Business Advisory directors Jack Deal and Ryan Pearcy look at the complexities of estate management and the issues business owners face in managing these effectively with people, processes and systems.
The efficient administration of an estate’s property portfolio is a key area and in this article we look at how modern technology can help streamline estate management.
The day-to-day management of a property portfolio carries a considerable administrative burden: dealing with queries from tenants, managing employees and subcontractors, chasing for rent payments and handling renewals. These tasks fall into two categories: infrequent but regular paperwork matters and reactionary queries, issues and repair work. Both require good processes to handle them effectively and larger property portfolios will carry a significant administrative burden without effective systems in place. Some of the examples below may ring true with you.
Invoicing and payments
The key areas in relation to cash flow are of course invoicing and payments. Generally handled at the end of each month, historically this will involve the manual creation and distribution of invoices for each tenant and then manual recording of these into a finance system/excel spreadsheet. The receipts are then generally received throughout the following month, normally as direct bank transfers or standing orders. These receipts are input into the financial system and matched against invoices, with outstanding balances reconciled at month end. A month after the tenant’s rent was due you will have a picture of any unpaid invoices, which then need to be chased, normally manually via a phone call or two, until payment is received. You might have a direct debit mandate setup, which gives you control of when you receive the funds. However, it is likely that this process, both in setting up the direct debit and collecting the monthly amount, takes up valuable management time. Each part of the cash collection process requires time, paperwork and manual entry and leaves you seeing management information much later than you need it.
Finding tenants is a lot of work and, historically, has typically been outsourced to an agent. This comes at a cost in exchange for outsourcing the hassle of managing tenancies. Without an agent you will need to market the property, manage applicants and then onboard successful applicants. Credit checks need running and rental agreements drawn up, signed and stored. You’ll need to remember renewal dates for each property and ensure agreements are updated when needed. When the renewal comes up there is more paperwork to be drawn up, signed and stored.
Other than significant property repairs, day to day management of the portfolio is generally reactive. Queries from tenants, for example around their rental agreement or payment arrangement, can be time consuming. Most ongoing communication with tenants will be about repairs. Something needs fixing and the tenant believes it’s the landlord’s responsibility. You need to assess what the issue is, how bad is it, who can fix it, when can it be fixed and how much will it cost. All of this must be solved quickly, to avoid a detriment to the tenant’s living conditions.
Large property portfolio owners may have a team who handle property repairs. Subcontractors may be used for certain works, and you may have a set list of subcontractors you work with. Managing the work schedule, communicating what needs doing and checking it has been done involves a lot of people management. If they are employees they are likely to be working across multiple areas of the estate and if they are subcontractors you may want to obtain quotes before work starts. This would all need to be tracked to ensure costs are managed and the profit for each property can be identified.
This all applies for both residential and commercial properties, albeit the issues are magnified in multiple tenant commercial sites, for example commercial units with communal areas, stables rented for equine activities, holiday lets, and properties used in events. These will likely operate under different agreements, with different rent arrangements and the issues that will arise will vary. The issues presented by properties used for events can be the hardest to manage. The fluid nature of event management means that a single property may face multiple uses with a number of tenants each year. To accurately measure profitability of events you need to allocated fixed costs such as utility bills. This is often ignored, giving an overly positive picture of the events business.
Is there a solution?
Luckily yes. Modern cloud-based property management systems enable the admin team, property managers, business owners and tenants to all work and communicate more effectively. They also don’t need to break the bank with costs being as little as £1per month per unit or property.
How do they work?
On a cloud-based property management system, the landlord and tenants will have access to portals which contains information regarding their property. Starting with onboarding, once a property or unit is setup an advert can be pushed through the property portal and all applicants can be tracked directly in the system, with text alerts for viewings. Credit checks can be completed in the system and rental agreements are setup centrally from templates and sent digitally for a digital signature via the tenant portal. Signed agreements are stored in the system.
At the same time as the agreement is created, a rental period is created with invoice dates, which are automatically drafted for review when the date is hit and sent digitally via the tenant portal. The property management system can be integrated with the finance system meaning you get instant data around unpaid rentals. An integrated direct debit system can also provide security over cash collection without the need for additional paperwork.
Tenants can be provided with general FAQs via the portal to reduce straightforward queries. They can also log repair notices in the system, which are then distributed to employees or sent to subcontractors individually or in a pool for tender. The repair work is then scheduled into a planner with visibility for the tenant of what is going on. All documentation is stored in the system so that it can be referred to later. All items can be created, or are created automatically, as tasks and can be assigned and added to planners with alerts for reminders. All costs can be allocated against properties for profitability tracking (which are also pushed to the finance system) and cost recharges can be created for those events that occur so that profitability of different areas of the business become clear in real time.
Selecting the right cloud-based property management system that works for the size of the estate can deliver a significant reduction in the administrative burden on your team. With any system conversion comes the challenge of change management and the impact on the team. Processes will need to be adapted, training tailored, and support secured. Getting this right can transform how you and your team work for the better.