Real estate as an asset class has traditionally been likened to investments that generate passive income.
In retrospect, the income is passive only if you outsource the management function. Property management is extensive and goes beyond rent collection.
Therefore, how do you know that you are getting value for your money as a property owner? How do you know that your property is being fully optimized to ensure you enjoy the best returns?
To start, if you’re in search of a property manager, here are the qualifications that you should consider within the Kenyan context:
- Bachelor’s degree in either Land Economics or Real Estate
- People skills — Your tenants are your first customers. The ideal candidate should communicate effectively, think on their feet, be reliable, patient, and maintain integrity.
- Previous experience — Here, you should be keen on the number of years, size, and type of portfolio managed
- Current practising License from Estate Agents Registration Board (EARB)
If you've ticked all the above, here are five best practices that set apart a professional property manager:
- Knowledge of statutory compliance and risk mitigation — Different sectors of real estate are required to comply with relevant laws governing tax, county by-laws, environment, and general safety and health of the workplace. The property manager should know the relevant ones to comply with based on the portfolio.
- Maintaining separate clients’ bank account — According to the Estate Agents Act Cap 533, subsidiary legislation, an Estate Agent who is providing property management services is required to open a separate designated account where both the name of the company and the client appear as the identity. Not only is this part of best practice but it allows for accountability and good bookkeeping of deposits received through rent and service charges.
- Adoption of the scale of fees — Like all professions, the Estate Agent Act Cap 533 also outlines the scale of fees for various services rendered. However, we’ve seen a deviation from the scale on instances where a property manager has been tasked to manage a development where common areas are jointly owned, for example, an apartment block or a gated community. Here, only service charge is collected and the revenue determined by the scale may not justify services rendered where economies of scale are lacking. This presents a shortcoming in the Act and property managers have opted to charge a flat fee or forgo such developments altogether.
- Emphasis on the need for a sinking fund — Maintenance of the physical aspect of the property is key to extend its useful life. It ensures a fair state of wear and tear. With this in mind, it is important to set aside funds every month to meet expenses arising out of emergency or expensive repairs that may be required short to mid-term. It is a forward-thinking approach that shows initiative on the property manager’s end.
- Transparency in operations — Despite being fully in charge on the ground, keeping your stakeholders informed on accounting activities is important. Trust is built where there are precise monthly reports on collections received versus expenses incurred. The ease of retrieval of crucial property reports empowers property owners to view their portfolios as businesses.For estate committees, a demonstration of internal controls for financial approval and good record-keeping ensures accountability to all residents, consequently improving relationships among stakeholders. RentPay is a powerful tool built with this in mind giving you access to real-time reports, anytime.
- Asset management — Simply put, the skillset required here is that of strategy to manage real estate property interest to increase investment value and reduce long-term costs. A proactive property manager possesses this skill, based on the level of experience and education. They advise stakeholders on the bigger picture based on previous, current, and foreseeable market trends. Asset management is at an advanced level and requires both financial and business acumen, therefore not an easy skill set to come by. In conclusion, property management calls for the highest level of resilience and adaptability. There are lots of uncertainties — hardly two days are ever the same. Therefore, the right opportunity and demonstration of value through your skillset, in addition to your academic qualification can translate to a rewarding career path.
Christabel Ojuok, MSc. Registered Estate Agent