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The Essential role of property asset managers

The role of the property asset manager is misunderstood by many, with the majority of property investors and other industry participants thinking that the role does not extend beyond the collection and remittance of rental receipts and acting as a buffer between the landlord and the tenant.

Little do they realize that a good property asset manager will generate a greater return from a property portfolio and enable long term portfolio strategic objectives to be realized.

Any investor in property would benefit from a professional property asset manager but it is essential to   know what to look for in selecting a professional to manage their property(s)?

  1. Astute investors understand that you need a professional who is experienced in the market. Not just any market, but the Dubai market. Typically, if you find somebody with at least 10 years’ experience, you will have found somebody who has survived the global recession, and that should provide a reasonable indication that they are in the business for the long term and that they had the skills to navigate and survive Dubai’s property slump. Many didn’t.
  2. Strategic Approach. A competent property asset manager will provide a whole host of services for the investor but the most important is the development of a Property Portfolio Strategy. The professional must be able to articulate and present his thoughts after conducting a thorough assessment of your personal situation and property portfolio. He must be able to provide you with a credible strategy and activity plan which is designed to harness the true potential of your property and provide you with the maximum rate of total return. It is essential to have a well thought out strategy for your property portfolio if you are to maximize your returns.
  3. Knowledge and Understanding. Not just anybody can formulate a credible and implementable strategy. It requires years of expertise and a fundamental understanding of what makes Real Estate such a worthwhile and superior investment. A true professional will have a strong knowledge base on topics including industry history, current market factors and trends, risk factors, and the likelihood of relevant future events that will affect the performance of your property investment. This knowledge should span global, regional and local landscapes and will require a good understanding of economic factors, industry knowledge extending to government policy and regulation, finance and market dynamics.
  4. Planning Expertise and Ability to Implement. Forming a strategy is one thing, but being able to bring the strategy to life is quite another. A true professional will provide an activity plan which will include details of pricing and marketing, customer relationship management and tenant management and policy for the entire portfolio. Essentially, this area of expertise is related to the “topline” or revenue generation and management of the property. Equally important is the cost management and maintenance supervision of the property. Many times, I have seen excellent “topline” performance being eroded due to poor operational and maintenance cost controls.
  5. Organizational Ability and Communication Skills. Managing your property portfolio will also require proper performance measurement, communications and review schedules, and status reporting and financial statements. Investors should always seek examples of these elements as transparency and candid performance appraisals are essential for managing your portfolio correctly by addressing shortfalls to objectives, issues requiring addressing and opportunities for performance improvement, in addition to your peace of mind.
  6. Customer Centricity. It’s important to choose a property manager who you can work with and who, you believe, has your best interests at heart. Your property manager must be customer centered and, unfortunately, in this business, this is not always the case.
  7. There is no point entering a business relationship that is lacking in mutual trust and respect. The investor must have confidence in his ability to manage a business … the investor’s business… which just so happens to be a property portfolio. As with all investments, but especially investments in property, there will be good times and challenging times. There is no such scenario as “set and forget”. It doesn’t exist. If you do not respect the manager you have appointed, the relationship will not survive the challenging times and you will need to go through the whole process of finding a replacement.
  8. A History of success. The investor should be sure to ask for referrals and call some existing clients. It’s important to seek out success stories and ask to see examples of client reports to assess their completeness, continuity and timeliness. The investor must ask the property manager carefully thought out questions to gauge the depth and breadth of knowledge that he possesses.
  9. Finally, it’s essential that the organization the investor is dealing with has the resources to support the manager of the portfolio. In these times of eliminating overheads, individual performance can be inhibited because of a lack of organizational support. The investor should ask to meet the team.

Choose Wisely The investor must ensure that the property asset portfolio is in good hands providing expected returns with as little hassle as possible. But the investor must realize that once a property manager is appointed, the ultimate return on the investment is largely in his hands.

Ask the agent

ask the agent

Mohanad Alwadiya
Published: Gulf News Free Hold
Dated: 14th May, 2016

Question: I have an apartment I wish to rent out. Which would be a more practical approach, getting a rental agent or a property manager? I heard that property managers usually charge more, why is that?

If you are going to engage the services of a realtor, you would enter a leasing agreement assigning the real estate agency to locate suitable tenants for your apartments, facilitate the signing of the tenancy agreement, and leaving you to assume the responsibility and devote your time to managing the tenant and all aspects of the property thereafter. A property management agreement includes a lot more.

A competent property manager will provide an assessment, strategy and activity plan designed to harness the true financial potential of your property. Considerations include history, current market factors and risk factors, whether they be global, regional or local in nature requiring a good understanding of economic factors, industry knowledge extending to policy and regulation, finance and market dynamics.

An activity plan will be provided covering pricing and marketing, customer relationship management, tenant management and policy, cost management, maintenance supervision, communications and review schedules, status reporting, financial reporting and resourcing. All of these activities will be performed by the property manager under a property management agreement.

A professional property manager will make your investment work harder for you and the additional returns you receive will outweigh any fees he/she might charge, which means less headaches for you.

 

Question: I am 52 and planning for my retirement with Dubai in mind as a future part-time retirement destination. Right now, I want to invest in a property I can rent out, then use personally in the future during retirement. Is this a good strategy?

Including property as part of your retirement plan is a sound investment decision and a safe bet to ensure you maximize whatever you savings or wealth you possess at this time. The key to choosing your property is determining the right balance between the amount to be invested, the returns you require in the interim period before you retire, and what type of property you want to enjoy in your retirement.

As the property will eventually be for your own use, you need to determine what you will enjoy in your retirement. The good news is, your tastes are likely to be shared by your tenants in the interim so renting should not be a problem.

Quality properties are available starting from AED 700 per sq.ft., but if you want to purchase in the prime areas of Dubai such as Downtown Burj Khalifa, somewhere close to the beach or with a golf course view, you can easily double or triple that amount. The choices are varied, and getting what works for you is certainly achievable.

You can expect a minimum net rental return of around 5% to 7% which, given the cheap financing available at the moment, makes for a solid investment in preparation for outright ownership and retirement. But be careful with fluctuations in exchange rates.

Factors such as location, the developer’s track record, building quality, service fees, building management and the existence of a functioning owner’s association will require a reputable local real estate professional to help you minimize any risks with your investment, whether during the procurement stage or managing your investment until you are ready to assume occupancy during retirement.

 

Question: What property characteristics should I, as a buyer, pay close attention to in order minimize any risks associated with my investment decision?

An old adage in real estate says “location, location, location” – as it is the first factor to consider and can drive up to 90% of any property’s value. The more established and prestigious locations such as The Palm, Downtown, Dubai Marina and JBR fared extremely well in the post-GFC period, and secondary, more affordable areas such as JLT, The Greens, Sports City, Discovery Gardens and International City followed suit.

But there are other factors as well. The quality of the end-product and maintenance services, and the extent of completion and quality of infrastructure should also be part of any investment consideration. With so much upcoming supply, buyers can demand, seek out and purchase the best of what is on offer.

Value for money and superior ROI must be considered very closely especially if you are an investment buyer. In the post-recession era, the chase for yield along with an increase in the level of critical assessment of true values has meant that properties that offer more in way of physical product and potential rental returns are attracting the greatest attention.

Current and future supply levels of various asset types need to be examined so consulting a reputable property broker to assist you is a must. For example, villas as an asset type, across-the-board, have outperformed other asset types because of supply shortages. However, when looking at the inventory pipeline, this may not be the case always as more affordable properties are likely to be in higher demand – a trend we are already experiencing.

But one thing is certain, it is the fundamental drivers of market values which remain, i.e. location, product features and benefits, product quality and demand and supply.

 

QUESTION: Can you please share some information on Dubai property management fees?

Like most services, property management fees would vary depending on the service provider. It may be anywhere between 3% and 6% of the rental receipts, and some will charge an administrative fee as well.

You need to know and understand what you can expect from your property manager as the depth and breadth of services provided by them in Dubai can vary greatly.

You can negotiate a fee structure based upon your actual requirements. We have had many clients who went with the cheapest on offer, with an ill-defined scope of services and, sadly but almost predictably, had very poor experience, resulting in all sorts of tenant problems, maintenance deficiencies, missed revenue, and generally poor advice with regard to marketing and obtaining the best returns from their property.

A competent property manager will provide an assessment, strategy and activity plan designed to harness the true financial potential of your property.

Depending on the size and complexity of your portfolio, you should have, as a minimum, a rolling 5-year activity plan which covers pricing and marketing, tenant management and policy, cost management and maintenance schedules. A competent property manager will also provide you with communications and review schedules, status reporting formats and regular financial reporting.

Ask for referrals and make sure you follow up with some existing clients to get an appreciation of levels of efficiency and professionalism.

 

Question: What would be the consequences if we hire a property manager who does not have the relevant property management license?

The property management practice has risen in importance since the last GFC made it harder for real estate brokerages to generate revenue from transactional services alone. In addition, demand for property management expertise grew rapidly as investors started to realise that investing in property is not a “set and forget” proposition, and requires constant attention as factors influencing its performance as an investment are as broad as they are complex.

You need professional help to manage your property investment, particularly during times when yield is harder to generate. Your property manager must ensure that you maximize returns from your property portfolio while operating within the law.

Your property manager should be licensed, experienced and have a strong history of successfully managing properties. If you knowingly engage a person or organization who does not possess the correct license to manage properties, you are essentially aiding that person or organization to operate outside the law which places you in an awkward position should something go wrong.

In addition, if you have a legal dispute of any kind regarding your investment properties, any involvement of the non-licensed party that you have managed to manage your property will place your legal position in jeopardy.

It takes only a little effort to check on the licensing status of any organisation by referring your query to RERA, the regulatory authority for real estate professionals in Dubai. Remember, it is better to be certain than shoot arrows in the dark – especially when it involves investing your trust and hard-earned money in any business venture.