Property Management with Lisa Indge
This week, we are extremely excited to have Lisa Indge of Let’s Rent on the show.
We discuss Lisa’s tips on property management, why you should use a dedicated professional rather than doing it yourself, and tips and tricks of the trade.
HERE’S WHAT YOU’LL LEARN FROM TODAY’S EPISODE:
- Number of properties per portfolio for most property managers;
- Legislation intricacies;
- Working with tenants to ensure that you keep your arrears in check;
- Vetting prospective tenants;
- What to focus on to increase your rental income;
- Return on investment for your cost outlay regarding painting, taps, etc;
- Timing the market with regards to showing the property;
- Keeping vacancy rates low;
- The value of good photos;
- Questions to ask a prospective property manager; And
- Looking at an overall investment property portfolio as part of your wealth plan.
LINKS OR ARTICLES WE MENTIONED:
SPEAKERS IN TODAY’S EPISODE
Michelle May – Sydney Buyers Agent
Marcus Roberts – Mortgage Broker
Lisa Indge – Let’s Rent
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Transcript
Michelle: Hello and welcome to Sydney Property Insider podcast, the show where we talk about all things that affect you as a Sydney signer investing in, looking to invest, and looking to maximize your returns from the Sydney property market.
Today, Marcus and I are super thrilled to have property manager Lisa Indge of Let’s Rent on the show. Lisa has run Let’s Rent from its inception over 13 years ago, with a vision to create a new way of property management where owners are happy and tenants are treated as clients. She’s a proud member of the R.E.I. Property Management Chapter, and contributes to making a difference in the industry. Lisa is sought far and wide to provide her views on the industry and has been featured in Domain, Smart Property Investment, and Real Estate Business.
Lisa, welcome to the show!
Lisa Indge: Thanks so much for having me.
Michelle: It’s great to have you here.
Lisa, you and I have known each other for over a number of years, now, but just so that our listeners can get an insight into you and your business, how did you end up in the rental-management business?
Lisa Indge: I’m not sure you know this story, Michelle.
Michelle: Probably not! (laughing)
Lisa Indge: Basically, about 14 years ago I saw an opportunity to start a business in real estate that would suit my skill-set. In those days you had to work for an agency for two years before you could open your own agency. Basically, just got a job in a real estate agency as a receptionist; then they put me into sales. I kept saying, “Can I just go to property management?” because nobody ever did. Eventually, I got into property management. I say “eventually”, it was about four months. About a year later I decided to open my own business.
Basically, it was about the fact that, yes, that was the direction I was going in, but it seemed very apparent to me that, as an industry, really, real estate agencies didn’t care about property management. It was kind of shoved in a back corner. There was no care-factor involved.
Michelle: Yeah. That’s very brave! After a relatively short amount of time go, “Yeah, that’s it! That’s what I’m gonna do!”
Lisa Indge: Well, I started with the plan in the first place, so getting the job was part of teasing the fire. (laughing) I will say that!
My background was in banking; I actually used to work for Futures Trading Floor.
Michelle: Oh, yeah?
Lisa Indge: Yeah, but real estate property management was harder.
Michelle: But kept calling you, as well. “Come. Come. We need you, Lisa!” (laughing)
Lisa Indge: Something like that.
Michelle: Tell us a bit about your current business. Where are you … Where do you operate?
Lisa Indge: My business is based in Balmain. We’ve always been based in Balmain and, obviously, being a specialist property management company, it’s been a little bit unusual because our territory has spread throughout the west and the eastern suburbs, as well.
Michelle: How many people do you have working in your business?
Lisa Indge: There’s a total of nine, including myself.
Michelle: Right!
Lisa Indge: We manage about 400 properties.
Michelle: Okay. Is that a typical number for the number of agents that you have working with you?
Lisa Indge: Absolutely not.
Michelle: I think the number’s normally a lot higher, isn’t it?
Lisa Indge: Well, no, the number’s a lot lower.
Michelle: Right.
Lisa Indge: As in, the number of people that work in an agency with a portfolio of 400, would probably be about half.
Michelle: Yeah, that’s what I mean. So there’s a lot more pressure for the agent.
Lisa Indge: Yeah. Yeah.
Michelle: Absolutely.
Lisa Indge: What we call the “average agent”.
Michelle: Yes, exactly.
I know for experience that you’re not the case; you’re not the average agent, because I know that you really look after your clients. (laughing)
Marcus: Lisa, what value is there … Especially for those that are looking at their first investment property, and are listening to the podcast, what value is there in using a property manager as opposed to doing it themselves? A lot of people might say, “Why would I pay a property manager for something I could do? It’s not like we have a huge empire just yet; we’ve just got the one property that we’re looking at renting out.” What value is there in using someone that’s a professional rather than doing it yourself?
Michelle: Yeah.
Lisa Indge: I actually think that it comes back before you actually purchase a property. I think this is where buyer’s agents come in really well, also. As a person on the street, what do you know about investing in a property? How can you walk into a property and say, “Yes, it’s going to be a good investment. It will appeal to tenants.”? I think that’s one of the values for a property manager: to give you advice in the very beginning.
I think that from there on the legislation’s very complex. As a lay person, you are actually exposing yourself to risk by managing the property yourself. For example, there’s certain parts of the legislation that say, “a landlord is not allowed to do x,” and there might be a $10,000 fine if you do “x”. Pretty sure it’s better to get a property manager to do it.
Michelle: Yeah, absolutely.
Lisa Indge: (laughing) But my experience with people who self-manage is that they have tenants who might be in arrears and they’re not really sure how to deal with that. They have a tenant that bullies them. I’ve definitely seen that happen. I think the other aspect is, when you have a long-term tenant as a self-managing landlord, you’re likely to have a rental level that is below market.
Marcus: Because it becomes much more difficult to negotiate it, especially if you’ve been doing it yourself. You say, “Gary and Steph have been in there for five years. I don’t want to put the rent up because they’ve been there for so long,” and so forth, so having that third party or having someone that’s not either the landlord or the tenant directly involved is really beneficial.
On that, you mentioned problem tenants or tenants that are bullying. How do you work with problem tenants or, even in the first place, vetting tenants or vetting prospective tenants?
Lisa Indge: Great question. Clearly, not every applicant is a good applicant for the property. To be honest, as you get higher up in rent, the vetting process becomes slightly different. One of the things we’re trying to establish when we first show a property, and when we engage with people who are inquiring about the property, is, “How do they respond to us? Do the treat us with respect? Do they treat us in a way that we would be happy with on a longer-term basis?”
For example, if you have someone who is very demanding from the very beginning, I’m pretty sure that that relationship is not gonna be getting better once they’ve moved into the property. It’s really important that you can establish, if you like, a personality type. What we are looking for is people who are easy to work with, people who are reasonable, and people who will, obviously, pay rent and look after the property. All that reference-checking behind the scenes supports all of that.
It’s interesting ’cause, obviously, I’ve been doing this for some time, I can pretty much look at an application and go, “No, I don’t think we’ll be taking that one.” (laughing) And I train my team to also have that skill, but it starts off at the property inspection. What I teach them to do is engage with people as they’re coming through the door, ask them questions, so that we have a little bit more of an idea about how they might respond.
Michelle: That’s definitely a point of difference for you guys, because I know that sometimes the rental-management side of things, like you mentioned before, in a real estate agency is a little bit like step-child. It’s not really the main priority.
Lisa Indge: That’s a really good description!
Michelle: Isn’t it! The agents that are at the inspections really are not bothered, and they hand out these applications forms like sweets, and don’t bother talking to you. They know nothing if you ask them questions. That’s a real missed opportunity there. I think for investors looking for a property manager should be asking that; “What is your strategy around vetting clients? Is that where it should start, at the open?”
Lisa Indge: Yeah, definitely. I think that it also comes down to how tenants should be treated. Tenants are not second-class citizens.
Michelle: No, exactly.
Lisa Indge: It’s a mutually beneficial relationship between a tenant and a landlord. One of the first things I noticed in the industry, which was quite shocking to me, were that tenants were treated with such disrespect, so when I first started the business that was actually one of our starting points, to treat tenants with respect and develop positive relationships with tenants, which of course enables us to do a better job for our clients. It’s a much more positive environment for everybody to work in. We’re here to help tenants as much as we are here to work for our client, as well.
Michelle: Especially, those tenants may become owners in time, and then become-
Lisa Indge: Investors?
Michelle: … probably. Yeah, exactly. It’s full-circle.
Lisa Indge: In my experience, that’s how … One of the reasons why our business has grown, the first area where we started picking up business was actually through people coming through inspections looking at potential rentals.
Someone walking through the door at a rental property may be coming to look because they have a comparable rental down the road and they want to see what this one’s renting for.
Michelle: That’s right.
Apart from managing the property, are there other parts of service that your company particularly offers your clients which may not be immediately apparent to a new client?
Lisa Indge: Yeah. As you know, I do a little reno.
Michelle: (laughing)
Lisa Indge: I think that when you’re looking at an investment property, particularly at the beginning … And I know you do this, Michelle. When you go into a property, you’re looking at the potential that it has. Then you might say, “How much is it gonna cost to re-paint, re-carpet? What else do we need to do?” It’s very important to go into that particular space and understand where to spend the money in order to make the smartest rental return.
I have had many conversations with clients and potential clients and they say, “We really want to change the taps.” I’m like, “You can change the taps, but it’s not gonna get you more rent.”
Michelle: (laughing)
Lisa Indge: “So cross that off the list.” But that’s the reality of it. Because we’ve been doing this for such a long time, it’s very easy for me, particularly, and certainly my team members, to go into a property and say, “This is where you should spend money, and this is approximately how much it’s gonna cost. We can get in quickly and we’ve certainly done that for you in the past.”
Michelle: The added benefit is, of course, because you have those contacts, you can minimize the amount of time needed that the property’s off the market and get it refreshed or whatever the case may be to put it straight on the market once it’s settled.
Lisa Indge: I remember one that you and I both worked on, where the client was purchasing the property and they needed to get re-painting and re-carpeting. I think they wanted to change the light fittings, as well, and I said, “You can do that.” (laughing) “It’s probably not gonna make that much difference.” We ended up going ahead with that; it wasn’t a substantial cost. We also had blinds quoted. In that particular instance, we also had to develop a strategy, because it was very close to Christmas.
This is another place where the advice of the property manager is really important. You could put the property on price and compromise finding a tenant before Christmas. I think our down-time on that property was literally two weeks. We had the property ready to go, the photographers in, we showed it. Within a day or two picked up an application, which was actually a really good application; that tenant’s still in there. And they paid above the price that we put it on the market.
That was a strategy we used in that instance where we priced it very keenly, so that we knew that we wouldn’t waste that inspection and potentially crack competition, which we did.
Michelle: Definitely timing the market is essential.
Lisa Indge: Definitely.
Michelle: I know from previous clients, as well, that they have an apartment in Bondi … Especially, beach-side suburbs are quite sensitive to that, aren’t they?
Lisa Indge: Yes! They are.
Marcus: Just on that, Lisa, one of the things you talked about was getting trade people in and so forth on the cost involved in initial set-up. What would be a ballpark investment that a client might need to make upfront, to get that property rented out? We’re thinking sprucing the property up, management fees, advertising, and so forth. And what kind of things would you recommend?
Lisa Indge: I can certainly say that with a two-bedroom apartment that needs a spruce-up, it’s probably gonna be $6-8000, to re-paint, re-carpet, perhaps change the lighting, do some blinds. And then the initial letting costs, if you’re looking at an average rent of, say, $700 per week, the cost to do the photography, the advertising, and the initial letting fee, it’s about two-weeks’ rent. And that percentage declines, obviously, as you go up in rent because the cost of photography and advertising remains the same.
Marcus: Again, $6-8000 for a two-bedroom, for the sake of the argument, that would then also generate higher returns in terms of the rent that would be received?
Lisa Indge: Without question.
Marcus: So, if you’re looking at renting a place out, yes, there’s an initial capital outlay for it, but you’re going to get, what’s likely, a better yield on that property for the weeks or the months ahead.
Lisa Indge: I think it’s not just about the yield, it’s also about vacancy, because vacancy can be very costly. If you have a property that is re-painted and re-carpeted, there’s no question, it adds to the rental price, but it also adds to the appeal. And as you know, Michelle, I’m a great believer in using virtual furniture.
Michelle: Mm-hmm (affirmative).
Lisa Indge: It really does increase the appeal online, so you get more people through the inspections and then you potentially get a higher offer, as well. In the case that we are talking about here, we managed to get about an extra $70 a week on that property with that spend.
Michelle: Which is not-
Marcus: Which is not nothing; I was gonna say that.
Michelle: Exactly.
It still amazes me. I was going through, looking at rental properties just recently for a client, just to give him comparables for the property that we were buying. The way that some agents are advertising- It really is deplorable! Shoddy- Even my iPhone takes better photographs than that!
Lisa Indge: Me, personally, I love the toilet shot.
Michelle: Yeah! (laughing) Lid up, of course!
Lisa Indge: Of course! Yes! Centre frame, toilet.
Michelle: “It’s got a toilet, people!”
Marcus: I like the one with … Where you can clearly see the person in the mirror taking the photo.
Michelle: Or the hand around the corner.
Marcus: Why aren’t you wearing your shirt when you did this?
Michelle: (laughing) Is this rental management, or is this eBay we’re talking about, now?
Marcus: These are premium sites, obviously.
Lisa Indge: It’s very true, though, when you see a property … It’s not uncommon, still, to see a property at $800 a week with really, really awful photos.
Michelle: Yeah. Clearly, it makes, then, such a difference when you do see something that’s advertised properly, and … Everything’s visual … We buy with our eyes.
Lisa Indge: Definitely.
Michelle: The same for buying property and selling property, it’s the same equation for renting. If you’re in the market to rent, rents are high nowadays. People have to earn a lot of money even just to rent. “Just to rent,” I say that with, you know-
Lisa Indge: If you consider how people are conditioned, as well, the sales market is the benchmark. If we look at how people are conditioned in the sales market, then we have to look at what we’re doing in rentals, which is why I moved to virtual furniture. Because I really don’t think that showing an empty room is the best way to present a property online. We don’t even know what that room is. Is it a living room? Is it a bedroom?
Michelle: Exactly.
Marcus: Mm-hmm (affirmative).
Michelle: No, it makes a huge difference.
Marcus: Lisa, in selecting a rental manager, what are the sorts of questions that our listeners should be recommended in asking? What questions would a … Someone that’s looking at renting out their first investment property, they’re going to a couple of different property managers, what are the first few questions that you think they should be asking the agent?
Lisa Indge: I think that with the property management industry right now there’s a lot of biddings offered business development managers, and their not property managers. It’s really important that the agent can actually demonstrate to you what their agency’s doing in their property management division. I think that’s the first thing to note. Because the person that you’re meeting is probably not the person who’s gonna be managing your property. I think that’s fine; I don’t think there’s an issue with that whatsoever. I think property managers are good at what they do, and we should let them do what they do and let salespeople do what they do.
First thing you need to understand what your risks are in owning investment property. You’ve got a risk of vacancy. The risk that the property is at market rent, that the rent’s being paid, the repairs and maintenance are being done on time, you are being paid on time, and that your tenant is being attended to. The tenant’s on a lease, because there’s a massive risk if your tenant isn’t on a lease. And the property’s inspected regularly. Clearly, what you wanna do is make sure that that agency is going to communicate with you effectively, and is going to be aware, and have systems and processes in place, to cover those risks. That’s my first list.
And I know that sounds like a long list, but it’s important as an investor that you do understand what your risks are, and be confident that the agency’s gonna cover those risks for you.
Marcus: Absolutely. This is an investment, and it’s one that you’re looking to achieve a return. Asking questions is nothing you shouldn’t be doing. Even as a first guideline, that’s fantastic.
Lisa Indge: Mm-hmm (affirmative). I’m gonna say ask them about their K.P.I.s. Because unless you measure what you’re doing, how can you effectively demonstrate to a potential client that you can achieve that?
For example … I won’t give you our best figures, but our best figures to date would be that we have 99.5% of our tenants paid in advance, and our continual average vacancy is about 0.74% over the last six months.
Michelle: Those are impressive numbers!
Marcus: Wow!
Michelle: That’s the benchmark, people!
Lisa Indge: (laughing)
What I’m saying is a lot of agents that you meet-
Michelle: Don’t do any of those things.
Lisa Indge: Well, they don’t know what their vacancy is. They don’t know … Those are two very high-risk factors when you own a rental property.
Michelle: Yeah, of course.
Lisa Indge: If the property is vacant, that’s really costly. And if your tenant’s not paying you rent on time, then you need to be asking yourself if you should be keeping this tenant onboard.
Michelle: Yeah, absolutely.
Marcus: And it sort of goes hand-in-hand with something we spoke about earlier, which is that many agents … And correct me if I’m wrong, but many agencies have seen rentals as a way of getting sales down the track. “Okay, we’ll put our youngest people on, or we’ll put our least-experienced people on to manage properties for a year or for a couple of years, get them accustomed to showing properties and so forth.” But really the value is, “Okay, we’re just gonna grow the rent rolls so that, then, we’ve got a based market for potential sales down the track.” So having someone dedicated that’s purely property management … As you say, the K.P.I.s might be entirely different, so it really is about vacancy rates, and it really is about rent in advance.
Lisa Indge: Very true.
Michelle: Absolutely.
I’ve learned a lot! Haven’t you, Marcus?
Lisa Indge: (laughing)
Michelle: It’s great, actually. I love having these experts on our show.
Is there anything else you’d like to add, Lisa, that we haven’t touched on today?
Lisa Indge: To go back to an earlier point, the fact that you, as a buyer’s agent, are a professional, doing what you do best, and I am a property manager doing what I do best is really significant in assisting people through the investment journey. And the same for you, too, Marcus, with getting the right finance.
The fact is that we have information that can really help people target the right property to purchase. For example, I have these lovely clients; they rang up one day, and they said, “Can you go and have a look at this property? We really wanna buy it. Can you get down there really quickly because there’s other people interested?” I looked at it online and I rang them back, and I said, “Why is it that you would like to purchase this property?”
I knew before I even went to the property that it was not a good investment. She was looking at it in the context of the location, and also the context that it had character. Those two things are great, of course, but the price point that she wanted the rental to be at, based on what the sales agent was saying, which was around 900 a week for a two-bedder, was fairly significant.
Michelle: Right.
Lisa Indge: What does someone, at $900 a week as a renter, expect? Pretty sure they’re gonna expect some built-in wardrobes, which my client recognized. But she said, “That’s fine. We’ll just need put in some built-in wardrobes.” I said, “They won’t fit.”
Michelle: (laughing)
Lisa Indge: “Once you put those wardrobes in, there’s no room for a bed.”
Marcus: Or you could … I’ve forgot the term for them, but one of those fold-away ones that come down from the wall, surely.
Lisa Indge: And from the door, jump to the bed.
I think that’s really important, because the average person on the street might not be able to see those things. And that was a huge time-saving for her, because I was able to give her that information straight away. I know you look at properties, as well, Michelle, and you go, “No.”
Michelle: Absolutely. I think it’s something that only experience will allow you to do, something that, if you are in this field and you look at properties day-in day-out, it’s something that we spot straight away.
Lisa Indge: Yeah.
Michelle: But if you’re just in it for a particular period of time, looking to invest, looking to buy, it’s a steep learning curve and you don’t wanna make that wrong decision, both for investing and for owner-occupied.
Lisa Indge: You know what? That actually translates into your return as you own the property over a long period of time. One of the things I’m actually quite fascinated in is numbers. One of the things I like to do is look at the portfolio and look at examples of properties where we’ve had really good rent-increases over the years, say over a five-year period, and look at properties where we haven’t had a rent-increase at all.
People probably don’t believe that rent hasn’t increased on a property in-city for five years. Well, I manage properties that are in that space. Clearly, as investors, we want to avoid purchasing those properties. They tend to be properties that are of a particular age. The ones that do tend to do really well in comparison always have the good floor plan, they’re in good condition, obviously they’re in good location, so they don’t have compromised situations such as light or being next to the Light Rail or the train going past the door.
Michelle: Yeah. (laughing) Absolutely.
Thank you so much, Lisa. I really enjoyed having you on the show. If people wanna get to know more about your business and how you work, what’s the best way to get in touch with you?
Lisa Indge: I’d love people to give me a call or send an email. My number is 0433 296231. And on email, I’m lisai@letsrent.com.au.
Marcus: Great! We’ll certainly put those in the show notes, as well, for anyone that’s reading.
Lisa Indge: Thanks so much.
Marcus: That’s all from us for this week, and thank you, again, Lisa, for being on the show. We’ve certainly learned a lot today.
We look forward to being with you next week. If you do have any questions, either for Lisa, Michelle, or myself, please send them through to ask@sydneypropertyinsider.com.au. That’s ask@sydneypropertyinsider.com.au. We look forward to being with you same place, same time next week!
Michelle: See you next week!