Landlord churn is a dynamic that businesses have to deal with regularly. Investors move into their properties or sell them. Either way, a percentage of landlords leave the agency every year. The agency needs to have a defined growth strategy to replace these properties. Organic growth is a key part of this strategy. Agencies must be careful that they don’t take any type of property to manage.

Investors move into their properties or sell them.

Writing new business is not as simple as having a potential new landlord sign a management agreement. Much more thought must go into various things that define the agency's profitability and risk profile. Such things include; Does the property meet general building regulations; Is the property older and requires lots of time on maintenance; will the commission rate and rental amount reflect a healthy return for the agency?

Writing new business is not as simple as having a potential new landlord sign a management agreement.

Let's have a look at general building regulations. Here is an example from a property that I managed once. The landlord was offering the property as a two-story home when the lower level was not legal height, nor did it have a legally plumbed bathroom. These types of building concerns can leave the agency open to litigation if someone was injured at the property. I’m not suggesting that the agency employs a building inspector to inspect every new management as these issues are often obvious to the untrained eye.

I’m not suggesting that the agency employs a building inspector to inspect every new management as these issues are often obvious to the untrained eye.

The next thing to consider is the age of the property. Imagine having a newer-style property with a good reliable tenant in place. These types of properties take very little effort or time from the agency to manage. We know that older, unkept properties attract less reliable tenants. This in return leads to more regular maintenance and often ongoing arrears issues that became time-consuming to manage for the agency.

We know that older, unkept properties attract less reliable tenants.

The final consideration when writing new business is the financials. Ensure lower rent properties attract a higher commission. If your agency has an average commission rate of 8% and a potential owner has $200 per property to manage, ask for 10% at least. Ensure the average rent and commission combination leaves enough revenue to make a profit from the management.

Ensure lower rent properties attract a higher commission.

While all of the above considerations are unique, they all impact the agency's financial position in some way. Leaving the agency open to exposure could cost compensation, vacancy or even litigation costs. Having an older property requires more effort to manage. Having a low-fee property restricts the agency's income. All these are mechanics that need to be considered when writing new business customers.

Leaving the agency open to exposure could cost compensation, vacancy or even litigation costs.