Property Hub - Investment Insights & Inspiration - Realty Talk - Increase returns by reducing turnover

Episode Date: June 27, 2024

It hurts every day a property remains vacant and every tenant changeover adds cost and increases revenue loss.  Full time property investor, rooming house specialist and owner of Rooming House Expert, Mark Baker, joins Bushy to discuss maximising rental income and reducing turnover.  Then we are joined by Moni Mazzeo who introduces a different approach to improving rental success by taking an interest in how your property manager handles stress. Subscribe for free to Realty Talk on the Property Hub channel, join our community and get more insights here: https://linktr.ee/propertyhubau Property Hub is a collaboration between Bushy Martin from KnowHow Property, Kevin Turner from Realty, Andrew Montesi from Apiro Marketing and Apiro Media, and Australia’s largest independent podcast network DM Media.See omnystudio.com/listener for privacy information.

Hi, I'm Kevin Turner. Welcome to this week's Realty Talk Show. It hurts every day a property remains vacant and every tenant changeover adds cost and increases revenue loss. They need to have the understanding of it and the experience of doing it. Realty is vital and it's not about going and picking who's going to do it for the lowest rate. It's who's going to get you're the best longevity of tenancies and therefore your best net return. Full-time property investor, rooming house specialist and owner, a rooming house expert, Mark Baker, joins Bushy to discuss maximising rental income and reducing turnover. And then we're joined by Modi Masio, who introduces a different approach to improving

rental success by taking an interest in how your property manager handles stress. before we start i want to say a special thanks to our supporters and content partners realty.com.au bmt tax depreciation know how property finance get rare property and appear on marketing and if in fact this is your first time with us a big welcome you'll find us on all podcast players and through the southern cross austere network and also now on hot copper australia's largest investment forum hey if you like the show hit that subscribe button help us to continue to bring you the best guests every week and don't forget too you can join the conversation anytime on facebook at the property hub collective and we'll be back in just a moment property deductions can save you

thousands of dollars each year to make sure you maximize deductions you need to work with the most experienced quantity surveyor in the country bmt tax depreciation is the leading specialist in the industry. They've completed over 700,000 tax deduction schedules for residential investment and commercial properties Australia-wide. BMT guarantee to find double your fee in the first full financial year deductions. Call BMT on 1300 728 726 today for an obligation free quote. Realty Talk and your host, Bushy Martin. Now, in a recent episode of Realty Talk, we opened your eyes to the growing rooming house opportunity as an affordable solution for both investors and tenants in our current times of

rapidly increasing costs. And this has actually created a flurry investor interest. So we're keen to discuss more on the subject today. And to state the bleeding obvious, rooming house success relies on maximising your occupancy and reducing resident turnover. But how do you do this? Well, to answer this and to dive further into this alternative investment opportunity, We're joined again by full-time property investor, rooming house specialist, and owner of rooming house expert, Mark Baker. He specializes in the development, conversion, and operation of rooming houses. So welcome back to the show, Mark.

Thanks for having me back. We had a really good chat last time, and I need to sort of dive a little bit deeper into the exercise, and I guess just to kick that off, what are some of the reasons that people move out of rooming houses, and how can you prevent that? Look, some of the things that you probably can't do anything about, they might have had employment in the area and it's come to an end, work contracts done, they're moving on somewhere else, just part of the game, maybe keep working with the employers

to keep a steady flow of people if that's the situation. But bigger issues are probably where there's potential for conflict between residents in the house because you've got everyone in much closer proximity, so things are a bit more amplified. and if someone gets on someone's nerves, it can escalate pretty quickly. So disputes about things like heating, for example. I mean, we had such early on where we had ducted heating in the house and you'd get disputes about what temperature people wanted things on.

Arguments over noise, if someone likes their music or whatever. So I think the ways to prevent it, like first, is being pretty active with your management, like having an idea of what's going on in the house so you can get on and talk to people as soon as there is any sort of issue. Other things like I mentioned, heating, individual heating for rooms is absolutely the way to go because you don't want any disputes over that. And if you're up north, cooling as well. um the you know noise thing and that depends again on what the house is if you've got a you know property that was a dwelling that you've converted it can be a bit hard to combat if you're building new absolutely you want to you know design for that in you know what you do for soundproofing and how far you go like you know whether just you know sand check plaster and

bats is enough whether you need to do you know party walls um layout can it can help a lot as well like not having you know necessarily minimizing the shared walls like putting things like you know wardrobes bathrooms and things like that yeah on shared walls so you can minimize the noise that goes between rooms um yeah look at yeah hotels i mean they've pretty much got it figured out yeah that's it it's probably a pretty good model on a smaller scale but yeah that makes a lot of sense you've touched on uh the importance of design and layout that would apply to you but also to the conversions i would have would have thought which would play a big part in what you're doing in your experience uh how does the layout and design of a rooming house affect this uh

tenant longevity then mate look it makes it makes a really big difference um yeah if i go out my own experience when i started doing this i was you know i think and i can see where people are coming from now when they're first getting into it um yeah i was putting in lounge rooms and you know all sorts of things like that. I learned pretty quickly they're a pretty bad idea. So my main thing is to minimize the common areas and make the rooms as comfortable as you can. If that's where you want them spending time away from other people.

So, yeah, I mean, it's my short thing. Make the common areas small and uncomfortable. Yeah, private areas large and comfortable. And that's where you're getting the rent for it too. So it makes more sense from that point of view that that works a lot better. And where I said hotels before, part of the design there is trying to create an entrance to the room so that you've got where they're sleeping as far from the hallway as you can and blocked by things like that. Yes, yes.

So we get some really good suggestions there because from a newbie coming in, it's almost from trailing you go let's make it really you know the common space is really really fun but what you're probably doing is you you're bringing people together that other otherwise wouldn't and and you're actually inciting the argument sooner than what they might occur if if they were there so whereby by rooms really comfortable on it and and allowing the residents to spend more time in the rooms because it's it's laid out in the way that they're comfortable doing that then you're actually de-risking the conflict to a certain degree so So, no, that makes perfect sense.

Yeah, that's right. And it's a big part of the design. I did touch on it. I can see where people are coming from with that and trying to create something where there'll be some socialisation. And, yeah, look, that's part of it, but that's usually better outdoors or if they want to socialise one-on-one, they can visit one another in their rooms.

That makes perfect sense. I like that. I think you agree with that. You touched on the importance of management earlier uh yep let's dive into that a bit more and get your thoughts on how important is a good manager and probably where do you find one well look i think it's i think it's pretty vital and look reality is it's probably a little bit of a gap in the market still at the moment i mean there's companies out there saying that they do it and there's real estate agents that

will do it um most of them yeah i'm generalizing a bit because there are some good ones but most of them aren't great at it and i think if you look at how property management typically works the work is in renting the property yeah ongoing yeah making sure people have paid their rent and things like that there's not a lot and there might be yeah six monthly inspections and things like that and if i talk victorian terms in rooming houses in the legislation there we can inspect rooms every four weeks so to give you an idea of how more amplified that is not that you're necessarily going to do that because that's a bit of an intrusion on people and might not be great for them but at least you've got the opportunity to do that if there's if there's yeah should the

need arise um and to keep an eye on things and manage things now most real estate agencies wouldn't be equipped for that and wouldn't be equipped for the ongoing operational stuff that's required um i mean one of the things i'll say this because i use this a little bit in the residential tenancies act there's yeah your normal tenancies there's rooming houses there's caravan parks and retirement villages yeah i don't think too many investors would go by a caravan park and get their local real estate agent to manage it that's right so my question then is what do you think they can do renting houses and look and there are specials that do and are good at it but they need to have the understanding of it and you know the experience of doing it so yeah

reality is it's vital and you know it's not about going and you know picking who's going to do it for the lowest rate it's who's going to get you the you know best longevity of tenancies and therefore your best net return and look after your property the best one hundred percent in the old days i you know i'm this is the old days mate because i'll show my age there but my good my good mother used to live in a boarding house in ballarat when she was a telephonist way back in the in the 50s 40s and 50s and in those days i remember she used to say that one of the other board was actually the manager and they got either discounted or free rent for living there, but they were basically then tasked with managing the property and keeping the pews down. Is that

something that's still relevant today or are there other more reliable options in terms of management that are more effective? Yeah, look, there's some situations where that's happening and it's working reasonably well. It tends to be more suited to larger properties. Like if you've got 30 residents or something like that you might want another site manager yeah the um challenge that i suppose occurs around it um is you know whether it goes to that person's head and they tend to be a bit of a standover person in the house and i'm in charge i set the rules so it can create issues as well yes so um yeah i'm not i'm personally not a fan of it especially in you know domestic scale stuff like if you've got you know nine rooms or something like that

or even less, like five in Queensland, I think there's a real risk with it. Yeah. And in doing that, same thing, I'd never do anything as a deal on the rent. So it's like you don't get a discount on rent or a free rent, you pay your rent and you get paid for work you do. Yeah, yeah, yeah.

It gets pretty messy, doesn't it? Yep. Way around. Very well said, and you're right, it could very well make things worse, not better, by adding angst into the free occupational space It might not otherwise be there, so a very good point. I guess to bring it to a head then,

how do we learn more about best practice in establishing and operating roomy houses then, Mark? Well, I'm going to suggest, like Victoria at least, has a peak industry body, so the Registered Accommodation Association of Victoria, so riav.org.au. They produce a best practice guide on behalf of consumer affairs and support a lot of operators and stuff like that.

So I would suggest in Victoria at least, Rav, Other things is looking at state government websites, Victoria Big Consumer Affairs, Office of Fair Trading in Queensland. It used to be Housing and Public Works in, I'm sorry, Office of Fair Trading in New South Wales. It used to be Housing and Public Works in Queensland. That's changed. I can't remember what it is now, but some of the government websites

have got a lot of good information. It's documents on minimum standards that are readily available in each of those states as well. So I'd suggest that's a good start. and, yeah, RAV would be a good contact anyway, even if you're in another state, to get an idea of what best practice is in that state and how you can apply that in your case.

Yeah, perfectly said. And then, of course, given you're on the show... Don't get in touch with me, I can help out too. Yeah, exactly right, given that's your area. So I guess that brings us to a perfect close because I really want to thank you for deepening our understanding of the whys and wherefores of Birmingham House, Mark. And we do suggest that anyone who wants to learn more

reaches out to you at roominghouse.expert by clicking the link in the show. So thanks again for sharing all this with us on the show today, Mark. No worries, thank you. Successful property investment is a game of finance. Do you have the right team and the right game plan? Realty Talk is brought to you by KnowHow Property.

More than mortgage brokers, Bushy Martin and his team of investment architects set you up with a sustainable strategy structured to lower your costs tax risk and stress while increasing your capacity for growth know how has helped over 1900 homeowners and investors secure more than 800 million dollars in property wealth so get set to live more work less and live your legacy. Want to know how to invest in your freedom? Visit knowhowproperty.com.au. This is Realty Talk powered by realty.com.au. Now imagine being in a job where you're always the meat in the sandwich and at the short end of a funnel where everyone's competing demands end up

as your responsibility. Well, welcome to the world of property management where you're constantly twisted and torn trying to solve everyone's problems, from the competing stress of tenant needs, landlord demands, and increasing pressure oftentimes from business owners to do more with less. But as we all know, the quality and consistency of property management is actually key to your long-term investment performance. So to discuss how to reduce cumulative stress and restore balance and productivity in this quite mission-critical aspect of yours and everyone's investment success, we're joined by Moni Marzio, founder of the largest independent property management company in South Australia, the Rental Property Network. And she's completed

a master's degree focused on the mental health of the property management industry. So we're looking forward to getting into that. So let's see how we need to change and welcome to Realty Talk, Moni. Hello, thanks for having me. Looking forward to it. Yeah, this is a subject that doesn't get much airplay, but is, I think, critical to the future of the industry overall. But I guess where I'd love to start with that is to get to talk us through what sort of challenges and problems you see property managers facing that's actually impacting negatively on them, as well as inhibiting investment performance. Yeah, look, it's one of the major things from my research was a lack of support. Now, if you'd asked me that pre me undertaking this research, it's not what I actually would have suggested, but support just became that overwhelming topic.

It flowed through all the way, a theme right the way through the research. And so if you look at property managers being burnt out, overworked with big portfolios, that it's just not sustainable long-term. They're overwhelmed, they're stressed. They're telling me their mental health is suffering, which obviously impacts the ability for the individual to undertake the duties of the role and obviously also the quality of the output. So firstly, there are a couple of other things. Firstly, lack of support was a main one. It's an eternal problem, isn't it?

Too many properties per property manager. We've watched that through decades. I know since my career started, I've had those discussions and you transition from being a salesperson to a principal and suddenly the shoe's on the other foot and you're looking at the business from different eyes for sure. But that large portfolio, too big a portfolio for an individual to manage in a 38-hour week, that was a real scene throughout the research. the lack of support obviously affects self-esteem um job satisfaction it inhibits the property manager from providing in many cases the service that they want to provide and i think what was really frightening from the research uh firstly half of the property managers i spoke to ended up in tears uh were really quite distressed about what they were having to deal with in the role

But the severity of the impact on some individuals, and it ranged from a negative impact at home to contributing to the end of marriages and some significant mental health crises where people were having some really significant implications throughout their home and themselves. So to me, that's disappointing. I don't want to see that for anybody in any job, but particularly property management where we build relationships, which with lots of people over a long, long time, these relationships go for decades. And so they need to be mutual relationships. And by mutual, I mean with all the parties, all of the stakeholders, the principals, the property management team, the investors, the tenants.

It needs to be more collaborative, I think. That was one of the challenges. Yep. investors um we'll talk a little bit later about how they could help there's obviously things they can do but one of the other things that property managers spoke about was a lack of training and and they highlighted this across the board as being a real issue lack of practical skills and not necessarily having the skill set to undertake uh particular elements of the role and and that includes found to increase stress and reduce job

satisfaction. So once again, if you think about that laterally, it's obviously going to have an impact on their output as property managers. And in that training, they also spoke about legislation changes and the stress that the legislation changes were causing them in terms of their understanding of it, their processing of it, changing their systems, their policies and procedures just not having a really good grip on it and not having a sounding board it linked back to support because then they said that they didn't have a sounding board to go to someone in the office to say oh what does this mean or how do i practically because legislation is one thing and then there's the practical way that we deal with it yes what do we do here in practical terms in

this particular situation. As an investor, I think long-term, realistically, if you have enough property and you're in investing for long enough, something's bound to go wrong. I'm not suggesting that it should or will, but it probably will. The likelihood of you having a tenant that perhaps is in arrears or some damages is very real if you're in this for long enough. And while it's my hope that agencies and property managers never place a bad tenant. Firstly, tenants change. So we may place a tenant that is an exceptional tenant at the time we put them in the property, but life happens. You think about the Ds of real estate, death, debt, drugs, divorce, disaster, domestic violence. All of these things can impact what was once a good tenant and move

them from, say, a Category A tenant down to, say, a Category D tenant. And these things happen and we need to be prepared for them. But think for a moment what that toll takes on property managers who are at the coalface of these situations. And many of them are really, really unpleasant. I think I mentioned to you earlier, we have about every nine months, we will at least have a death of a tenant in the property. And if you think about that and a property manager walking into that, it really can impact the mental health and wellbeing of the individuals. 100%. I think the thing that gets missed often is the consistency and the longevity of that stress and pressure. It's not isolated events that happen now and then. This is constant day

today. And that sort of burnout that results from that accumulative pressure over time is something I just don't think is really understood or taken on board. And as you say, it's not a matter of if there's going to be an issue on a property, it's when it occurs, but making sure you've got the right team around you that has the contingencies in place to actually deal with it. And if you've got a property manager who's stressed to the eyeballs, has no headspace to be able to deal with that, well, that's where the potential issues are going to arise. So, look, I guess there's a good flow on to what I want to ask you next,

and that is, you know, what is the impact of all this on investors and landlords then, as you see it? Bonnie? Well, half of the participants of the study that I did had a physiological reaction to stress. So that might be sweating, heart palpitations, nausea. I mentioned crying earlier. but 30% had suffered a significant mental health crisis because of work pressures.

So one participant said the abuse, it just doesn't stop. Another was touching a chest and one of the benefits of the research that I did was that it was like we're doing now so I could see them. It was interviews and it was touching a chest and said it just hurt here all the time. As an investor, just think about that for a moment and think about the property manager's ability to effectively manage your property If they've just been abused by a tenant in the workplace from another investor, in most cases, they're simply not equipped to deal with that. And the toll, you mentioned long-term, there are studies on this, long-term impacts through the cause of burnout when you are exposed to this level of stress consistently, day in, day out.

And property managers, I think this is forgotten with lots of people and investors included. The emotional aspects of their daily work life is not dissimilar to those that healthcare workers or other service workers experience. And that prolonged exposure decreases job satisfaction and it increases the likelihood of burnout. We're dealing with heightened emotions. You know, you think about the big events in people's lives. Moving house is one of those events. and the heightened emotions, if they've got excessive workload, so they're already dealing with people that are in a heightened state

because they need a home in the midst of a housing crisis here in South Australia, so that exasperates the matter, but then they've got a high workload, and then they're dealing with physical and emotional abuse. Now, it's not just emotional. That shocked me. I had property managers talking about physical abuse. We should be safe in our workplace.

we should be able to do this role and go to work and feel safe when we're doing that yeah for investors having a property manager who is either not equipped to deal with this or who is not supported through this it really has the potential to negatively impact that investment yeah totally and i guess that if what's the productivity drops down then there's it's you don't have to be einstein to work out that it's going to impact on the actual management of the property. So I guess the obvious question now then, Monty, is how can this actually be improved and what needs to change? Look, I had a whole lot of suggestions, recommendations at the end of my report. Property managers are asking for enhanced support systems,

so a more supportive work environment, which can be achieved through things like mentorship, but also just regular check-ins. And that can be the investor, it can be the principal, it can be a colleague, hey, let's grab a coffee, let's meet for a coffee, let's just have a chat, giving them that opportunity just to defrag a little bit or share, just, you know, a problem shared or just the problem shared as a problem lessened or something, just sharing that and giving them somewhere at the outlet. Regular training obviously was included as a recommendation.

Training on soft skills is really important, stress management, mental health first aid emotional intelligence and customer service skills was an interesting one that i hadn't really considered but was highlighted by several of the participants as they just didn't have those customer service skills to deal with certain situations because depending on what you say you can escalate a situation or you can de-escalate it and had the training yeah it makes sense if you're defensive that that triggers off a whole cascade of other issues, whereas you know how to absorb that and empathise in a way that diffuses a situation

and that doesn't elevate to that point. So, yeah, very good points. 100%. And also they've been asking, and this doesn't perhaps, well, not directly, a lot of these investors might sit back and think, well, it doesn't really affect me, but it does. And that's the point that I'm trying to make. An organisation to have a good EAP,

which is an Employee Assistance Programme, that they can reach out to in the event they have had a situation that has upset them or caused them stress or if it's been a death of the child or whatever, somewhere they can reach out and get the help that they need. In the processing applications, we can talk about that. And just if you look at the series of events that a property manager does and you look at, you know, I've got a new property to market.

What's a new land? Are we going to take care of that? We then advertise. We have to do that. We then get to open inspections. We have to do that because somebody's got to be there. We have to do the lease. we have to lodge a bond. There's an application process in there. And if you look at the,

I guess, the weak points of the whole spectrum of the tasks that we do, processing of applications is one that corners can be cut. Yes. And especially when a property, and I'm not saying there's property managers out there wanting to do this, but when they're overwhelmed, overworked, stressed, all of the other things they can't cut they have to do the lease they have to lodge the bond you know there are there are legislative requirements some of these things the process of application is one and investors will also know if you've been investing for a while ingoings and outgoings is another one there are the very weak points that that can potentially have corners cut yeah very well said

so i guess that the uh obvious question here uh for investors is what do investor landlords need to be doing or thinking differently in order to actually help property managers and by doing so, in turn, actually end up helping themselves? I might not like my first answer, but I'll say it anyway. And I'll challenge investors to be less price driven and more concerned with the technical skills of the property manager and the support that's provided to the property manager, the wellbeing that's around them, the wellbeing policies within the organisation. Investors, in my mind, spend so much time researching, analysing all of the analytics with areas and growth and council reports and strategic plans from council and everything else that I hear investors doing. And then they get to the property management.

And let's say they had two properties, maybe one at $450, one at $470. I'm talking Adelaide terms. And if the 470 was going to give them a significantly better outcome, they're probably going with that one. They're not going to say, oh, no, I'll take the much lesser outcome and the less capital growth for $20,000. But then we get to selecting a property manager and suddenly we're so price driven as investors. and that does not support the business model that I'm speaking about with all of the support around the property manager and all of the initiatives that can help them

and keep them in the industry. And we haven't talked today, but I'm sure you've spoken before about the churn of property managers. We want to stop that. And the way the investors can stop that is to think a little bit more. These are significant investments. We all know that, our investors. why then are we so price driven when it comes to the property manager and that's something

investors could that's a change a switch that investors can click and immediately make but also use effective communication strategies understand that the property manager is on your side so this comes down to how an investor selects a property manager and i think there's lots of things that can be done there i think it's super important that we don't lay blame on property managers for some of the things that are going wrong and for some of the corner cutting that I've spoken about. These are upper management issues, not property manager issues. And so that's where the fault lies, not in the actual property managers. They're all out there trying to do the best they can with what they have. But as investors, ask some real questions when

you're selecting property managers. Really ask the question, what supports are in place for you as a property manager if you encounter any abuse in the role? That will give the investor a good idea of what's happening internally. Look for anything that's outward facing in terms of how they support their property managers. Do they have things or do they advocate for things like mental health first aid or EAPs? What's outward facing from the organisation that the investor can actually have a look at and go, okay, I can see that they've got a really good framework here. they're very supportive. That'll give you a clue in terms of what's going on. But one of the big clues is also fees. I'm not saying you have to go with the most expensive, but really have a look

at those fees and question if you're right at the bottom end of those fees, do you think seriously that the property manager is going to get all of the support that they need? Because I'd argue it's not feasible. 100%. Look, we've only really just scratched the surface, but you've highlighted some really important issues there. So I really want to thank you, Monty, because you've really made it clear that if you're an investor, having a property manager that's suffering burnout, overwork, overwhelm, stress, or poor mental health is obviously going to impact the quality of output and therefore the sustainability and viability of their investment. And that clearly more support from everyone involved, including training on stress management and emotional

intelligence, along with creating some sort of flexibility in the work environment is actually going to be key to everyone's benefit moving forward. And the investors actually need to ask better questions to determine this so that they're actually focused on service value and not just cost. And what I'd like to call money, excuse my breath here, but we want to focus on mental wealth as well as mental health because if the investor thinks that way and takes a long-term approach rather than a short term we're going to end up with a better outcome for everyone so look i really want to thank you for bringing all of this to our attention and thanks for your time on the show today molly thank you are you curious about harnessing your super for property investment

propel your future with the enlightening online seminar the ultimate master class to self-managed super fund property mastery. Reserve your spot now at GetRare.com.au forward slash SMSF. Spearheaded by Rasty from independent buyers agency GetRare Properties, this masterclass unravels strategic property investment using your self-managed superannuation fund. You know, it's not just about learning. It's about transforming your financial future through education. So embrace this opportunity to enrich your investing acumen. Enroll now in the free masterclass and begin a journey that marries insight with action, leading to a financially empowered tomorrow. Unlock bonus content now as a premium subscriber. That brings us to the end of

this week's show. Make sure you don't miss a single episode of Realty Talk or Bushy's Get Invested podcast both delivered to you each week and you can do that by subscribing to the property hub now on your favorite podcast player or wherever you are listening to or watching this show also join the conversation anytime on facebook all you have to do is search the property hub collective thanks to our supporters and content partners realty.com.au bmt tax depreciation know our property finance, get rare property and appiro marketing. I'm Kevin Turner and on behalf of Bushy Martin and the Property Hunt team, we look forward to seeing you again next week.