Property Management And How Do You Get The Best Out Of It
What is property management in India?
You buy a residential/business/ commercial property either to live in it, start a business, invest in real estate or rent it out. Once the euphoria and celebrations of buying your property are over, you need to put it to use. A property is like any other asset you might decide to buy, when used it gains in value, when idle it is a dead investment and could add to your woes. A property manager represents you on matters concerning the property.
So what makes you invest in property?
You are doing well for yourself, and have spare money to invest. The city you have identified has been expanding, growing well and there is a sizable out of town working population, that has habitat needs and wants. There is uncertainty in the market, real estate prices are yoyoing. You think the market has reached the bottom of the curve and may be on its way up.
You earn in a currency that is stronger than the Indian rupee and would like to invest back home. You would like to structure/ plan your income tax so that you could factor in long/short term capital gains taxation.
Can your real estate broker be your property manager?
The primary role of a real estate broker is to bring the renter and the owner together and effect a rental. That is, draw up a rental agreement on the terms agreed on and collect his commission. After that, his role is over.
Some real estate brokers double up as property managers for customers, but there could be some conflict of interests in these two roles.
A property manager’s role is long term, given the fact that he/she is going to be managing the property on the client’s behalf. The property manager could be compensated as a percentage of the value of the work done or as a monthly retainer.
A broker’s allegiance is to keep the property in the rental market and to look for new renters so that he can achieve his personal or financial targets. A property manager is responsible to keep the property ship-shape and maintain it in its pristine glory.
The Importance Of Trust In The Relationship:
Who, when and why you give your rental property keys to is extremely critical, and something that you should always be aware of, all the time. It also tells others the kind of person you are.. concerned, care-two-hoots, responsible, laid back.
Here I would like to illustrate an example. There was a broker who helped my friend’s in-laws buy a new home closer to him. When the time came to rent out the old property they approached him. There was an element of trust built due to the previous transaction. The keys to the old home were given with an understanding that the home is to be opened and showed to prospective renters only.
About 4 days later my friend’s mother-in-law got a call from the Chairman of the society informing her, that a gentleman and a lady were coming to the flat for the past three days in the afternoons and stayed on for two to three hours on the pretext of showing the flat to prospective renters. What was out of the ordinary was that nobody else was coming to view the flat during those hours and the Chairman thought that something was amiss.
On enquiring with the broker we realised that the key to the flat was handed over to a local sub-broker, who was conveniently was using it for his personal interests. Thankfully the whole episode was nipped in the bud, but the broker was never able to regain my friend’s trust.
In another case, an apartment buyer asked the builder to help get renters. The builder rented out the property himself using a proxy and used it as storage for his documents and files. The property owner got to know only when his property was sealed by the tax authorities.
It is to avoid incidents like this that you need a professional property management company, to help you look after your asset and act in your interest.
Freelance Property Management Professionals VS Professional Property Management Company
- You could use a freelancer if your requirements are basic. The important thing here is to ask yourself, ‘Is he/she trustworthy? Does he come recommended?’
- A few questions that you may want to ask the freelancer include; how many properties does he manage currently?
- What will happen if he gets more properties, falls sick or moves to another city?
- What are his lead times to revert and how would you keep in touch with him?
- Does he operate with a mobile phone or does he have an office?
- What is the size of properties that he manages?
- How does he charge for his service?
When you deal with a Professional Property Management Company:
- You deal with professionals.
- Your agreement with them is ironclad.
- They know exactly what role to play, for what client and for what time frame.
- They could advise you on property laws that are local, provincial, countrywide or global.
- They would be aware of all forms of documentation and how to execute them.
- Their services are especially more invaluable when you live in another part of the globe, and need a property to be managed in India or elsewhere.
- A property management company can liaise on your behalf with the co-operative society, local bodies, government, pay your taxes, collect rent on your behalf, draw up agreements, help in the upkeep of the property.
- They could also represent you in litigation on a property if authorised and keep you up to speed on developments.
Property management companies and professionals are here to stay. Their importance grows when you face a pandemic like the present one and are possibly in lockdown in another city. The type of arrangement that you could have with them depends on the scope of work, trust and the expertise they bring to the table.
A good property management company is an asset to have on your side.