hunter: Okay so let's just say if I put on a conference, and say we're gonna put a conference just on systems and procedures and processes and check lists, no one will show up.
Mike Mortlock: Right.
Darren Hunter: You know, the thing is, is that that is probably one of the most important things that any business can do. Is have quality control, with right processes and procedure and all of that. And they'll be transformed if they just follow right process. However, if I put on a rent-roll growth conference, and how to get more business, everybody will be there.
Mike Mortlock: Right.
Darren Hunter: And so, we run growth conferences, certainly marketing conferences as well for property management, how to get more income, how to get more properties all of those sort of things. So aside from that, the draw cards are growth, but also how to get better with points of difference. And how to service the client better as well. Generally, property manager wanna know how can we service our clients better, because of course that turns into more business, because it turns into referral business and so forth as well. So really, overall, it is very much about growth.
Mike Mortlock: So you're dealing with property management, property manager and property management organizations day in, day out. What typically are property managers doing very well in general, and not doing very well?
Darren Hunter: So on the well side, it would be understanding legislation. And I would be encouraging any property investor out there, that legislation is getting more and more complex; more and more tighter, more and more harder. Privacy act - oh my goodness me! That's accelerated to very difficult levels now, where the penalties are huge for any breaches of privacy. So this is where the property managers excel. Running the systems on how to manage your property competently, to make sure the tenants pays the rent on time, look after the property. They're the good property managers, but on the bad side of it would the biggest complaint globally, that property investors have about property managers, which is a lack of communication.
Mike Mortlock: Yep.
Darren Hunter: And a lack of care and concern for the property investor as well. And really, respecting the fact that the property investor has taken a risk. Most people out there, they want to own a rental property, but they can never get off zero properties.
Mike Mortlock: Yep.
Darren Hunter: But your property investors, they've gone from zero to one, or one to two, or two plus properties. They've taken the risk, property managers in lot of cases don't have their care fact to say "Mr. Smith, you're my client, I really respect the fact that you've taken this risk here, and I'm on board, you have my back for the long haul." There's a lack of care and concern.
Mike Mortlock: Yeah, and I completely agree with that, I mean for a lot of our property investors they're buying one investment property, and the stats are saying the vast majority of investors only have one. And they're basically putting on their chips on black there, that's their one goal to purchase that asset, an appreciating asset and their whole sort of hopes and dreams in retirements can really be tied up in that. So it does get very emotional for property managers, for property investors I should say.
Darren Hunter: Absolutely, and you're right. 70% of property investors only have that one property, whereas when I go to America, and I'm training real estate agencies there, typically 50% of owners have one property and the rest have two, five, ten, 20.
Mike Mortlock: Yeah, right.
Darren Hunter: It's a lot more multiple property investors over there. Having said that, in America and certainly New Zealand, 80% of properties are actually self-managed by the property investors themselves.
Mike Mortlock: Right.
Darren Hunter: Australia just has a culture about it that people value their time above everything else, they value their piece of minds so they're more inclined to give their property management to someone else to manage on their behalf, instead of doing it themselves.
Mike Mortlock: Yeah, and hopefully they value the expertise and experiences as well. I mean, one of the things that you mentioned before, and something that you're actively involved in, is helping property managers increase their fees. What sort of resistance do property managers face here? And how do they sort of justify that they're worth paying more than perhaps the sales focused practice that offers a reduced fee, property management division to try and get the sales in the door?
Darren Hunter: So firstly, right off-the-cuff Mike, my warning to property investor was if you have agencies that are willing to discount or who are already cheap, and are willing to go cheap, they have simply adjusted their fees to the level of services they provide. Low fees means low service. And your piece of mind will be destabilized, though you could save some money in the short-term it could cost you a packet of money, in the long-term with poor property management, bad tenants it could cost you thousands.
So from that point of view, I encourage property investors to value high charging agencies, because if they charge high it means they're charging higher than their competitors in the area, which means they actually believe they're worth it. People only charge in line with what they believe they are worth. If they're charging more, it means they deliver more and you're gonna get far better piece of mind. So that's basically, where it's at. If you've got an agency that charges more than their competitors, it means their boss actually values property management. You are going to save more money in the long-run by having a quality agency charging higher fees.
Mike Mortlock: And what typically is the difference between an agency that values property management, and one that's just trying to sort of have that race at the bottom with fees? How would the service differ typically?
Darren Hunter: Okay. That's a really good question. I'm gonna help you with that. So this is how cheap fees turns into poor service. Number one, is that the agency let's say signs up a cheap property, or a property at cheap fees. And the property investor's thinking "Wow, I've got a good property management agency here. And I've saved some dough too." So they immediately get this sense of value, but it's fake, it's false because this is what happens, you see. The agency still has the same level of overheads as the quality agent down the road. They still have to pay property managers quality. They still have to pay the same amount for fuel, and cars, and insurance, and rents, and phones and all of those sorts of things. So therefor, their profit margin is a lot lower than the agency down the road, when they're going cheaper. I mean that's just simple business understanding. But this is what happens, the boss goes "Well I need to make some quality money here." Then they load more properties onto that property manager, which means now the property manager's not only working 40 hours a week, but nights and weekends too. They get brunt out.
Now in this day and age, quality property mangers will not put up with that anymore. And so not only do the quality property managers leave that type of business, but they will not come to that business as well. So the agency has an inability then to attract quality, experienced property managers, which means they either have to go and find inexperienced property managers. And train them up, but they've got no resources to train. So those people end up leaving quickly, and here is what happens. The agency ends up attracting the bad, incompetent, negligent property managers because that's the agency that they know that they can get away with it, because the boss doesn't care about property management. He doesn't focus on it, then they can do what they like. And so therefor, the owner gets bitter and upset in the end, because it got these high turnover property managers.
They're getting poor service, negligence is occurring which is costing a lot of money. And it just becomes a bitter pill in the end. That what cheap fess ends up turning into. And the agency in the end, the boss goes throws up his hands in the air and says "I don't wanna do this anymore. This is doing my head in, there's too many problems. I'm not earning enough money. It's not worth it." And they end up selling at a real discount rate, and that owner ends up going to another company and getting transitioned over. That's what happens to cheap fees in the end.
Mike Mortlock: So Darren, stereotypically property managers tend to sort of be female, certainly there's a bit more of a mix in the sales department, but PM tends to attract the females more than males. Why do you think that is? And what do you think is at play there?
Darren Hunter: So basically what I believe is it really comes down to that women are built for property management better than males. And I give the analogy there's 500 plates on stage, you know that show where you have 500 plates and they're all on sticks and you're spinning those plates. And one starts to wobble, it's gonna drop. You've gotta keep it spinning. Women in general, perhaps can manage 500 plates on stage successfully, where the typical male; and there are some males out there that are very good at property management, but the typical male in general cannot manage 500 plates. They might only be able to successfully manage 100 or 50 and the rest will drop.
And so there is a lot of the differences, and that's why I see and you get a typical situation where you've got a husband and wife working. But the woman is actually managing the household, managing the children, keeping really, really busy that where the male may not be helping out with the house work. May not be helping or they're more inclined to sit on the couch. The woman is able to manage a lot more, at any particular time. And manage 500 different tasks, and keep those going as opposed to the male.
Mike Mortlock: Getting back to the relationship between the property investor and the property manager, how crucial is that relationship and the communication between the parties?
Darren Hunter: Well the communication is key, that is the most important thing to a property investor, it's the maintain their piece of mind. Basically, the state of play that the property investor wants to be in, is to be able to have the property investment, having it performing and then not having to think about it.
Mike Mortlock: True.
Darren Hunter: And therefore, either the property manager is looking after things and communicating such to the property investor. And relaying on the most important things that they need to know about. Now of course different property investors need different levels of communication, the property manager has to work out whether one investor just wants to be told what's on every now and then, others need a lot more attention than that. A good property manager will know the levels of communication and obviously the higher their care factor, the higher that they are going to make sure or the better they're gonna make sure their property investors are kept well informed.
Mike Mortlock: Yeah, and what sort of clues can you give us, give investors that their property manager might not be looking after their property adequately?
Darren Hunter: So in that regards, there it would not looking after things adequately, well the first thing to go, the first things where problems are going to arise is late rents.
Mike Mortlock: Right.
Darren Hunter: And the inability of the property manager to get on top of it really, really quickly. It's early intervention. So if the property manager's allowing the tenant regularly get behind in the rent, now there are some tenants out there despite all their best efforts, insist on not paying on time. But if the property manager is not adequately jumping on board with that really, really quick then that's you know, going to turn into a possible eviction. And that's just bad news for everyone. Another thing that could also show that the property manager is not doing the best thing, of course a lack of communication, not returning calls, not returning emails, that is a reflection of their lack of care factor. But also, in your inspection, your routine inspections are very vague, lacking detail, you know things not adequately being passed on, the owner not being aware of stuff those sorts of things are a good indication. But a really good one, is a lack of care factor in getting back to calls, and emails in a timely manner.
Mike Mortlock: Yep. Now I'm interested in why investors might sort of suffer from the service with their property manager. Is that typically to do with how many properties they manage? How many properties is typical for a property manager?
Darren Hunter: Okay, so this varies. And it varies greatly over Australia. So for example, in Victoria there's a lacking of a lease renewal culture, which means a lot of tenants are allowed to simply go from fixed term lease onto a non-fixed term at the expiration of their fixed term. And the legislation provides for that, or you cannot obligate a tenant, but that takes out a whole heap of work. Also in states like Victoria and New South Wales, they tend to have a two routine inspection a year culture. Whereas other states may have up to 4 inspections a year.
That greatly changes the ability of how many properties you can actually manage, if you're taking out the lease renewal factor and having your routine inspection agenda. So it really depends on what part are you in Australia, but here is what I like to say you see a property manager can manage a certain amount of properties depending on how far those properties are from the office. So if the property manager is spending too much time sitting in a car, and too much travel or they can manage less. If you know is a three and four bedroom family homes with a big garden, compared to one and two bedroom apartments in the same building. All that then determines how much they can actually manage.
Mike Mortlock: Right.
Darren Hunter: Are they managing too many lower socio-economic properties? Well that means you've got low income, low fees, low profitability and high work levels. So you might be only able to manage half the amount of properties, in a lower socio area, than say a middle-high, middle class suburb. So all those factors they depend on how much they can actually manage. So this is the answer I give to the property management industry when they say how many properties can a property manager manage?
Mike Mortlock: Yep.
Darren Hunter: The first thing how long is a piece of string?
Mike Mortlock: Exactly.
Darren Hunter: But the real answer is the property manager or the agency has to get these three things right. Happy owners, happy property managers, which means they're not burnt out, and then a good quality profit margin. If the agency can get those three things right, then the actual property numbers per property manager are correct.
Mike Mortlock: Now that's an interesting insight, and to be honest I naively expected you to say something like 200 or 150, but -
Darren Hunter: No.
Mike Mortlock: Yeah, it's obviously depends on the type of properties, and where they are, and who's renting them, and that sort of thing. Now to stop sort of picking on the property managers, as we've been doing, what is it that property investors are doing that property managers complain about the most?
Darren Hunter: Well in that case they're very typically owners that aren't wanting reasonable rent you know, get a property rented quickly, what's the market rate, charging market rent so you get some owners that want unreasonable rents, which means the property is gonna be vacant anyway, or might attract not good tenants. They're gonna attract what we call the desperate, they'll pay any amount of rent but not pay anything at all. But the other typical issue, let me give you an answer, we call it the C-class owner. And this is what gives property managers nightmares. It's the C-class owner that is the biggest and greatest factor that influences a property manager to resign.
Mike Mortlock: Right.
Darren Hunter: And so the C-class owner, I say C-class owners are like a packet of cigarettes that will take years off your life.
Mike Mortlock: Right.
Darren Hunter: And I teach the property management industry to sack these people, and get rid of them because property management doesn't pay enough to deal with these people, and life's bitter to have these people in your business. This is what a C-class owner is. Seven characteristics, number one over demanding and unreasonable. You call them up with good news, and they pee all over your parade, they dump on you emotionally, they bully you, they control you and just give you a very, very bad day. Number two, they take up lots of your time, they send you five page emails, every day on trivial things and really take up your time. And what I say they do your head in. Number three, whatever the rents are, they want more.
Number four it's whatever your fees are, they just want less. Whatever your fees, they want you to take on less. And even if you're the cheapest in town, they still want you to do less. You have little to no money into the property, which means we end up with a degraded property where a good tenant just doesn't want live there. So therefore we have a bad property that just attracts say bad tenants, and those types of owner typically have low rent properties, which means a low management fee, low income. It's just bad business all around. That's the stuff that burns out property managers and gives them nightmares.
Mike Mortlock: Yeah, awesome. Now I wanted to just ask. Are there any particular questions that property investors should be asking when they're looking to engage a property manager?
Darren Hunter: Okay, so to understand that most real estate agencies out there if they're doing sales and property management, they're either good at one and bad at the other. Very rare you're gonna come across a sales and property management company that does both, and does both well. I would say that 10% of real estate agencies out there do both well. And they do both well simply because the boss cares about property management. So the questions really need to surrounding how much interest does the real estate boss have with property management?
How much does it resource? How much does it care? And also, if you see their fees are a lot better, or a higher than other competitors in the area, don't translate that into a negative. See well these people obviously believe they're worth more, despite cheaper competitors. There's a reason behind that, and usually there is a boss that cares, values property management. And they're the sort of things you've gotta be looking for.
Darren Hunter: Otherwise, you're gonna get stuck with a real estate agency that performs in sales, does property management on the side, and property management simply becomes a by-product to the sales process, a bit like toxic waste. And therefore, it's a bad experience all around.
Mike Mortlock: That's awesome. That's a really interesting insight, and yeah seeing how engaged the principal is in the department, I can see how that can make a big difference. Look, Darren I've really enjoyed the chat today. I wanted to let people know if they are interested in getting in touch with you, what's the best way to facilitate that?
Darren Hunter: Well, on Facebook I do have the largest property management Facebook page, anything property management in Australasia, third largest globally. So just go to Facebook darrenhuntercom, also my website darrenhunter.com. If you wanna drop me a line, it's easy firstname.lastname@example.org.
Mike Mortlock: That's an easy one to remember. Now Darren, just to finish up. If there's one piece of advice that you can impart to property investors, what would that be?
Darren Hunter: Value a good property manager. Look after them, stay with them. They're very, very hard to find. But firstly, seek out that agency that cares about property management. And if they care about property management, they'll likely attract you the people that care too. And that's what's gonna give you the best piece of mind when it comes to the management of your investment property.
Mike Mortlock: That's awesome. Property managers are such a crucial part of a successful property investment portfolio. And you're one of the gurus that's showing then how it's all done. So very much appreciate your advice and your time today Darren!
Darren Hunter: Thanks Mike! And yes, thanks everyone for listening, but yeah. Property management is an exciting area. Thanks for your time.
Mike Mortlock: Awesome. Appreciate it!
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