Lisa Indge owns a property management business called Let's Rent, helping investors lease their properties out and make sure that they get good results out of it. However, years into her own investment journey, she still refuses to manage her own three-property portfolio.
Like many property investors, Lisa has built a reliable financial team to help her manage her assets and avoid any "emotional factor" that could affect her business of creating wealth through property.
"I don't manage my properties, my team do, and I think that's really important because that creates a separation between myself and my tenants which allows them to negotiate rent increase without [a] sort of an emotional factor coming in," she said.
Smart Property Investment's Phil Tarrant and Vivienne Kelly agreed that having a firewall between the investor and his properties can be a powerful strategy that can ultimately lead to success. After all, property investment is simply like running a business—the owner and his tenants must maintain a professional relationship to ensure fair transactions.
Lisa said: "You need that barrier between yourself and the tenant not just for yourself, [if and when] the tenant reacts quite differently to another party compared to the owner of the property."
"I have been contacted by investors in the past who have managed their own properties. They've become really good friends with their tenants, which at first, I think, is fantastic, because I can tell them anything and we can work together. But when the time comes for the rent increase, it's like your mate asking you for money and they feel like they can say 'no.' The process sort of gets derailed because of the friendship," Vivienne added.
According to Lisa, something as simple as the owner living with his tenants can easily put an "emotional factor" into the equation.
The property investor and manager shared: "It doesn't even have to be a friendship. I have a client who lives in the same building as her tenants and we had a scenario a couple of years ago where the tenant cornered her and negotiated rent reduction. [She] rang me and I went [and said to the tenant that], 'You are not to have those conversations.' It's taken me two years to get the rent back up to the level that it was at prior to this negotiation."
"She never talks to her tenants anymore apart from saying 'Hello' in the corridor. It's key in ensuring that you can manage it as a business," she added.
Their advice to property investors: If tenants ever try to engage you and negotiate rent prices, always have them talk to your property manager.
Lisa concluded: "It's about perception, and the more that you create that professional barrier, the easier it is for you to negotiate rent increases because when you're running as a business, [you'd say] 'Well, these are the market comparables...' It's not a negotiation... It may be, but it depends on the scenario."
Tune in to Lisa Indge's episode in The Smart Property Investment Show to know more about how she negotiates rent increases and what she looks for in investments, both within and outside of her self-managed super fund.