Why Investors Need Real Estate Managers

Published on 31st July 2007

Many property owners in Kenya have shied away from using property managers.  A recent survey in Nairobi revealed that 60 percent of commercial property investors do not use professional property managers while in residential property investors, the figure is even worse, over 95 percent of Kenyan residential landlords opt to manage their own property.

Is it that Kenyan property investors do not trust their Estate Agents? Is it that the Estate Agents do not add value to the Property Management Market? 

In Kenya, the Property Management Industry has been invaded by quacks, crooks and conmen who have made investors to shy away from estate agents. There are several listings of estate agents on the main stream print media on houses to let. Most of them have no fixed abode and the public should stand warned on using them.

Mburu, for example, had just finished his studies at the university and landed a plum job with a leading audit firm. He had been living with his brother and felt that time had come for him to move into his own house. He perused the local daily and saw an ad for a two bedroomed house in Kilimani estate in Nairobi that was going at Ksh.15,000 per month. When he called, the gentleman on the other end told him that the house was within a high class court and went further to describe it.

The deal was so sweet for Mburu that he immediately asked his brother to lend him some Ksh 45,000 which was to include two month’s deposit and rent for the house. The “agent” told him that he was in someone’s office waiting to collect the money from another prospective tenant and that if Mburu got there before him, he would be the tenant. Mburu and the agent went to a city hotel where the agent produced a lease agreement that had already been signed by the landlord. Mburu quickly appended his signature to seal the deal. He was then taken to the house and thereafter paid the money. Mburu could not believe what he saw. The house was better than what he thought. Workers on site doing final touches on the paintwork told him that it would be ready for occupation in two days. The next morning, he asked his girlfriend to come and see the new house and select the best curtains before they moved in. To his surprise, he found someone else moving in the house. On asking, he was told the house belonged to someone else and that the owner had not asked anybody to let the house for him. He was the third person to fall prey to conmen over the same house.

In Kenya, the professional training required for one to be a Real Estate Agent is a B.A Degree in Land Economics which is currently offered from the University of Nairobi. Further, there are regulatory bodies, namely the Estate Agents Registration Board and the Institution of Surveyors of Kenya which are the two main bodies that control and regulate the professional practice of Registered Agents.

It is thus important for a property owner to insist on dealing with a Registered Estate Agent as they will have recourse in law should they act unprofessionally.

Some of the duties of a Property Manager include:-

Rent Collection: The Agent collects rent on behalf of the landlord for a commission.  This is usually also regulated by the Estate Agents Act to be 7.5 – 10 percent for Residential properties and 2.5 – 7.5 percent for Commercial properties.  Since the Agent will have all information on the tenants, then it is easier for him to collect rent faster than the landlord since the landlord may have other engagements such as a full time job.

Repair and Maintenance: Agents also act on behalf of the landlord in maintaining properties.  Since their training involves understanding the buildings, they are able, with the help of other professionals, to identify and repair buildings promptly and more efficiently as opposed to the landlord handling the repairs him/herself.

Identify Suitable Tenants: The work of an agent also involves identifying a suitable tenant to occupy a particular house.  A landlord, on the other hand, may not have the time to interview the tenants and may rent out the house to the available tenant who may turn out to be a defaulter.

Advice on Suitable Tenants: Professional estate Agents are also trained to be valuers.  They can easily interpret the market trends and advise landlords on when to review their rents to ensure that the landlord continues to receive optimal returns for his investment.

Managing Utility Bills: In the previous years, the companies providing utilities such as water, sewer, electricity, and telephone never followed up on these services. One could consume these utilities and fail to pay for them creating huge arrears.  It is the work of the Property Manager to ensure that all utility bills incurred by the tenants are paid on a monthly basis. 

Maintenance of Service Charge Accounts: In Commercial properties many tenants will pay rent which has the service charge component.  The estate agent ensures that there are proper and functionable services in the buildings.  These include: lift maintenances, cleaning, garbage collection, security and many others.

Paying of necessary outgoings on behalf of the landlord: Some landlords are either too busy, have full time jobs or are running other businesses. They therefore have little time to engage in running their properties. Agents thus ensure that all related bills like insurances, water and power bills, mortgages grants to families, shares and any other instructions given are promptly paid on instructions from the landlord.

There are several advantages of using an estate agent. Agents are able to assess and implement new rents as they are in touch with market trends. They can manage and advice on repairs and keep collecting rent when due. Their fixed deadlines within which rent should be remitted makes the landlord to have a reliable and periodic income. 

The property manager is able to make rational decisions which help improve returns. The managers use their expertise to not only ensure that landlords optimize their investments but also be indirectly involved in their investment and attend to other duties. 

Property Management comes along with several disadvantages such as: cost which was hitherto not there (usually between 2.5 to 10% of the rent collected) leading to landlords, in some instances, to increase rent. Where the manager does not have full autonomy, red tape may make issues like repairs take long. There are a few instances where some agents have failed to remit money collected to the landlord.

It is important for investors to know that there are professionals in the market who can offer services to the enjoyment of tenants and landlords. Experience has shown that tenants who do not default rent prefer houses which are managed by professional Estate Agents as their complaints and concerns are handled more promptly and efficiently. 

At Metrocosmo, we manage properties for a number of people who live outside the country.  They give us instructions on who to pay or where to put their money and the net effect is that we have more people in the diaspora willing to invest in Real Estate as they are assured of their returns being well managed. Why collect rent yourself if you can hire a professional to do it?

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